Erste Bank: A penny saved is a penny earned (upgraded to BUY)
In this report, we have upgraded Erste Bank to BUY (from Hold) and set our new 12M price target (PT) at EUR 40.5 (up marginally from EUR 39.9), offering 16% upside potential currently. This is enough upside for us to yield a positive bias on the stock and we see a chance for a positive share price performance, which could be driven, in our view, by the cost delivery in 2H18E. We expect this to trigger positive pre-provision profit momentum. Erste Bank trades currently at our 2018-20E P/Es of 10.4-9.9x, at double-digit discounts vs. its historical average P/Es and its regional peers (the CE3 and Austrian banks trade at 2018-19E P/Es of 13.8-12.7x). We note that c.50% of its earnings are generated in the Czech Republic and Slovakia. The key risk to our moderately positive view is a reversal in the asset quality trends in the region and we note that our forecasts foresee a COR normalisation, but still assume a rather supportive environment.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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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