Erste Group raised to BUY, TP EUR 41 - Overly punished for our new baseline macro scenario
We upgrade our recommendation from HOLD to BUY call albeit lowering 12m TP to EUR 41 (was 49) as a result of penciling in a new baseline macro scenario and raising COE due to existing uncertainties~40% negative GDP growth outlook revision in CEE and AT, higher CPI pressure but also a notch better support from key rates resulted in a 10-13% EPS outlook reduction over the mid-term mainly from adjusting risk provisioning and operating costs forecasts
Erste recently outlined its limited exposure towards RU/UA/BY and confirmed its CET1 target of 13.5% which given decelerated but still positive capital generation provides a solid backup for opportunistic M&A actions (preferred vs. share buyback)
The stock trades in line with peers on P/B - ROE regression and offers an average dividend yield of 5.5%
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.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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