OTP Bank: High growth, high returns (upgraded to BUY)
We have upgraded OTP to BUY (from Hold) and set our new 12M price target (PT) at HUF 18,118 (from HUF 11,623). We join the positive trade on OTP quite late, we admit. However, we believe that there is still attractive upside left, as the market is only now starting to increase its expectations gradually and the positive earnings revision trend is likely to stay, in our view. We are well ahead of the latest consensus (our 2021-23E adjusted net profit is 10-18% ahead of the latest mix of earnings upgrades). At the same time, we are still more cautious than management’s guidance of an adjusted ROE recovery to 18-20%, hopefully coming soon (our 2021-23E adjusted ROE is at 16-17%). The positive earnings momentum, on our forecasts, should be driven by: i) a faster and stronger COR recovery than expected previously; ii) solid organic volume growth (biggest driver: Hungary); iii) the inclusion of one potential acquisition (NKBM in Slovenia) in our 2022-23E earnings; and iv) some very cautious inclusion of higher market rates in Hungary (not full reflation trade potential for the group, in our view). These are the key angles of OTP’s equity investment story, in our view.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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