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Archives: CreditSights Issuer List
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Fundamental View
AS OF 24 Feb 2025SBUX operates and licenses Starbucks cafe locations. Management has historically targeted lease-adjusted leverage of under 3x and has expressed support for the current, high-BBB ratings profile.
Recent results showed headwinds from lower traffic across the company’s locations in the U.S. and weak results in its second-largest market, China, due to increased competition in the market and cautious consumer behavior in the region.
SBUX navigated a volatile 2024, which included activist investments and an abrupt CEO change. While new CEO Brian Niccol is an experienced operator, we have reservations about the company’s restaurant reimaging plans.
Business Description
AS OF 24 Feb 2025- SBUX is a leading coffee roaster and retailer. The company operates and licenses over 40,000 Starbucks locations worldwide where it sells premium coffee beverages as well as other specialty drinks and prepared foods. Slightly over half the locations are company operated (52%) and the rest are licensed to third party operators.
- In F2024, SBUX generated $36.2 bn in revenue and $7.0 bn in adjusted EBITDA. SBUX has three reporting segments: N. America (75% of F2024 revenue), which covers cafes in the U.S. and Canada; International (20%), which includes China, Japan, Latin America, and EMEA; and Channel Development (4.9%) which includes revenue from other branded products sold outside retail locations through partnerships with large consumer companies such as Nestle and PepsiCo.
- On a geographic basis, SBUX's two largest regions are the U.S. (42% of cafes), and China (19%).
Risk & Catalysts
AS OF 24 Feb 2025In response to the activist attacks, SBUX announced an unexpected change in CEO and hired Brian Niccol, a veteran of the quick service restaurant industry with a successful track record at Taco Bell and Chipotle.
Lower discretionary spending in the U.S. could continue to weigh on SBUX’s sales outlook. We view its premium-priced beverage offerings as having significant risk of consumer trade down into more value-oriented options.
SBUX faces activist pressure from both Elliott and Starboard Value. There have been reports that the company is considering strategic partnerships or alternatives for its locations in China, where SBUX has consistently reported weak results (China locations represent ~10% of total company operating income).
S&P has a negative outlook on its BBB+ rating, and said a downgrade could occur if adjusted total leverage is sustained above 3x in F2025.
Key Metric
AS OF 24 Feb 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 29,061 | 32,250 | 35,976 | 36,176 | 36,149 |
| EBITDA | 6,775 | 6,385 | 7,252 | 7,001 | 6,685 |
| EBITDA Margin | 23.3% | 19.8% | 20.2% | 19.4% | 18.5% |
| EBITDA-Capex to Revenue | 18.3% | 14.1% | 13.7% | 11.7% | 10.5% |
| Total Debt | 14,616 | 15,044 | 15,400 | 15,568 | 15,561 |
| Net Debt | 8,160 | 12,226 | 11,848 | 12,282 | 11,890 |
| Net Leverage | 1.2x | 1.9x | 1.6x | 1.8x | 1.8x |
| Lease Adjusted Debt to EBITDAR | 2.9x | 3.1x | 2.8x | 3.0x | 3.1x |
| EV / EBITDA | 20.4x | 17.1x | 16.1x | 17.6x | 17.3x |
CreditSight View Comment
AS OF 06 May 2025SBUX is in the early phases of an operational turnaround plan intent on reigniting foot traffic by improving the in-store experience. The “Back to Starbucks” program has come at the expense of margin due to heavy investments in labor. While the plan is ultimately to increase transactions and tickets due to improved experiences, we are skeptical that the company will be able to recoup the margin. Also, the strategy comes at a time when economic uncertainty could weigh on discretionary purchases. Also, recent results have weighed on the company’s share price, which could test the patience of equity investors and possibly draw activist attention to the name again. We recommend avoiding this risks in favor of McDonald’s bonds, despite ~20 bp of incremental spreads at SBUX.
Recommendation Reviewed: May 06, 2025
Recommendation Changed: May 01, 2024
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 07 Feb 2025UBS agreed to acquire Credit Suisse in March 2023 after the latter collapsed following a severe liquidity crisis.
CS was a large and complex organisation, so the integration, and the inevitable associated losses and costs, will dominate UBS’s strategic outlook and financial performance for several years.
However, UBS was able to negotiate substantial downside protection which should shield it from losses at CS.
Away from CS, UBS has reshaped its business model, with a greater emphasis on wealth management and less focus on investment banking, particularly fixed income.
Its earnings remain somewhat dependent on capital market conditions, but its capital, asset quality and profitability ratios have been among the strongest for European banks.
Business Description
AS OF 07 Feb 2025- Headquartered in Zurich, Switzerland, UBS has private, corporate and institutional clients worldwide and retail clients in Switzerland. It is one of the world's largest wealth managers.
- It completed the acquisition of CS on 12 June 2023. It has merged CS’s domestic Swiss bank (Credit Suisse Schweiz AG) with its own domestic bank (UBS Switzerland AG) in 2024, keeping the CS brand “for the time being”.
- CS’s holding company (Credit Suisse Group AG) has been merged into UBS Group AG, so that the group has a single holding company, and the operating subsidiaries, including UBS AG and Credit Suisse AG, were merged on 31 May 2024.
- UBS operates through its Corporate Center and four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management, and the Investment Bank, plus a new Non-core and Legacy division following the acquisition of CS.
- The Investment Bank has been restructured in recent years to scale back fixed income trading and focus on equities trading and origination & advisory business.
Risk & Catalysts
AS OF 07 Feb 2025The acquisition of CS will be a long and complex process, and the necessary restructuring is likely to result in heavy losses and costs, although UBS has substantial protection, not least in the large negative goodwill.
Litigation costs have been a feature of UBS’s results in recent years, although it has agreed settlements in various cases recently.
A French court imposed fines and civil damages of €4.5 bn ($5.1 bn) in February 2019, which UBS appealed. The Court of Appeal retried the case de novo in March 2021 and reduced the fine to €3.75 mn plus civil damages of €800 mn and confiscation of €1 bn. UBS has appealed again and has set aside reserves of €1.1 bn ($1.2 bn) so far.
Key Metric
AS OF 07 Feb 2025| $ mn | 4Q24 | Y24 | Y23 | Y22 | Y21 |
|---|---|---|---|---|---|
| Return On Equity | (1.3%) | 6.0% | 38.4% | 13.0% | 12.4% |
| Total Revenues Margin | 2.6% | 3.0% | 2.9% | 3.1% | 3.2% |
| Cost/Income | 105.7% | 84.8% | 95.0% | 72.1% | 73.6% |
| CET1 Ratio (Transitional) | 14.3% | 14.3% | 14.3% | 14.2% | 15.0% |
| CET1 Ratio (Fully-Loaded) | 14.4% | 14.4% | 14.4% | 14.2% | 15.0% |
| Leverage Ratio (Fully-Loaded) | 5.4% | 5.4% | 5.4% | 5.7% | 5.7% |
| Liquidity Coverage Ratio | 216% | 216% | 216% | 164% | 155% |
| Impaired Loans (Gross)/Total Loans | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% |
CreditSight View Comment
AS OF 09 May 2025We have Market perform recommendations on UBS AG (operating bank) and UBS Group (holding company) having revised the HoldCo recommendation from Underperform in August 2024. Its rescue and takeover of Credit Suisse in March 2023 was a seminal event that has had major consequences for UBS’s strategy and financial performance, as well as carrying substantial execution risk. However, the integration is on track, and UBS’s performance has been steadily improving. Capital, asset quality and liquidity all look strong, although Swiss regulatory capital requirements will continue to increase in coming years.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: August 14, 2024
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Search topics about wealth insights and investments.Pertamina
- Sector: Energy
- Sub Sector: Oil and Gas
- Region: Indonesia
- Bond: PERTIJ 3.1 30
- Indicative Yield-to-Maturity (YTM): 5.339%
- Credit Rating : -/BBB/-
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Fundamental View
AS OF 30 Dec 2024Pertamina enjoys very strong linkages with the Government of Indonesia (GoI) and is assured of extraordinary support in times of distress.
Slightly higher YoY FY24E Brent crude prices could lift upstream margins and overall EBITDA (given the upstream business accounts for >65% of consolidated EBITDA).
Although leverage typically remains low, Pertamina incurs large capex spending that could pressure its free cash flow generation.
High persisting dividend outflows could restrain free cash flow improvements.
Business Description
AS OF 30 Dec 2024- Pertamina is involved in a broad range of upstream and downstream oil, gas, geothermal and petrochemical operations.
- In the upstream sector, it engages in the exploration, development and production and supply of crude oil, natural gas and geothermal energy.
- As for the downstream sector, the company carries out refining, marketing and distribution of oil, gas, fuel products and petrochemical and other non-fuel products.
- As of 31 December 2022, its total proved oil reserves stood at ~1,289 mmbbl (mn barrels of oil) and gas reserves stood at ~817 mmboe (mn barrels of oil equivalent). Its average daily oil and gas production was ~1,044,000 boe per day in FY23. The company owns and operates 6 refineries in Indonesia.
- Under the Public Service Obligation (PSO) mandate, Pertamina is responsible for providing certain grades of motor gasoline, automotive diesel oil, kerosene and LPG at subsidized prices. The subsidized retail price is often times lower than the cost of production, creating a shortfall, for which it receives reimbursements from the GoI.
Risk & Catalysts
AS OF 30 Dec 2024Pertamina’s profitability is materially affected by volatility in oil & gas prices. Prolonged periods of low oil prices could hurt upstream earnings that form the bulk of overall EBITDA (>65%).
As retail prices of certain fuel products are regulated, realized prices may be below its cost of sales.
Pertamina has to initially absorb the shortfall between the regulated retail price and the cost of producing and distributing certain fuel products. If the price of crude oil exceeds the price ceiling set by the GoI, the company may receive insufficient subsidy reimbursements.
Capex typically remains elevated and which pressurizes its free cash flow generation.
Key Metric
AS OF 30 Dec 2024| $ mn | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Debt to Book Cap | 36.2% | 38.5% | 41.2% | 42.1% | 37.6% |
| Net Debt to Book Cap | 22.4% | 18.9% | 21.9% | 12.5% | 8.5% |
| Debt/Total Equity | 56.8% | 62.5% | 70.0% | 72.7% | 60.4% |
| Debt/Total Assets | 26.4% | 28.3% | 29.9% | 30.8% | 27.4% |
| Gross Leverage | 2.2x | 2.4x | 2.5x | 1.9x | 1.9x |
| Net Leverage | 1.3x | 1.2x | 1.3x | 0.6x | 0.4x |
| Interest Coverage | 8.1x | 7.8x | 8.7x | 11.2x | 8.9x |
| EBITDA Margin | 14.9% | 19.9% | 16.0% | 16.7% | 17.7% |
CreditSight View Comment
AS OF 19 Mar 2025We have a Market perform recommendation on Pertamina. Pertamina’s Jan-30/31 bonds trade 22 bp/24 bp wider than Petronas’ 30/32 bonds, while its longer-dated bonds trade an average of 42 bp wider. We see this differential as fair given Petronas’ solid net cash position, larger EBITDA, and stronger financial reporting quality; we believe the wider differential for the longer-dated bonds is attributable to Petronas’ notes trading tight. We remain comfortable with Pertamina’s full state-ownership, timely fuel subsidy and compensation from the Indonesian government, our expectation for Pertamina’s strategic policy role to sustain, positive free cash flow generation, robust credit metrics and adequate liquidity. That said, its capex remains elevated amid a ramp up in energy transition goals.
Recommendation Reviewed: March 19, 2025
Recommendation Changed: May 16, 2023
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 30 Dec 2024PLN enjoys extremely strong ties with the Government of Indonesia (GoI) given its critical policy role of electrifying the nation.
We see a modestly poorer FY24 credit outlook as resilient domestic power demand, flattish power tariffs and insulation from input cost volatility are offset by sizable capex for coal and renewable capacity additions.
President Prabowo’s plans to tamp down on PLN’s monopoly could induce longer-term regulatory uncertainties.
Business Description
AS OF 30 Dec 2024- PLN is involved in the entire electricity value-chain, from power generation, to transmission, distribution and retail.
- It alone accounts for 76% (~47 GW) of Indonesia's generation capacity (of which 8 GW is renewable capacity), while IPPs provide the remainder.
- The company controls and operates the entire transmission and distribution network in the country. It is the sole buyer of electricity produced by IPPs, through power purchase agreements (PPAs).
- It sells electricity to well-diversified off-takers – 41% to households, 25% to industrial customers, 21% to businesses and 12% to others.
- Since 2015, the GoI has gradually implemented monthly tariff adjustments for 13 customer groups, so that rates charged to customers are better matched with production costs.
- However, under the Public Service Obligation (PSO), the company will continue to sell electricity at subsidized rates of 50% to 450-volt amperes (VA) power households and 25% to 900 VA power households. The GoI subsequently reimburses the company for the difference between the subsidized tariff rate and production cost, typically within 2-3 months.
Risk & Catalysts
AS OF 30 Dec 2024The company provides subsidized electricity to certain households for which it subsequently receives reimbursements from the GoI; though these payments tend to get delayed during major events such as COVID-19 pandemic.
In order to increase the country’s electrification ratio to 97%, the company had been mandated by the GoI to develop large electricity capacities through the Fast Track II and 35,000 MW Programs. Implementation of such complex programs has required significant capital expenditure, which has led PLN’s FCF to fall deep into the red in recent years and created a funding gap.
The success of the above programs is also contingent on the company’s ability to source coal cheaply, select quality contractors, acquire land rights and receive adequate subsidy reimbursements from the GoI.
Being primarily a thermal power producer, PLN may be viewed unfavourably from an ESG perspective.
Key Metric
AS OF 30 Dec 2024| IDR bn | FY21 | FY22 | FY23 | 1H23 | 1H24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 29.7% | 28.9% | 27.8% | 26.9% | 27.5% |
| Net Debt to Book Cap | 26.9% | 25.2% | 23.7% | 24.6% | 25.4% |
| Debt/Total Equity | 42.2% | 40.7% | 38.5% | 36.7% | 38.0% |
| Debt/Total Assets | 25.7% | 24.6% | 23.4% | 22.6% | 22.9% |
| Gross Leverage | 5.0x | 4.2x | 4.3x | 4.0x | 4.3x |
| Net Leverage | 4.6x | 3.7x | 3.7x | 3.6x | 4.0x |
| Interest Coverage | 3.2x | 4.3x | 3.6x | 3.9x | 3.2x |
| EBITDA Margin | 28.0% | 30.1% | 26.4% | 33.4% | 29.5% |
CreditSight View Comment
AS OF 19 Mar 2025We have a Market perform recommendation on PLN and prefer its 2047-2050s. While we acknowledge PLN’s higher coal-related ESG risk and potential long-term regulatory concern, we remain comfortable with PLN’s resilient credit profile supported by healthy domestic power demand, good insulation from input cost volatility and strong state-ownership. We see fair spread differential of 20 bp wider than Pertamina; we think PLN’s shorter-dated trade close to fair. Against its own curve, PLN’s 2047-2050 trade on average 56 bp wider than its 2030s; similarly rated Indonesian state-owned O&G Pertamina on the other hand sees an average spread differential of 42 bp across its longer-dated versus its own 2030. We thus see scope for PLN’s long-end to tighten another ~15 bp.
Recommendation Reviewed: March 19, 2025
Recommendation Changed: December 06, 2024
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
How may we help you?
Search topics about wealth insights and investments.Export-Import Bank of India
- Sector: Financial Services
- Sub Sector: Financial Services
- Region: India
- Indicative Yield-to-Maturity (YTM): 4.92%
- Credit Rating : ( Baa3 / BBB- / BBB- )
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Fundamental View
AS OF 27 Dec 2024The Export-Import Bank of India (EXIMBK) was founded in 1982. Its credit standing is built upon the key role it plays in the promotion of India’s cross border trade and investment development, as India’s official export credit agency.
EXIMBK is 100% owned by the Government of India. Given its crucial policy role, close governmental links and quasi-sovereign status, we view it as inconceivable that the Indian government would fail to provide EXIMBK with support in a timely manner, if needed.
Business Description
AS OF 27 Dec 2024- EXIMBK presently serves as a growth engine for the internationalization efforts of Indian businesses, facilitating the import of technology and export product development, export production, export marketing, pre- and post-shipment, as well as overseas investment.
- As at F1H25, EXIMBK's loan portfolio was principally made up of export finance (68%) and term loans to exporters (18%), with the remaining 14% split among the financing of overseas investment, import finance, and export facilitation. 44% come under the policy business/face GOI risk while the remaining 56% are to the commercial business.
- By geography, the bank has a primary exposure of 33% to Africa, 56% to Asia (mainly South Asia), 7% to Europe and the Americas, and the remaining to the rest of the world.
Risk & Catalysts
AS OF 27 Dec 2024As a quasi-sovereign issuer with backstops from the Government of India and the Reserve Bank of India (RBI), it is viewed as a proxy to the sovereign. Any downgrade to India’s sovereign rating will flow through to EXIMBK as well.
EXIMBK’s policy role may require it to, at times, take on exposures that could lead to financial losses. This has led to poor asset quality and high impairment charges similar to the public sector commercial banks during the years leading up to the pandemic.
Capital standing, however, is robust thanks to capital infusions from the Government of India which have been stepped up in recent years – INR 50 bn was injected in FY19, followed by infusions of INR 15 bn and INR 13 bn in FY20 and FY21 respectively. The bank received INR 7.5 bn in FY22 despite capital levels remaining strong during the year. No infusions have been made since FY23 due to the comfortable capital position.
Key Metric
AS OF 27 Dec 2024| INR mn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| Net Interest Margin (Annual) | 1.84% | 2.19% | 2.29% | 2.06% | 1.70% |
| ROAA | 0.19% | 0.54% | 1.04% | 1.43% | 1.16% |
| ROAE | 1.49% | 3.97% | 7.76% | 11.47% | 9.54% |
| Equity/Assets | 13.23% | 14.12% | 12.87% | 12.06% | 12.31% |
| Tier 1 Capital Ratio | 24.0% | 28.6% | 23.7% | 19.6% | 27.4% |
| Gross NPA Ratio | 6.69% | 3.56% | 4.09% | 1.94% | 2.02% |
| Provisions/Loans | 2.46% | 0.90% | 1.24% | 0.29% | 0.16% |
| Pre-Impairment Operating Profit / Average Assets | 2.13% | 2.31% | 2.41% | 2.12% | 1.68% |
CreditSight View Comment
AS OF 06 Jan 2025Exim Bank of India is the country’s key policy bank with full government support. It provides financial assistance to exporters and importers with a view to promote trade in India. It is 100% owned by the Government of India (GoI) and is a proxy to the India sovereign in international debt markets (quasi-sovereign status). The bank cannot be liquidated without the government’s approval and has a track record of government capital infusions. The bank’s asset quality is back on track after some wobbles in previous years. Capital levels are strong. We maintain a Market perform recommendation on the bank.
Recommendation Reviewed: January 06, 2025
Recommendation Changed: January 04, 2021
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
How may we help you?
Search topics about wealth insights and investments.BMO Financial
- Sector: Financial Services
- Sub Sector: Consumer Finance and Banking
- Region: Canada
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Fundamental View
AS OF 30 Dec 2024BMO is geographically diversified within Canada & via its commercial banking business in the U.S. and is also well-diversified by revenue with contribution from fee income businesses.
Credit has performed worse than peers in 2024, but losses are likely to stabilize and gradually improve in 2025, based on underwriting and risk management changes in recent years as well as seasoning effects.
Business Description
AS OF 20 Dec 2024- BMO Financial Group is the fourth largest depository institution in Canada with C$1.41 tn in assets as of F4Q24 and a market capitalization of US$70 bn. Total deposits were C$982 bn at F4Q24.
- BMO operates 1,890 branches in Canada and the United States in 2024.
- As of YE23, BMO had 1,013 branches within the United States, mostly in the Midwest. BMO ranked 11th in deposit market share in the U.S. (SNL), with a top-2 share in Illinois.
Risk & Catalysts
AS OF 20 Dec 2024BMO has a strong core deposit base in Canada and in the U.S., which mitigates the potential for a liquidity event. BMO remains well-capitalized relative to requirements with a target CET1 ratio of 12.5% (13.6% at F4Q24).
BMO closed the acquisition of Bank of the West from BNP Paribas in February 2023, significantly expanding its footprint in the U.S. We don’t expect deal integration to have much impact on the credit profile.
We view real estate-related risk in Canada as manageable for BMO given low LTV of exposures in vulnerable markets and conservative underwriting. Commercial real estate accounts for ~10% of total loans, and office is quite manageable at ~1% of total.
Credit deterioration was worse than peers in 2024, leading to elevated provisions in 2H24; BMO has indicated the problem loans were mostly originated in 2021, and provisions should start to improve in 2025.
Key Metric
AS OF 20 Dec 2024| $ mn | FY20 | FY21 | FY22 | FY23 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue | 17,461 | 20,509 | 26,727 | 21,694 | 24,095 |
| Net Income | 3,790 | 6,167 | 10,519 | 3,291 | 5,380 |
| ROAE | 0.94% | 0.92% | 0.92% | 0.92% | 0.92% |
| NIM | 1.58% | 1.53% | 1.53% | 1.53% | 1.53% |
| Net Charge-offs / Loans | 0.25% | 0.14% | 0.08% | 0.14% | 0.39% |
| Total Assets | 713,376 | 797,018 | 860,451 | 969,851 | 1,011,587 |
| Unsecured LT Funding | 51,916 | 51,915 | 64,886 | 63,418 | 66,700 |
| CET1 Ratio (Fully-Phased-In) | 11.9% | 13.7% | 16.7% | 12.5% | 13.6% |
CreditSight View Comment
AS OF 27 Feb 2025We maintain our Market perform for BMO, with our preference within the group remaining to trade up in quality to RBC and TD. Surprising deterioration in asset quality metrics was the story throughout the latter part of F2024, with provisions well above historical average levels. Management has attributed the weakness largely to large wholesale loans to new borrowers originated in 2021, but given the steady climb in reserve coverage as well as changes to risk management and underwriting in recent years, BMO is confident quarterly provision ratios should moderate across F2025 alongside further potential benefits from efficiency initatives. This appeared to be the case in F1Q25, with provisions lower QoQ though reserve build continued. Revenue growth was strong YoY across NII and fee income.
Recommendation Reviewed: February 27, 2025
Recommendation Changed: August 26, 2020
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 30 Dec 2024TD’s credit profile is supported by its scale, profitability, and history of strong credit quality, particularly in its core domestic banking footprint. TD also sees significant revenue contributions from the growing capital markets business and wealth management. U.S. retail banking has scale and is an important part of the overall franchise, but profitability will remain challenged.
We expect TD to continue to manage capital levels conservatively given profitability and regulatory pressures stemming from BSA/AML issues.
Business Description
AS OF 18 Dec 2024- Toronto Dominion is the second largest depository institution in Canada with C$2,062 bn in assets as of F4Q24 and a market cap of US$93.3 bn as of December 16, 2024. The company has C$1,269 bn in total deposits.
- As of 2024, TD ranked 9th in terms of U.S. deposits with approximately US$290.1 bn in deposits and 1,137 branches (SNL). The U.S. footprint is focused on the Atlantic coast including Delaware, New Jersey, New York, Massachusetts, New Hampshire, Connecticut, Maine, Vermont, and Pennsylvania.
Risk & Catalysts
AS OF 18 Dec 2024Toronto Dominion has a strong, largely retail-driven deposit base in both Canada and the U.S., which should mitigate the potential for a liquidity event.
The remediation efforts related to the U.S. business represent a medium term headwind for TD’s overall earnings profile, but one we view as manageable given the strength of the Canadian and Wholesale banking parts of the franchise. We expect TD to maintain strong capital and liquidity positions throughout the remediation period.
With the CEO transition, TD is conducting a strategic review of its business priorities and capital allocation, and therefore suspended its medium-term profitability targets. Management expects to provide an update to the medium-term targets in 2H25.
We view real estate-related risk in Canada as manageable for TD given low LTV of exposures in vulnerable markets and conservative underwriting, as well as significantly lower interest rates in Canada compared to the start of 2024.
Key Metric
AS OF 18 Dec 2024| $ mn | FY20 | FY21 | FY22 | FY23 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue | 30,311 | 31,801 | 35,848 | 33,866 | 37,163 |
| Net Income | 8,846 | 11,371 | 13,544 | 7,883 | 6,509 |
| ROAE | 1.30% | 0.79% | 0.79% | 0.79% | 0.79% |
| NIM | 1.72% | 1.56% | 1.69% | 1.75% | 1.73% |
| Net Charge-offs / Loans | 0.34% | 0.18% | 0.15% | 0.24% | 0.34% |
| Total Assets | 1,289,484 | 1,394,270 | 1,406,122 | 1,407,709 | 1,479,549 |
| Unsecured LT Funding | 55,061 | 67,073 | 88,875 | 90,998 | 87,128 |
| CET1 Ratio | 13.1% | 15.2% | 16.2% | 14.4% | 13.1% |
CreditSight View Comment
AS OF 03 Mar 2025We maintain our Outperform recommendation for Toronto Dominion. Historically TD has traded as one of the tightest names in the Canadian bank peer group. However, over the past several quarters TD has traded towards the middle of the pack among Canadian banks, closer to BMO and BNS than to RBC. We continue to believe the best value in the sector in current conditions involves trading up in quality to TD and RBC. With the direct financial impact of the BSA/AML settlement in the rearview mirror (but with further restructuring and compliance costs still pending in the next few years), we remain confident in credit fundamentals long-term. The capital raise from selling SCHW shares is positive and allows for investment in Canadian and Wholesale banking.
Recommendation Reviewed: March 03, 2025
Recommendation Changed: March 08, 2023
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 09 Dec 2024BNP’s financial strength is based on its strong franchises across retail, commercial and investment banking, and its wide business and geographic diversification. Profitability is sound and fairly resilient, while asset quality has held up well.
Uncertainty around the financial health of the French sovereign and its ratings have the capacity to weigh on BNP’s stock price and its credit spreads.
Capital ratios are run tightly considering BNP’s balance sheet size, although this is in the context of its liquid and well-managed risk profile.
Business Description
AS OF 09 Dec 2024- BNP is one of the most diversified banking groups in Europe, having been created from a merger of the retail/commercial bank BNP and the corporate/investment bank Paribas in 2000.
- Domestic Markets (DM) comprises the Group's four retail banking networks in the eurozone and its three specialised business lines (including leasing and digital banking). The retail banks are French Retail Banking (FRB), BNL in Italy, BNP Paribas Fortis in Belgium and BGL BNP Paribas in Luxembourg.
- International Financial Services (IFS) includes consumer finance, asset management and private banking, and subsidiaries in non-eurozone countries, including TEB in Turkey and BNP Paribas Bank Polska.
- Corporate & Institutional Banking (CIB) is a global provider of financial solutions to corporate and institutional clients and includes BNP's extensive trading and investment banking businesses.
Risk & Catalysts
AS OF 10 Dec 2024Pressure on margins is high in Personal Finance, and despite the change in product mix – reducing the concentration in Personal loans and credit cards and moving to Auto loans, it was still a difficult FY23.
BNP Paribas remains the subject of various claims concerning the Madoff matter; amongst other claims. Litigation provisions on the balance sheet stood at €841 mn at 30 June 2024. BNP says the latest claims against it stand at $1.1 bn as of June 2024.
If there was a negative rating action on the sovereign via an outlook change or notch downgrade, it is possible that BNP’s ratings will be impacted but it is difficult to say with any uncertainty. France represents around 30% of revenues and gross commitments on balance sheet and sovereign bond holdings are moderate; we discuss more below.
BNP is increasingly using significant risk transfers, mainly synthetic securitisations of loan portfolios, to gain regulatory capital relief and manage credit risk.
Key Metric
AS OF 09 Dec 2024| mn | 3Q24 | Y23 | Y22 | Y21 | Y20 |
|---|---|---|---|---|---|
| Return On Equity | 9.3% | 9.0% | 8.2% | 8.2% | 6.4% |
| Total Revenues Margin | 1.8% | 1.7% | 1.7% | 1.8% | 1.9% |
| Cost/Income | 60.4% | 62.6% | 60.7% | 67.3% | 68.2% |
| CET1 Ratio (Transitional) | 12.7% | 13.2% | 12.3% | 12.9% | 12.8% |
| CET1 Ratio (Fully-Loaded) | 12.7% | 13.2% | 12.3% | 12.9% | 12.8% |
| Leverage Ratio (Fully-Loaded) | 4.4% | 4.6% | 4.4% | 4.1% | 4.9% |
| Liquidity Coverage Ratio | 124.0% | 148.0% | 129.0% | 143.0% | 154.0% |
| Impaired Loans (Gross)/Total Loans | n/a | 2.9% | 2.9% | 3.3% | 3.6% |
CreditSight View Comment
AS OF 09 May 2025BNP remains one of the more diversified bank names in Europe. Its strong business and geographic diversification has helped it maintain good profitability and asset quality. It has extensive operations in Italy via its subsidiary BNL. Earnings have been resilient, with CIB a stand-out performer. Liquidity and funding metrics look sound. Asset quality has held up well, although an outlier is the group’s personal finance business. The latter is being restructured, to focus more on auto finance rather than personal lending. BNP’s capital position strengthened in 2024 but it will weaken in 2025/6. It is looking to expand now in insurance and asset management, likely to grow fee income. Despite global uncertainty, BNP has not amended any of its target for 2025/2026.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: October 30, 2018
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 02 Dec 2024We expect PT Mineral Industri Indonesia’s (MIND ID) strategic importance and policy role to the Government of Indonesia (GoI) to strengthen in line with the GoI’s downstream push and green energy transition efforts.
We expect MIND ID’s credit metrics to improve meaningfully from FY25 onwards as strong commodity prices (barring coal and nickel), capacity additions, and healthy dividend income from key joint venture PT Freeport Indonesia (PTFI) could offset high capex.
Mining regulatory risk remains a concern, though MIND ID’s large diversified scale of operations could partly limit such risks.
A potential IPO of its aluminium business within the next 3-5 years could boost financial flexibility.
Business Description
AS OF 02 Dec 2024- MIND ID is an unlisted Indonesian state-owned holding company of various Indonesian mining operators.
- Key subsidiaries include: 1) Bukit Asam: Coal mining, processing, and sale of coal; 2) Timah: Tin mining, processing, and sale of downstream products; 3) Aneka Tambang (Antam): Mining, processing, and sale of gold products, nickel, ferronickel, bauxite and chemical grade alumina; 4) Inalum: Production of aluminium.
- Key unconsolidated joint ventures and associates include: 1) PT Freeport Indonesia (PTFI): Mining, processing and sale of copper, gold and silver. MIND ID aims to raise its stake in PTFI to 71% from a current 51% in the medium-to-long term; 2) PT Vale Indonesia (PTVI): Mining and processing of nickel. MIND ID has a current 34% stake in PTVI.
Risk & Catalysts
AS OF 02 Dec 2024MIND ID is subjected to unanticipated changes in mining policies that raise operational and regulatory uncertainties.
MIND ID is exposed to commodity price fluctuations that could hurt sales price realizations and profitability.
Capex typically remains elevated, pressurizing its free cash flow generation and leverage.
MIND ID faces material asset concentration risk for its coal, gold and tin segments.
Key Metric
AS OF 02 Dec 2024| IDR bn | FY21 | FY22 | FY23 | LTM 9M23 | LTM 9M24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 52.0% | 44.6% | 41.6% | 41.5% | 38.0% |
| Net Debt to Book Cap | 29.6% | 27.1% | 24.5% | 25.3% | 23.7% |
| Debt/Total Equity | 108.3% | 80.5% | 71.2% | 70.9% | 61.4% |
| Debt/Total Assets | 46.1% | 38.7% | 35.6% | 35.4% | 31.6% |
| Gross Leverage | 4.7x | 3.5x | 7.0x | 6.2x | 6.0x |
| Net Leverage | 2.7x | 2.1x | 4.1x | 3.8x | 3.7x |
| Interest Coverage | 3.2x | 3.9x | 2.2x | 2.3x | 2.2x |
| EBITDA Margin | 21.5% | 19.9% | 12.3% | 12.3% | 11.8% |
CreditSight View Comment
AS OF 22 Apr 2025We have an Underperform recommendation on MIND ID. We think valuations are uncompelling versus its SOE peers, at 8-14 bp wider than Pertamina and flattish to PLN. We think the differentials should be wider and see room for MIND ID to widen ~10-15 bp ahead, considering MIND ID’s materially weaker credit profile, less crucial policy role, and greater exposure to Indonesia’s mining policy changes. Proposed mining royalty hikes, if effected, will be broadly negative for MIND ID. We also expect free cash flows to remain negative over the next 2 years from heavy downstream capex. That said, key mitigants include MIND ID’s gradually strengthening strategic importance, resilient commodity prices (especially gold), and persisting large dividend income from Freeport Indonesia (PTFI).
Recommendation Reviewed: April 22, 2025
Recommendation Changed: March 19, 2025
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 29 Nov 2024
In an industry beset by manufacturing issues and operational hiccups, HWM continues to perform admirably while also paying down debt. Gross adjusted leverage reached 2.5x, an all time low for HWM and down 2 turns since 2021, on $800mn of debt paydown and EBITDA growth.
Moody’s recently double upgraded the credit to Baa1, while Fitch placed its BBB on Positive Outlook. S&P has upgraded one notch to BBB. We expect the credit will stabilize at the BBB+ level in the years to come. We continue to prefer HWM to such BBB+ peers such as RTX, with ~10-15 bp of spread pickup that we believe can narrow over time, as the agencies continue their upgrade cycle.
Business Description
AS OF 29 Nov 2024- Howmet Aerospace Inc. is the surviving entity of the legacy Alcoa Inc. following two major spin-off transactions in 2016 when Alcoa was spun off and in 2020 when Arconic was spun out. Howmet is now focused on high value add, high margin aluminum, titanium and nickel superalloy casting and forging.
- Products are sold into the Commercial Aerospace (51% of 2023 revenue), Defense Aerospace (15%), Commercial Transportation (20%), and other end markets (14%). Howmet also has four reportable segments: Engine Products (49% of 2024 segment revenue), Fastening Systems (20%), Engineered Structures (13%), and Forged Wheels (17%). The Engine Products segment produces investment casting – including airfoils and seamless rolled rings – as well as rotating and structural parts. The Fastening Products segment produces aerospace and industrial fasteners as well as those sold into the commercial transportation, automotive, renewables, construction, and industrial equipment. Engineered Structures produces titanium ingots and mill products for aerospace and defense applications as well as produces aluminum forgings, nickel forgings, and aluminum machined components. Forged Wheels provides forged aluminum wheels and related products for heavy-duty trucks and commercial transportation.
- Howmet operates 62 facilities in 11 different countries (primarily the US and the UK) and receives the majority of its revenue from the US and Europe.
Risk & Catalysts
AS OF 29 Nov 2024Aerospace industry recovery remains robust. Domestic travel boom significantly benefited narrowbody business while international travel supporting the next stage for widebody recovery. However, there are signs that passenger demand may start to falter- at least domestically in the US- and we’ll be tracking how much of the booming OE demand will be realized over the next few years.
Howmet should benefit from increase in its overall volumes across the board in both commercial aerospace and defense.
In addition to the increasing demand for aerospace products, increased energy demand driven by the AI boom will be driving higher volumes and demand for HWM’s portfolio of IGT products.
Forged wheels segment faces persistent headwinds from the still-weak trucking industry. However, HWM has an edge in the segment thanks to its lightweight products.
Key Metric
AS OF 29 Nov 2024| $ mn | Y21 | Y22 | Y23 | LTM 3Q24 |
|---|---|---|---|---|
| Revenue | 4,972 | 5,663 | 6,640 | 7,270 |
| EBITDA | 1,135 | 1,276 | 1,508 | 1,806 |
| EBITDA Margin | 23.0% | 22.2% | 23.0% | 26.6% |
| EBITDA-CAPEX-INT % of Revenues | 54.4% | 60.2% | 64.4% | 73.5% |
| Total Debt | 4,232 | 4,162 | 3,706 | 3,394 |
| Net Debt | 3,512 | 3,371 | 3,096 | 2,919 |
| Net Leverage | 3.1x | 2.6x | 2.1x | 1.6x |
CreditSight View Comment
AS OF 01 May 2025Howmet Aerospace (Baa1/BBB/BBB+; S/S/S) reported a 6% YoY revenue increase and a 28% rise in EBITDA, driven by robust performance across defense aerospace, commercial aerospace, and industrial sectors. The company raised its 2025 guidance, anticipating an additional $75mn in free cash flow and $120mn in EBITDA, taking into account the net impact of tariffs. Despite a challenging trade environment, Howmet expects to pass on tariff costs to customers, mitigating a gross impact of $80mn to a net $15mn. With a stock surge of 1100% over five years and a loan-to-value ratio in the A ratings territory, Howmet’s ongoing ratings cycle suggests favorable credit spread tightening, and we continue to like the credit.
Recommendation Reviewed: May 01, 2025
Recommendation Changed: March 02, 2022
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group