Erste Group confirmed at BUY, TP EUR 35 - Room for upside from gradually improving environment
We confirm a BUY call at higher TP of EUR 35 (was 26) as a result of improving EPS outlook and lower risk-free ratesBased on our forecasts, NIM should bottom-out in 2022e (or late 2021e) and combined with assumed risk costs decline into the anticipated economic recovery would trigger a gradual updrift of ROE towards 9%+ by 2023e
Asset quality proved so far robust with low NPL ratio and relatively comfortable NPL coverage thanks to front-loading of risk provisions in 2020 providing a shield against the upcoming NPL inflow cycle
Erste trades in line with peers on P/B ROE regression and offers an average dividend yield of 3-4%
In the still uncertain dividend environment from the regulatory perspective, more M&A action might be taken positively by the market
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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