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Decent operating trends Erste Bank is delivering a respectable financial performance, flattish year-on year as lower policy rates and cost inflation are absorbed, but slightly ahead of expectations, driven by small improvements in volumes and net interest margins and some cost containment. Optimism on 2026 outlook The management team expect to see improving revenue growth in the year ahead, with increasing volume growth and stable interest rates. They also expect to see reduced cost growth, with moderating wage inflation, moderating investment spend, and some efficiency benefits. Poland progressing well The approvals and preparatory processes are apparently going well, aiming for completion around year-end, as planned. In the meantime the business is performing well, and the Polish economy is strong. Bank tax proposals are unwelcome but supposedly temporary. Strong capital generation, ahead of plan Proforma CET1 ratio has risen to 18.2%, already close to the original 18.25% year-end target (pre-Poland), which is now upgraded to 18.5%. Dividend plans for 2025 are unchanged (10% payout, 50-75c), as is a return to 40-50% payout next year, and scope for share buybacks before long. We update numbers, remain Neutral We revise our financial forecasts, with small upgrades. We raise our target price, on the new estimates, and with a 12% cost of equity (previously 12.5%). Fundamentals are positive, but we think well understood, and we keep our Neutral view.
Erste Group Bank Erste Group Bank AG
What happened? Erste Bank has reported 3Q numbers slightly ahead of estimates, and with slightly improved FY25 guidance. BNPP Exane View: Attributable profit EUR 901m is 8% ahead of consensus 838m, +2% YoY. ... driven by revenues 2% ahead (+4% YoY), costs 1% heavier (+8% YoY), LLPs a little heavier. ... and divisionally by Austria 6% ahead (flat YoY) and CEE 1% ahead (-11% YoY). Capital is up a little QoQ from 17.4% to 17.5% CET1 ratio. TBVPS is +5% QoQ to EUR 52.85, shares are trading on 1.61x. FY25 guidance is improved on NII growth (from 0% to 2%, cons is +1%), cost/income (from 50% to ~48%, cons is already 47%) and CET1 ratio (from 18.25% to 18.5% pre Poland, vs comparable 18.2% 3Q). FY25 guidance is unchanged on loan growth (5%), fee growth (5%, cons 5%), cost growth (~5%, cons 5%), LLPs (20bp), RoTE (15%, cons 15.7%). Capital return guidance (dividends) is unchanged at max 10% payout FY25, a temporary reduction to support the internal funding of the Poland acquisition. No comments in the slides on 2026 outlook. The conference call is at 09.00 CET.
Operating steadily Erste Bank''s 2Q numbers were relatively uneventful, slightly ahead of consensus estimates, but slightly down versus the year before. Both Austria and CEE are performing in line with expectations. Management upgraded the FY25 guidance slightly, including RoTE from ''~''to '''' 15%. Managing capital successfully The bank has boosted its capital position as planned, ahead of the Polish acquisition which is expected to close around year-end. The Cet1 ratio is up from 15.9% to 17.4% QoQ, aiming for 18.25% by year-end pre-acquisition, or 13%+ post-acquisition, and 14.25% by end-2026. The Polish business seems to be in good shape Erste say that everything they have seen so far - in public disclosures, and conversations with Spanish and Polish colleagues - is very positive, makes them confident and optimistic about the acquisition, confirming the business case assumptions or better. We add Poland into our estimates now for the first time We make a first attempt here to include the financial impacts of the transaction in our Erste Bank numbers, with a substantial uplift to profits, impacts on balance sheet and capital, as well as the suspension of share buybacks and the temporarily lower FY25 dividend. We keep a Neutral rating Erste Bank is trading on 1.6x the latest tangible book value, around 8x 2027 earnings on our new estimates, or around 9x consensus (which is likely to be only partially updated for Poland). We maintain a Neutral rating.
What happened? Erste Bank reported 2Q results a whisker ahead of company-compiled consensus, with a very slight upgrade to FY25 PandL guidance (mainly '''' vs ''~''), and unchanged capital guidance ahead of the Poland integration. BNPP Exane View: Bottom-line profit EUR 921m is 13% ahead of consensus 816m, and +9% YoY. Boosted by a positive one-off in non-operating items (''other operating result'', related to a technical change in the inclusion of associate), more than offsetting higher bank taxes. Perhaps more meaningfully, operating profit EUR 1408m is 2% ahead of consensus 1374m, -2% YoY. Driven by revenues 1% ahead (+5% YoY), costs 1% heavier (+8% YoY), provisions in-line. Divisionally, Austria is a 3% miss on operating profit (-17% YoY), CEE a 5% beat (+2% YoY), operating divisions in total 2% ahead (-7% YoY). Capital is strong, CET1 up from 15.9% to 17.4% QoQ, ahead of the Poland acquisition impacts. They confirm 2025 CET1 target (pre-Poland) 18.25%, then 2026 (incl Poland) 14.25%. TBVPS is -2% QoQ to EUR 50.44, shares are 1.60x. Total assets are +1% QoQ, with loans +2% and deposits +1% (+5%, +6%, +3% YoY). Outlook update includes slight upgrades to loan growth (5% vs ~5%), NII (0% vs ~+/-0%), LLPs (~20bp vs ~25bp), RoTE (15% vs ~15%). Other elements are confirmed -- fee growth 5%, costs ~5%, cost/income 50%. No new comments on the Poland acquisition. The conference call is at 09.00 CET.
What happened? Earlier today Erste Bank announced the agreement to acquire 49% of Santander Bank Polska as expected, and in a press release and presentation (available here) gave details of the transaction and its financials. BNPP Exane View: The main surprise and a key positive for investors is that Erste is financing the transaction without equity issuance. . As expected it is using surplus capital (EUR 3.4bn, 16.22% 1Q CET1 ratio vs 14% target), cancelling the accrued share buyback (0.7bn), and temporarily lowering its target CET1 ratio from 14% to 13.5% (0.7bn). . In addition, it is reducing the 2025 dividend payout to 10% from the expected 45% (adding EUR 1bn), setting aside a further c40% of 2025 profits (1.2bn), and undertaking some balance sheet optimisation (0.6bn). . This gives some EUR 7.7bn total financing, covering the purchase price (EUR 7.0bn) and some restructuring charges as well. The transaction is expected to complete around 4Q25. Erste expects to restore its CET1 ratio from 13.5% end-2025 to 14.25% during 2026, and to return to a normal 40-50% dividend accrual in 2026 as well (paid 2027). Erste expects 20% EPS accretion from 2026, implying EUR 8.5, versus consensus EUR 7.1, putting the shares on 7.5x. Erste expects a group RoTE of 19% in 2026 (versus pre-transaction consensus 15%). It expects a return on investment of 11% in year 1 (2026), which it views as ''broadly in line with return on alternative capital deployment options''. There are some minor perimeter adjustments. Santander Polska will sell its 60% stake in Santander Consumer Bank to the Santander parent group (which will then own 100%), prior to closing. Erste will acquire 50% of Santander''s local asset management unit. There are also cooperation agreements in corporate and investment banking and payments. There is also a partial protection on CHF mortgage liabilities, a contractual indemnity from Santander Group for the majority of Erste''s share of potential CHF...
A mixed start to the year Erste Bank put up mixed numbers in the first quarter, with revenues and profits a whisker light (1% below consensus) and less good YoY (revenues +1%, costs +5%, operating profits -3%). However capital was much stronger, CET1 up from 15.1% to 16.2% QoQ, and TBVPS +5% QoQ. The outlook is maintained Notwithstanding the slightly soft start, the company is maintaining its FY25 guidance unchanged, with loans +5%, NII flat, fees slightly upgraded from ~+5% to +5%, cost/income 50%, risk costs ~25bp, and RoTE ~15%. All eyes are now on Poland They key focus is now the potential acquisition of Santander Polska, which we have commented on separately (note), and will continue to do more work on. This may involve equity issuance (10%?) and cancellation of the 2H25 share buyback (EUR 700m). Management say that the FY24 dividend (EUR 3 per share) will be paid regardless, and we would expect a normal FY25 dividend too. They say that if no MandA transpires by year-end they will do bigger capital distributions rather than staying at 16%+ CET1, although we note that they said something similar last year, so we wait and see. We update numbers, keep a Neutral rating In this note we update our (standalone) financial forecasts, with only limited changes, and no change to our target price. The Poland transaction obviously has potential to change the financials and the valuation, which we will explore further as we go forward. We keep our Neutral rating unchanged.
What happened? Erste Bank has reported 1Q numbers with profits a whisker light, but capital materially stronger. The FY25 guidance is largely unchanged. We cannot see any comment yet on the potential Santander Polska acquisition (see note). BNPP Exane View: Profits are 1% below consensus (-5% YoY), driven by revenues 1% light, costs in-line, LLPs lighter, other items heavier. Austria PBT is 1% below consensus, driven by revenues 1% light. CEE PBT is 6% below consensus, driven by revenues 1% light, costs 1% heavy, LLPs heavier, other items heavier. Capital is stronger, up from 15.1% to 15.9% QoQ vs 15.5% consensus. TBVPS is up 5% QoQ to 51.38, shares are 1.2x. We cannot see anything in slides on the Santander Polska acquisition, or how to finance it ... will wait for discussion on the conf call. The slides show CET1 15.9% reported / phase-in and 16.2% proforma. Helped by positive Basel-4 effects. Implies surplus 3.3bn vs target 14.0% (vs 4Q24 1.7bn surplus). Plus, they could reverse the 700m FY24 buyback accrual, which would give a total 4bn financing versus the 7-8bn potential cost of the 49% Santander Polska acquisition. Loan growth is 5.8% YoY, exceeds 5% for first time since 2Q23. Deposits are up 4.6% YoY. NII is solid in CEE, softer in Austria with daycount and variable rate loan repricing. FY25 guidance confirmed at ~0%. Fees are flat QoQ, +9.5% YoY. They are upgrading 2025 fee growth guidance from ~5% to 5%. Other guidance items are unchanged, costs +5%, cost/income 50%, risks costs ~25bp (vs 15bp 1Q), RoTE ~15% (vs 15.2% 1Q). There is no change in the capital return plans at this stage. They reiterate EUR 3 FY24 DPS and the plan for EUR 700m share buyback from 2024 profits, subject to approval.
A decent end to a strong year Erste Bank''s 4Q figures were either side of consensus estimates (revenues better, offset by costs, loan loss provisions, non-operating items and tax all a little heavier than expected), but were strong in absolute terms, and rounded off another record year for the group. Capital distributions in focus Erste announced a FY24 dividend in line with expectations (EUR 3.00, from 2.70 the year before), but share buyback plans slightly below expectations (EUR 700m, from 500m prior year, and 800-900m market estimates), to be approved in 1H25 and implemented in 2H25. Mixed signals on future capital deployment There are mixed messages on future capital uses. There is still interest in an acquisition in Poland, but seemingly with nothing imminently available. They target 14% CET1 with a small cushion, not 1% cushion as currently. They view buybacks as ''less of a no-brainer at 1.4x P/TB''. German stimulus and Ukraine ceasefire scenarios will be important variables Erste could be a beneficiary of supply chain stimulus across its geographic footprint, driving loan growth and stronger fee income (as well as reducing the risk of heavier interest rate cuts). We update numbers, remain Neutral We revise our forecasts following recent reporting, with only minor changes. We raise our target price, with a lower cost of equity (now 11.5%, from previous 15%), reflecting the better growth outlook and reduced risk premiums that we are seeing across the sector. We keep a Neutral view on the shares, with the positives well understood and some uncertainty around capital deployment.
Operating trends are robust, prompting 2024 guidance upgrade Erste Bank is delivering slightly better than expected financial performance, allowing small improvements to FY24 guidance. NII is now expected +2% YoY (from +0%), the cost/income ratio ≤48% (from 50%), and the RoTE 16% (from 15%). Early indications for 2025 are more in line Management expect loan growth to continue at mid single digit %, and NII to remain around 2023-24 levels (EUR 7.2-7.4bn, consensus 7.3bn). They are constructive on fees, benign credit quality, and costs under control (cost/income ~50%, as in consensus). They expect an RoTE around 15%. Management expect to clarify acquisitions / buybacks by February Executives reiterate interest in the possibility of inorganic growth in core markets, but will not hoard surplus capital if deals are unavailable, with scope for further share buybacks. They expect to give some clarification by the time of full-year results in February, at the latest. We keep a Neutral rating Erste Bank is operating well, and surplus capital could be deployed in a variety of ways that could create value. However the positives appear well understood, and the valuation is similar to the sector average. We update estimates with small changes, and keep a Neutral view.
Operating trends appear to be resilient Erste is due to report 3Q results on 31 October. Revenues in 3Q should be close to 2Q levels, with NII running 1-2ppts better than the flat FY guidance, fees growing slightly, other income a little lower. We model costs increasing slightly. Credit quality remains healthy, loan loss provisions should be benign in the quarter and on track to finish comfortably within the 20bp FY24 guidance. Attributable profit should remain slightly above EUR 800m in 3Q. Waiting for news on capital deployment We would expect the CET1 ratio to remain close to 2Q''s 15.5% and increase to nearly 16% by year-end, a EUR 2-3bn surplus above the bank''s 14% target ratio. We expect the company to complete the current EUR 500m share buyback programme during 4Q. We then wait to hear news of potential Polish investments and/or deployment of surpluses into further buybacks. We are Neutral on the shares We update our estimates here, with 5-6% increases in 2024-25 profits, although 2026 little changed. We raise our price target slightly. We keep a Neutral rating on the shares, although we acknowledge some of the positive developments that are underway. The valuation gap is less than for some other banks, and the relative advantage of a mid-teens RoTE is less than it was with other banks now in a similar range.
Healthy operating trends Erste is delivering slightly ahead of expectations on volumes, NII, fees, costs and credit quality, allowing management to upgrade guidance for FY24 as expected. They now expect loans +5% YoY, NII flat, Fees +10%, risk costs 20bp, RoTE 15%, and a dividend of EUR 3.00 per share. Decent outlook for 2025-26 Perhaps more importantly, the outlook for next year and beyond looks encouraging too. Volume growth is picking up in 2Q and 2H24, and could be similar or stronger in 2025. Management expect NII to plateau at current levels, with volumes offsetting slight margin compression as policy rates normalise back down. Other drivers seem well managed too. Incoming CEO starts to articulate his priorities The new CEO promises continuity (growth, footprint, business model, capital return) but also progress (more digital advice, more asset management / bancassurance / pensions, more digital back office, more operating efficiency, and a disciplined approach to MandA). Capital deployment is a key debate, returns versus acquisitions The group is pursuing share buybacks (EUR 500m 2H24) but will still have a sizeable capital surplus at year end. Management prioritise acquisitions (if available) ahead of buybacks, but won''t hoard capital if inorganic opportunities fail to materialise. They are interested in Poland, which could be challenging, and also other existing/new markets in the eastern part of the EU. We remain Neutral on the shares We update our estimates and target price. We view the shares as inexpensive in absolute terms and undervalued, but see more compelling stocks elsewhere in the sector. We stay Neutral.
The birthplace of some of the world''s most famous composers, Austria is also home to two of the best banks in Europe. In the complex symphony that is the banking sector, Erste and BAWAG stand out. They are, however, very different compositions. Erste is a classical bank of long standing, now in an interlude with flat near-term earnings. BAWAG is a private equity business in the public markets, orchestrating best-in-sector returns and accretive acquisitions. We unpick the key moving parts in this note: net interest income drivers, sources of superior returns, capital flows, and management performance frameworks. We initiate on Erste at Neutral and BAWAG at Outperform.
EBS EBS BG
• Operating income increased by 27% to €2.69bn for Q3 23 • Risk provisions declined by 15% to €157m for Q3 23 • Net profit after minorities increased by 61% to €820m for Q3 23 • The RoTE was 19.1% for Q3 23 • The management announced a target RoTE of around 15% for 2024
Buy-backs should become a recurring feature The EUR2.7 DPS targeted for 2023 (c.8% dividend yield) is in our view a floor for future years. We model a EUR0.05 yearly increase in 2024/25e staying within the guidance of a 40-50% ordinary pay-out ratio. The EUR300m buy-back announced in April was approved by the ECB yesterday and will kick off on August 16. We had previously stated that, in the absence of bolt-on acquisitions, a EUR400-500m annual buy-back could become a regular feature. With Erste''s FL CT1 ratio increasing by a further 50bps in Q2 to 14.9% and more subdued lending growth prospects in the coming few quarters, we now embed a EUR500m buyback in 2024e and 2025e. Despite this EUR1.1-EUR1.2bn of capital in excess of a FL CT1 ratio of 14% is still available throughout the forecast period to fund possible MandA. Estimate revisions Following Q2 results, we increase our adj. EPS estimates for 2023e by 10% (higher trading gains and lower LLP) and by 2/4% for 2024/25e (1% cut in net income on lower NII more than offset by a lower share count). As we expect provisions and trading income to normalise to higher/lower levels, we model lower earnings in 2024/25 relative to 2023e. Erste remains one of our European top picks Erste''s earnings will peak in 2023, but a 5.7x P/E for 2024/25e is in our view too low for bank with solid asset quality, a degree of excess capital and exposure to CEE economies with a structurally attractive medium term growth profile. The buy-back soon to be launched is relatively small, but, considering the relatively low liquidity of the shares, will in our view provide a degree of support in the coming months. We reiterate our Outperform rating.
• Net profit attributable to shares increased by 33% to €846m for Q2 23 compared to Q2 22 • Impairments on loans were releases/income of €8m for Q2 23 compared to €85m for Q2 22 • RoTE was 20.2% for Q2 23, RoTE target upgrade from 13% to 15% to above 15% for 2023 • Erste Group is targeting a dividend of €2.7 per share for FY2023 compared to €1.90 for FY2022 and confirmed €300m of share buy-backs in 2023
Earnings should plateau soon, but at a higher level Following Q1 results we increase our adj. EPS estimates for 2023 by 6% and leave 2024/25e broadly unchanged. We estimate a (stated) net income of c.EUR2,550m throughout the forecast period, some 9/5/3% above VA consensus. We expect NII tailwinds (Euro rate hikes, rollover of the bond portfolio, pull-to-par on the Sberbank loan book in CZ, volume growth) to more than offset the headwinds (lower rates in CEE, widening deposit beta). Higher fees and lower systemic charges should offset c.80% of the increase in costs, and cost of risk should remain below 25bps. 15% ROTE in 2023 Management reiterated the guidance of a 13/15% ROTE in 2023, but now targets the upper end of the range. NII is seen growing at 15% y/y (previously +10%) with fees and loans at c.+5% (unchanged). Cost should increase by 9% (previously +7/8%) with a cost of risk 25bps (previously 35bps). Our estimates are broadly in-line with guidance apart from NII which we see growing at +20% y/y. We flag that Q1 NII annualised at +20.6% and that the CFO indicated during the conference call that peak NII will only be reached in Q2/Q3. On our calculations no windfall tax will be payable in CZ over the forecast period, whilst management guidance embeds EUR100m. We see room for a EUR400-500m annual buy-back Erste targets a 40-50% pay-out ratio which we embed in our estimates. As we estimate c.EUR1.4bn of capital in excess of a FL CT1 ratio of 14% in 2025 in the absence of bolt on acquisitions, a (small) annual buy-back could become a regular feature of Erste''s distribution policy. This would boost annual TSR to 10-11% (7/8% dividend yield + 2/3% buy-back). Outperform rating reiterated. Erste remains one of our European top picks Erste''s earnings will likely soon peak, but this should not prevent a rerating of the stock from current levels. We view peak earnings as sustainable for the foreseeable future and this ''annuity'' should in our view...
• Operating income increased by 23% to €2.5bn for Q1 23 compared to Q1 22 • Risk provisions switched from expenses of €59m for Q1 22 to a credit of €20m for Q1 23 • Net profit after minorities increased by 32% to €594m for Q1 23 • The RoTE was 14.6% for Q1 23. The management is now aiming for the upper end of the target range of 13% to 15% for FY2023
A mid teens ROTE bank trading below TNAV On our estimates Erste will deliver an average ROTE of 13.3% over 2023-25. This would increase to 14.2% should all capital in excess of a FL CT1 ratio of 14% be distributed to shareholders. The gross NPE ratio still stands at 2% and EUR928m of overlays/FLI provisions provide strong protection against a possible deterioration of asset quality (46bps of loans). At 0.9x TBV valuation remains in our view undemanding. Erste remains one of our top picks among European banks. The 2023 guidance will likely be upgraded Management reiterated the guidance given last quarter of a 13-15% ROTE in 2023 as well as these line-by-line drivers: lending +5%, NII +10%, fees +5%, costs +7/8%, cost of risk 35bps. With Q4 NII (net of one-offs) annualising at +12% vs FY 2022, higher Eurozone rates and higher volumes we see plenty of room for an upwards revision in the coming quarters. Our adj. EPS estimates for 2023-25e increase by an average of 3% and we now expect a 16.8% y/y increase in NII in 2023. (Small) buy-backs could become a recurring feature Erste announced the intention to seek authorisation for a EUR300m buy-back in Q1 (2% of market cap). As expected, the ordinary pay-out ratio will remain in a 40-50% range in future years (c.6.5% average dividend yield in 2023-25e). Management will continue to explore future bolt on acquisitions, but buy-backs could become a recurring feature since EUR1.5bn of excess capital will on our estimates be generated by 2025.
• Net profit increased by 12.5% to €2.16bn for 2022 compared to 2021 • Operating income increased by 11% to €8.6bn for 2022 • RoE was 12.6% for 2022 compared to 11.6% for 2021 • DPS proposal is €1.90 for FY2021 compared to €1.60 for FY2021 plus a share buy-back up to €300m in 2023 • RoTE target confirmed in the range of 13% to 15% for 2023
Compounder with 40% re-rating potential We move Erste to our Top Picks list, following our note ''Plenty of runway to peak earnings''. Erste is one of the ''great compounders'' within our coverage, whilst trading at a P/E discount versus the sector. After last year''s underperformance, an improving macro/asset quality sentiment as well as strong earnings momentum should support a rerating of the stock. Additionally, we see scope for attractive capital return: on our estimates Erste builds up EUR400-700mn excess capital p.a., and consequently we see potential for a share buyback announcement over the coming months. We should have more clarity on the latter after full year results on February 28. Our updated top picks list As we laid out in our outlook note recently, we continue to prefer Eurozone retail and commercial banks, and are still comfortable in ''quick-twitch'' markets. Austria is early- to mid-cycle in terms of rate sensitive, whilst CEE is further into its rate cycle. Despite that, we see positive NII progression also after 2023 as rate cuts in cee are more than compensated by higher volumes. Overall, we are c.10% above consensus on EPS for Erste. Our updated top picks list includes Caixabank, Erste, Unicredit, Commerzbank, Bankinter and Bank of Ireland.
The only compounder trading at a P/E discount vs the sector Erste generated average annual growth in TNAV per share of 13% in 2015-21 (including dividends). Only 8 other commercial banks managed 10%+ over the same period. On our estimates the CAGR will increase to 16% in 2021-24e. All the compounders apart from Erste trade at a P/E premium vs the sector and rightly so. After an upbeat outlook statement presented in November the stock has recouped some of the (in our view unjustified) underperformance which followed the onset of the Russia-Ukraine war. Continued strong earnings momentum, improving sentiment with regards to macro/asset quality and, potentially, the announcement of a buy-back in the coming months will in our view underpin a further rerating. Earnings growth is set to continue, despite CEE rate cuts We increase our adj. EPS estimates for 2023/24e by 4/5% on higher (eurozone linked) NII and publish forecasts for 2025 for the first time. Despite modelling CEE rate cuts from Q4 23 we expect NII to continue growing on higher volumes. After a loss in 2022, trading income should normalise. Cost inflation should moderate after 2023 and the contributions to resolution funds/deposit guarantee schemes (c.EUR300m in 2022e) are set to fall sharply from 2024. We translate our relaxed stance vis-a-vis asset quality into a cost of risk of c.30bps in 2023-25e (18bps in 2022e). Stripping out excess capital Erste will on our estimates generate a ROTE of 14%+ over the forecast period. Our 2023/24e EPS estimates are c.10% above consensus. Excess capital will continue to build. A (small) buy-back could be on the cards We expect Erste''s pay-out ratio to remain in a 40-45% range and estimate an increase in the FL CT1 ratio from 14.2% in Q3 22 to 15.4% in 2025. On our estimates EUR400-700m of additional excess capital above our ''go-to'' FL CT1 ratio of 14% will build up every year, for a total of c.EUR2.2bn in 2025e (15% of market cap). Bolt-on...
Bearish sentiment should reverse Erste has yet to recoup most of the (in our view unjustified) underperformance which followed the onset of the Russia-Ukraine war. Despite the challenging environment, operating trends remain very strong with loans and deposits up 10%+ YTD, 9M 22''s core revenues increasing by 16% y/y and the stock of NPEs at a new multiyear low (gross NPE ratio of 2% with 52% coverage). On our estimate Erste will generate an average ROTE in 2022-24 of 13.2% despite a relatively large amount of excess capital. Current valuation levels are in our view very attractive. We reiterate our Outperform rating. Upbeat yet realistic guidance for 2022/2023 Management guided for a ROTE of c.14% for 2022 and of 13-15% for 2023e. Healthy lending (10% for 2022e /+5% for 2023e) and the increase in Eurozone rates should lead to strong NII growth (c. +20%/+10%). Fees and operating costs should grow at 6/%5% and 6%/7-8% respectively with cost of risk remaining below 20bps and below 35bps. Management overlays on Stage 2 loans currently amount to EUR324m equal to 16bps of loans. We increase out adj. EPS estimates for 2023e and 2024e by 9% and 13% respectively primarily on higher NII. Apart from lower fee growth, we are broadly aligned with management guidance and 14% above IBES consensus. Higher estimates drive the increase in our TP from EUR41 to EUR45. A decision on a possible buy-back will be taken in Spring 2023 With an estimated FL CT1 ratio of c.14.3% in 2022e, Erste has EUR1.2bn of excess capital relative to its 13.5% target. Despite progressive dividends over the forecast period excess capital will on our estimates increase to EUR2.1bn by 2024e. Bolt-on acquisitions and organic growth remain management priorities, but we do not exclude that a portion of excess capital could be distributed to shareholders.
• Operating income increased by 9% to €2.1bn for Q3 22 • Risk provisions switched from releases of €31m for Q3 21 to expenses of €184m for Q3 22 • Net profit decreased by 4% to €510m for Q3 22 • Erste upgraded its RoTE target for 2022 from >10% to around 14%, 13-15% target for 2023 • Risk costs guidance of <35bp for FY2023
• Erste Group is targeting a dividend of €1.9 per share for FY2022 compared to €1.60 for FY2021 • Net profit increased by 22% to €688m for Q2 22 compared to Q2 21 • Impairments on loans switched from expenses of €47m for Q2 21 to releases/income €85m for Q2 22 • RoTE was 17.1% for Q2 22 • Risk costs of 90bp for FY2022 forecasted in a “no gas from Russia” scenario
• Operating income was up by 11% to €2.04bn for Q1 22 • Net profit after minorities increased by 26% to €449m for Q1 22 • Impairments on loans rose from €36m for Q1 21 to €59m for Q1 22 but at 13bp remained at a low level • RoTE was 12.2% for Q1 22
• Net profit increased by 146% to €1.9bn for 2021 • Loan loss provisions declined by 88% to €159m for 2021 • RoE was 11.6% for 2021 compared to 4.7% for 2020 • Dividend per share proposal is €1.60 for FY2021 compared to €1.50 for FY2020 • Erste said that “the evolving Russia-Ukraine situation does not impact Erste Group directly”. We have a different view.
• Net profit increased by 55% to €533m for Q3 21 compared to Q3 20 • Loan loss provisions switched from expenses of €195m for Q3 20 to releases of €31m for Q3 21 • Erste confirmed double-digit RoTE target for FY2021 and reduced estimated risk cost from 30bp to 15bp for FY2021
• Erste Group targets a dividend of €1.6 per share for FY2021 and another €1.00 per share for FY2020 in Q4 21 • Net profit increased from €59m for Q2 20 to €563m for Q2 21 • Impairments on loans declined from €613m for Q2 20 to €47m for Q2 21, group guidance lowered to 30bp for FY2021 • RoTE was 14.2% for Q2 21
• Net profit attributable to shareholders increased by 51% to €355m • Operating income increased by 10% to €1.83bn for Q1 21 mainly by trading and FV result swing • Impairments on loans were €36m or 8bp for Q1 21, group guidance is <65bp for FY2021 • RoTE was 10.6% for Q1 21
• Net profit decreased by 47% to €783m for 2020 • Loan loss provisions were €1.3bn for 2020 compared to €39m for 2019 due to COVID-19 burdens • RoTE was 5.1% for 2020 compared to 11.2% for 2019 • Dividend per share proposal is €0.50 for FY2020, in line with ECB’s recommendation. An additional €1.00 per share has been reserved for a potential later payment.
