CEE Banks – Great opportunities with different risk profiles
The CEE region is expected to deliver a moderate rebound of GDP growth in 2024,
following the preceding year’s weak growth, fuelling expectations of sustainable profits in
the banking sector. Inflation is seen to be twin faced in our region, similar to most of the core
economies. Even with a diminished potential for much intra-year improvement of the inflation
path in 2024, this inflation provides several CEE central banks more room to cut policy rates
this year. Lower interest rates are expected to ease some of the burdens of the CEE state
budget, though most of the improvement should come from higher VAT and other revenues
boosted by stronger GDP growth.
Due to the transfer of coverage, we revisited our earnings estimates for OTP, Erste and
RBI. The higher the risk, the higher the upside potential in our coverage. OTP and RBI had
underperformed its peers in the first quarter which might have related to their risk profile as
investors took profit after stellar gains in both names.
OTP: We raise our June-25 TP to 23,000 HUF per share for OTP Bank and remain Buy rated
on the stock, implying 33% upside potential excluding dividends. OTP will soon pay out HUF
535 per share as dividends, translating into dividend yield of 3.1% while the HUF 60 bn SBB
program is still ongoing. The next catalyst will be the Q1 earnings report scheduled for 10 May.
Erste: We raise our June-25 TP to 55.31 EUR per share for Erste and raise our
recommendation to Buy on the stock, implying 32% upside potential excluding dividends.
Erste will payout 2.7 EUR per share as dividends in May, translating into dividend yield of 6.1%
while the EUR 500 mln SBB program is expected to start in June after the ECB’s approval.
Erste is due to report Q1 earnings on 30 April.
Raiffeisen: We raise our June-25 TP to 24.8 EUR per share for RBI and remain Buy rated on
the stock, implying 38% upside potential excluding dividends. RBI has already paid dividends
on 11 April, while the uncertain Strabag share acquisition (3.8 EUR per share) gives another
21.2% upside potential. RBI is scheduled to post Q1 earnings on 2 May.
Erste Group is a financial services provider based in Austria. As of Dec 31 2015, Co.'s total assets amounted to Euro199,743 million and the number of customers was approximately 16.5 million. Co.'s key business is the retail business, covering the entire spectrum from lending, deposit and investment products to current accounts and credit cards. In addition to providing financial services to private individuals, Co.'s core activities also include advisory services and support for corporate clients in financing, investment and access to international capital markets, public sector funding and interbank market operations.
OTP Bank is a financial institution based in Hungary. Co. is engaged in retail banking (account management, bankcards and Electronic sevices - OTPdirekt) corporate banking and private banking. In Hungary traditional banking operations are performed by Co. while specialized services, including car leasing, investment funds and insurance are developed and offered by Co.'s subsidiaries. Co. expands its operations throughout the region via its foreign subsidiaries. As of Dec 31 2011, Co. had total assets of HUF10,200,527,000,000 and deposits of HUF6,398,853,000,000.
Raiffeisen Bank International is a universal bank focusing on corporate and retail customers in Central and Eastern Europe (CEE) and on corporate customers in Austria. In CEE, Co. consists of a network of banks, leasing companies and financial service providers. In Austria, Co. is involved in corporate finance and export and trade finance banks. Co. provides services to customers in 2,800 branch offices. In the retail banking business, Co.'s product and service portfolio comprises inter alia credit services (mortgages, credit cards and personal loans), as well as payment transaction and current account package services. As of Dec 31 2014, Co.'s total assets amounted to Euro121.6 million
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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