Intro
Basler Kantonalbank is a mid-sized Swiss bank with deep roots in the Canton of Basel, where it was founded in 1899. The bank is fully owned by the Canton Basel City, however, has listed participation certificates listed on the Swiss stock market. The bank enjoys a very strong balance sheet with a total capital ratio of around 19% (vs. a minimum of 12%) and leverage ratio of above 10% (vs. a minimum of 3%).
Historically, Basler Kantonalbank was strongly focused on its own Canton, as is the case with almost all cantonal banks in Switzerland. For a few years however, the bank has been pushing the roll out of its ‘online-bank’ under a separate entity called Bank Cler, which is not tied to specific locations anymore and potentially shows good growth potential as more and more bank clients use easy to use apps on their smartphones.
Valuation
The capital of the owners is basically split into two categories: The first is the endowment capital, which is fully held by the Canton. The Canton provides the bank with a state guarantee, for which the bank has to reimburse the Canton. Additionally, the Canton receives a yearly a profit distribution for the endowment capital.
The second class are the participation certificates. Holders of the participation certificates don’t have voting power but the right for a dividend, if performance permits a distribution. The current distribution amounts to CHF 3.10 per certificate, reflecting a yield of almost 5%. The book value of a certificate as of end 2020 was almost CHF 80, which includes the effect of the endowment capital held by the Canton.
What’s next?
The price of the participation certificates touched CHF 140 in 2011 and has been in a steady decline since then. The bank also faced some issues with the US Department of Justice, which it settled in 2018 and reduced risk substantially. With further expected growing assets and profits, coupled with the solid dividend yield of almost 5%, the fair value might be closer to around CHF 100, which would reflect a premium of ~20-25% of the book value.
Current Price
CHF 65.80 per participation certificate
No comments:
Post a Comment