BUY KBC – Setting up for a Stella Q1 print, we see a 25% upside

The 1Q banking earnings to date are supportive of the KBC story. Stock is huge laggard YTD versus the p/book discounted names but they’re in the right zone now to play catch-up and we expect a robust Q1 earnings performance.

We believe that management have set their plan to pay down capital to 15.5% and the ways of delivering this.

You can go around in circles on these stocks on the capital/distribution debate at a time when there many better ways to spend your time, however KBC should set up really well on non-NII & asset quality.

If management stick with, or even upgrade, their EUR 4.3bn NII guide for the year – provide some clarity on capital and distributions – the stock is ready to fly.

Future potential catalysts include setting the path ahead on capital as well as rate hikes in CZ later in the year are.

Analysts’ model for CET1 to be run down to 15.5% by FY23

We have a price target of EUR 80 leaving a 25% upside