OTP Bank: should fare well, absent more negative events (upgraded to BUY)
We have upgraded OTP Bank to BUY (from Hold), while cutting our 12M price target (PT) to HUF 12,905 (from HUF 14,442), offering 25% upside potential. The key reason for our upgrade is the attractive valuation juncture. Currently, OTP is trading at our rather cautious 2023E P/E and P/BV of 7.7x and 0.8x, respectively. We believe that its underlying medium-term profitability and growth profile should be reflected in the banking group rerating back to at least 1.0x. The only reason we are not more bullish is the scale of the geopolitical and political interference risks. These risks have taken their toll already and we expect them to continue to have an impact on the headline ROEs, at least in the near term; and they are out of management’s control, unfortunately. However, at the current valuation, we see them as largely priced in, and any improvement on this front may be rewarded by a strong share price performance, in our view. We keep our positive view on OTP’s medium-term adjusted ROE outlook, seeing it at above 16%.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.
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