On Thursday, Banco Comercial Portugues (BCP:LI) received an upgrade in its stock rating from 'Hold' to 'Buy' by Jefferies, with the price target also being increased to €0.48, up from the previous €0.25. The revised price target suggests a 44% upside potential from the stock's current market price.
The upgrade comes with a positive outlook on the bank's ability to generate substantial regulatory capital in the coming years. According to Jefferies, Banco Comercial Portugues is expected to generate €1.8 billion in regulatory capital over the period from 2024 to 2026. This forecasted capital generation, coupled with an existing €1 billion excess, indicates that approximately 55% of the bank's market capitalization could be potentially returned to shareholders over the next two years.
The firm's analysis points to dividends and share buyback programs as the likely methods for returning capital to shareholders. However, Jefferies also mentioned alternative scenarios where Banco Comercial Portugues might engage in mergers and acquisitions (M&A). Potential moves could include the acquisition of minority stakes in Polish entities or participation in in-market consolidation.
The financial institution's stock performance and return prospects are now viewed more favorably by Jefferies, reflecting the potential for significant shareholder value creation in the near to medium term. The upgrade and price target adjustment reflect an optimistic stance on the bank's strategic financial management and capital allocation plans.
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