On Monday, Citi maintained a positive stance on EFG International AG (EFGN:SW), adjusting its price target slightly upwards to CHF14.90 from the previous CHF14.70, while reiterating a Buy rating on the stock. The adjustment follows a period where EFG International's performance, similar to its Swiss counterpart Julius Baer (SIX:BAER), did not fully meet analyst expectations, primarily due to elevated costs. Despite this, Citi's analyst remains optimistic about the company's organic growth prospects.
EFG International's July to October earnings fell short of projections, attributed to increased expenses rather than a decline in revenues. The net new assets (NNA) growth also showed a deceleration, coming in at 4%, which is lower than the over 7% growth seen in the first half of 2024. Nonetheless, the firm's recent hiring spree has bolstered confidence in its capacity for organic expansion.
Following the earnings update, Citi has made slight revisions to its financial forecasts for EFG International. The estimated earnings per share (EPS) for 2024 have been reduced by 1% due to the earnings miss. However, the EPS estimates for the years 2025 to 2028 have been increased by 2-2.5%, supported by a 1% outperformance in assets under management (AUM), which is expected to yield a 1% increase in revenues. The anticipated revenue margin is projected to remain broadly stable over the years 2025 to 2027.
The upgraded price target to CHF14.90 reflects the anticipated higher earnings. Citi's analyst cites several factors for maintaining a Buy rating on EFG International shares, including the company's strong operating momentum characterized by growth and operating leverage.
Furthermore, the potential for extraordinary capital returns in the absence of mergers and acquisitions is seen as an increasing possibility, adding to the surplus capital optionality. Lastly, the analyst notes that there is a notable upside to the consensus estimates for EFG International.
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