OTP Bank: bittersweet status quo (downgraded to HOLD)
OTP Bank (OTP) has seen a stellar earnings performance ytd, delivering a 27%+ adjusted ROE in 1H23 and the headline ROE at 30%+. Our 2023E forecasts imply an adjusted ROE of 24% and a 2023E P/E of 3.9x. We expect OTP to keep booking strong adjusted earnings in 2024E, despite scrapping Russia, to zero, divesting Romania and with a higher COR outlook. We forecast a 2024E adjusted ROE of 17%, headline c.16%; and, on our forecasts, OTP is trading at a cheap 2024E P/E of just 5.5x. Such a valuation suggests no outright downside risk, in our view. However, we fear that the stock may stay in limbo, as the market may be applying a discount due to the potential risk of charges imposed on the banks by the Hungarian government, which may be seeking additional budget proceeds. Our macro house view is that the Hungarian government may take some action on this front only next year. We have downgraded OTP to HOLD (from Buy), after the stock has returned 35% since our previous update. Our updated 12M price target (PT) is at HUF 15,207 (up from HUF 12,905), offering 12% upside. The Hungarian budget related risk feeds through to a higher cost of equity in our GGM. In our view, due to these risks, the market may ignore OTP trading currently at a discount to its historical multiples (5Y average 12M FWD consensus P/E of 8.2x); hence, we have removed the multiples valuation from our 12M PT.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.
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.
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.