Report

Erste Group confirmed at BUY, TP EUR 26.00 - Capital ratios at a record level

The main positive in 2Q reporting clearly was the capital development with reported CET1 standing at 14.2% even still including dividend accruals for 2019 (56 bps) and for 1H 20 (12 bps). Without dividends and incorporating already communicated quick fixes by the regulator (software, sovereigns in IRB to become effective in 2H 20 and 1Q 21), the CET1 ratio would even exceed the 15% threshold. Thus we see limited reasonable arguments against Erste resuming dividend payments next year. While we expect Erste to deliver 8% ROE thereafter with normalising COR, which is not reflected at a P/B multiple of 0.6. We confirm our BUY recommendation and the TP of EUR 26.
Underlying
Erste Group Bank AG

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.

Provider
Raiffeisen Bank International AG - Institutional Equity
Raiffeisen Bank International AG - Institutional Equity

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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