OTP raised to BUY, TP HUF 13,500 - Robust fundamentals in a tough environment
We significantly cut our 12m TP to HUF 13,500 (HUF 20,700) after adjusting our earnings forecasts to RU/UA war-related circumstances as well as on downside macroeconomic risks on OTPs main markets in CEE.Despite tightening valuation parameters (higher COE, lower ROE) and reclassifying OTP to high-risk stock, ~30% upside potential justifies an upgrade from HOLD to BUY recommendation purely from the fundamental point of view. Nevertheless we advise on still potentially unfavourable news-flow from the geopolitical side in the near future
Based on the downward revision of earnings forecasts to account for difficult market conditions for banks in RU/UA we believe that at current levels the market prices-in much worse scenario for the rest of OTPs operations excl. RU/UA vs. our projection of 16-17% ROE, stable NIM, risk costs of 30 bps and 5-7% loan growth.
Even our base-case scenario in RU/UA incl. negative impact on CET1 at ~250 bps vs. our previous update, seems fully priced-in.
OTP might have lost a bit of its M&A story appeal, but we believe that the acquisition policy executed in past years may compensate to large extent for the accumulated loss burden in RU/UA
From the capital perspective, OTP may reach the low point during 2022e as a result of the accumulation of RU/UA losses and the acquisition of NovaKBM in Slovenia, however our model suggests restoration towards pre-war levels by end-2024.
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.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.