Erste Bank: Keeping promise on ROTE (stays BUY)
In this report, we revise our financial forecasts for Erste Bank, discuss the risk of introduction of special charges for the banking sector in the Czech Republic, and reflect a EUR 230m negative one-off (in gross profit) in our 2019E expectations due to the unfavourable ruling of the Romanian court regarding building societies. We note that the discussion on sector charges in the Czech Republic restarted in late-April during the EU elections campaign, followed by some political turmoil in Austria in May, and then finally the recent news on a significant one-off loss in Romania. All of the above led to a share price drop, which resulted in the wiping out of the stock’s positive share price performance until mid-April. We consider the current momentum an attractive entry point for Erste Bank; thus, we reiterate our BUY rating, while cutting our 12M price target (PT) to EUR 38.2 (from EUR 40.5), to reflect the risk of sector charges.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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