On Monday, CFRA, a notable financial research firm, upgraded the price target for Mediobanca (OTC:MDIBY) Banca di Credito Finanziario SpA (MB:IM) to €16.00, up from the previous €12.00, while keeping a Hold rating on the stock. The adjustment comes after the company reported a substantial year-over-year increase in its third-quarter net profit for fiscal year 2024.
Mediobanca's net profit for the quarter surged 18% to €355 million, exceeding the S&P Capital IQ consensus estimate of €302 million. This performance was attributed to robust revenue growth across all its business segments.
Specifically, the Wealth Management division saw a 13% increase due to higher asset under management flows, while the Corporate & Investment Bank division experienced a 44% rise, driven by increased fees from debt capital market activities, mergers and acquisitions, and lending services.
Additionally, the Consumer Finance arm reported an 8% growth, reflecting a positive trend in net interest income.
The revised price target reflects a price-to-book (P/B) ratio of 1.3 times, which is above Mediobanca's five-year average P/B of 0.8 times. CFRA justifies this higher ratio with the bank's improving return on equity profile and the current higher interest rate environment.
Alongside the price target change, CFRA has also increased its earnings per share (EPS) forecasts for Mediobanca, raising them to €1.48 from €1.40 for the fiscal year ending in June 2024, and to €1.55 from €1.45 for fiscal year 2025.
The positive results underscore the strength of Mediobanca's diversified revenue streams, which, according to CFRA's analysis, should help mitigate the impact of an expected easing of interest rate tailwinds.
Despite the optimistic outlook on the bank's performance, CFRA maintains a Hold rating, indicating that the current stock valuation offers limited upside potential for investors.
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