OTP Bank: all about capital returns (stays BUY)

We keep OTP Bank as a BUY, with an increased 12M price target (PT) of HUF 34,877/share, offering 16% upside. We appreciate its strong results delivery and we expect this to continue. We forecast a 2025E ROE of short of 21% (excluding the Russian operations, 18%+). Our current forecasts, based purely on organic growth, imply upside vs. the current consensus estimates. However, if this was OTP’s only story, we would see its current valuation as offering too little upside to guarantee an outright positive stance, and we would wait for a better entry point, remaining upbeat on the bank’s organic earnings outlook. An extra boost for this outlook comes from the potential of leveraging up the existing capital surplus to either pursue M&A or, eventually, reward investors with significantly higher dividend payments. These can help to keep the 18%+ excluding Russia ROEs in the medium term, which we see as not priced into the current valuation, at 2025-26E P/BVs of 1.4-1.2x. We note that, recently, management expressed its hope to be able to announce an acquisition by the end of this year, and we see this as a potential share price catalyst and a reason to keep our outright positive stance on the name.