Banking on Impact – The Independent Equity Analyst

Banking on impact - The Independent Equity Analyst

In this edition of Banking on Impact series, a large international bank reports strong financial results that exceed market expectations, leading to an 18-month high share price. However, during their Investor Day, the Heads of Investor Relations and Group Sustainability face difficult questions about the bank's sustainability policy.

Don’t get caught in a similar situation: incorporate impak's solutions to make sure you have contextualised, double-materiality based impact assessments on all your public and private clients. 

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BD-Independent Equity Analyst

How one (smart) question spoiled the party at the Bank’s Investor Day

SIB (Super International Bank) released robust, above-consensus H1 financials in July that beat all market expectations. Revenues were up two digits with all group divisions showing steady year-over-year increases, new impairments were low, results showed no exceptional (or one-off) items, and the bank’s return on equity was the best of its peer group.

SIB’s share price reached 18 months highs on the news and strong market momentum continued throughout the summer. However, contrary to others, François, a senior independent equity analyst, had not changed his target price and guidance on the stock.

On September 15th, the Bank’s Investor Day (for the third year running held at the iconic Dorchester Hotel on Park Lane, London) kicked off with an introductory message from the Head of Investor Relations (IR) followed by state-of-the-art slide shows delivered by C-suite members.

The level of enthusiasm about the bank’s recent performance was at its peak and it was time for questions. As usual, several equity analysts raised 3 questions instead of just 1, seeking guidance from the CFO to fine-tune their models. The IR then turned to François and said “Please, go ahead with your question

François said “Thanks for taking my question and congrats on your H1 performance”. He went on, “My question refers to your 1800 Global Banking clients and the way you track their transition journey”. The CEO looked at the Heads of IR and Group Sustainability as if to say – “this one is for you”. François went on, “More precisely, could you please advise whether or not your sustainability policy accounts for positive impact measurement and double materiality, as increasingly recommended by regulators? In other words, do you only focus on a company's mitigations to potential non-financial risks or, also consider a company’s positive and negative impacts on society and the environment? Thank you.”

It was obvious from their vague and ambiguous responses that neither the heads of IR nor Group Sustainability were prepared for this one. Yet, they proceeded with an overview of the bank’s ESG policy (which most of the audience knew already about) and acknowledged the merits of positive impact and double materiality, which the bank would consider further for its sustainability policies.

The mood had changed and as many attendees were now leaving the conference room (nodding to François for his excellent question) the IR, somewhat embarrassed, ended with a closing statement inviting François to follow a one-on-one discussion as they had reached time for the garden lunch.

impak Analytics’ assessments and ratings on both public and private issuers would have helped SIB answering François’ question. Our solutions go beyond conventional ESG analysis, encompassing contextualization, positive impacts and double materiality. 

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Miguel Holguin