Davy Morning Equity Briefing

Dec 10 2018

Market Comment

Sales of NPLs may be only viable option

The Central Bank of Ireland’s (CBI) Macro Financial Review 2018: II understandably concentrates on the risk associated with Brexit to the Irish economy and banking system. Also from a banking perspective, it is noteworthy that its view on non-performing loan (NPL) reductions has somewhat changed ¿ it now states that asset sales or foreclosures may represent the only viable option. Sales have been an important and successful tool for lowering NPL levels during 2018 and we expect this to remain the case, albeit at lower activity levels into 2019.

Greencoat Renewables

Agrees to acquire two BlackRock wind assets

The acquisition of two BlackRock wind assets in Ireland bookends a very successful year for Greencoat Renewables. It has grown its portfolio almost 3x in the last 12 months, demonstrating the significant secondary market opportunity that it envisaged at the time of its IPO. It now represents just over 10% of the Irish wind farm market. Its capital structure has also now matured nicely. Leverage is likely to reach 60% following recent transactions and we expect the fund to operate in a higher (and tighter) gearing range going forward. Both portfolio and balance sheet developments should support improved NAV momentum. We reiterate our ‘Outperform’ recommendation.