UniCredit Bank Reiterates its BUY Rating on Erste Bank, Target Price Reduced

October 12 00:00 2011

LONDON, October 12 (RainbowNewsLine.com) – Analyst Thomas Neuhold of UniCredit Equity Research reiterates his BUY rating on the shares of Erste Bank (WBAG: EBS), while reducing his estimates for the company. The target price has been reduced from €33 to €30.

In a research note published yesterday, analyst Thomas Neuhold, mentions that the company has reduced its expected net profit to a loss of €700-800 million in ’11 and accounted some extraordinary charges of around €1.6billion in their P&L statements. The reduction in guidance is not unexpected, the analyst says.

The analyst’s views are as follows:

  • The major charges borne by the bank was in Hungary of around (€762 million),an  impairment charges of €627 million in Romania and a net charge of €180 million related to reclassifying its CDS portfolio.
  • Analyst believes that special charges of €1.2 billion out of the total €1.6 billion were not completely unexpected considering the recent developments in Hungary and Romania.

Erste Bank is the leading retail bank in Central Eastern European Countries (CEE) and the bank exhibits strong profitability throughout the cycle and it attracts long-term growth prospects in CEE, the analyst says. The stock is expected to trigger on the final outcome of Basel III regulations, economic recovery in CEE and stabilization of risk provisions. The valuation of the stock seems striking at around 0.8x tangible book and 5.8x earnings for ’12 and thus retaining his buy opinion, according to UniCredit Bank. The EPS estimates for 2011 and 2012 have been reduced from €2.07 to -€2.25 and from €3.50 to €3.22, respectively.

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