Kruk (WSE:KRU) shares rose 2.3% after Citi moved the stock to a Buy rating, highlighting what the bank called an appealing valuation in spite of a soft showing in the first quarter.
The Polish debt-collection group reported first-quarter 2026 net profit that was 4% below the consensus compiled by PAP and 17% below Citi’s own forecast. Citi attributed the shortfall to revenues that missed expectations, a consequence of smaller-than-expected revaluation gains and operating expenses that ran higher than Citi had modelled. Operating costs exceeded Citi’s estimates by about 2%, driven largely by increased court and tax expenses. Kruk’s net profit was aided by a low effective tax rate of 3%.
Revaluation performance by country
Revaluation outcomes varied across Kruk’s markets in the quarter. In Poland, revaluations fell to Zl 57m from Zl 124m in the fourth quarter of 2025 and Zl 61m in the year-ago quarter. Romania recorded revaluations of Zl 29m versus Zl 28m in the prior quarter and Zl 54m year-on-year. Italy showed Zl 8m of revaluations compared with Zl -2m in the fourth quarter of 2025 and Zl 17m year-on-year, while Spain posted negative net revaluations of Zl -1m.
Citi expects revaluation gains to pick up in coming quarters, calling for modest improvements in Poland and Italy.
Operating and collection trends
Net interest income rose 11.7% year-on-year in Q1, supported by a 15.5% year-on-year increase in the stock of non-performing loans and an 18.3% year-on-year rise in estimated remaining collections. Staff costs were up 3% year-on-year, while spending on external services declined 5% year-on-year. Cash collection increased 5.2% year-on-year but softened 2.8% quarter-over-quarter.
Citi noted an absence of clear business catalysts that might prompt a re-rating of the shares. Nevertheless, the bank highlighted valuation metrics it deems compelling: an FY2026E price-to-earnings multiple of 7.3x and a dividend yield of 5.8%. Citi said it views the low valuation itself as a potential catalyst for a re-rating.
Market context
The share reaction to Citi’s upgrade suggests investor attention to valuation and income characteristics can offset near-term operational weakness, at least in the short term. The firm's outlook for recovering revaluation gains and the firm dividend yield underpin the upgrade rationale.