Investing.com -- Shares of PAG edged slightly up 0.5% Friday as the banking group reported a first-quarter trading update that surpassed management's expectations, particularly in net interest margin (NIM) performance.
The positive movement in the stock reflects investor confidence bolstered by the company's strong start to the year.
PAG's first-quarter update, which did not include a conference call, highlighted several key financial metrics. The company's CET1 ratio, a measure of bank solvency, stood at 14%, slightly down quarter-over-quarter but still comfortably above the bank's target. Loan growth was modest at 1.0% for the quarter, while the buy-to-let (BTL) loan pipeline showed a significant year-over-year increase of approximately 24%.
The outlook for the fiscal year 2025 remains unchanged, with management reiterating their guidance on NIM, loan volumes, costs, and adjusted return on tangible equity (ROTE). Analysts have recognized PAG's performance and potential, noting its impressive operating trends and the possibility of a valuation premium over its peers.
"PAG has excellent momentum, impressive operating trends, and there is a potential catalyst from IRB approval. We believe that PAG can sustain a premium valuation vs peers due to a superior ROTE, likely FY25 earnings upgrades, consistency of earnings and growth. PAG has had the 6th most consistent earnings since 2000 out of 50 European banks," according to an RBC analyst.
"A linear regression analysis, sub-dividing the population into low and high earnings volatility banks, suggests that PAG is undervalued. Lower capitalisation of tech spend should lead to less nasty surprises vs peers regarding future cost growth. Conservatism around macroeconomic forecasts should also allow PAG's cost of risk to remain benign in the following years," the analyst added.
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