While ROE target looks achievable, Erste management has a job to do improving the cost/income ratio.
Compared with EU peers, Erste runs with a rather high cost/income ratio. As of year-end 2017, the CIR stood at 60%, an increase of more than 200 basis points compared with the prior year. While revenue stayed flat, total costs increased by 3%. While management is ambitious in decreasing the CIR, ideally to 50%, we believe this looks rather optimistic in the short to medium term, given ongoing digital expansion and upward cost pressures due to wage inflation in some countries. We estimate a cost/...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.
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