![- DEPO...Centralna banka Bosne i Hercegovine / Central Bank of Bosnia and Herzegovina n/a n/a Evropska banka za obnovu i razvoj [EBRD] European Bank for Reconstruction and Development](https://static.fdocuments.in/doc/165x107/5e6204c74b2d0c0a59342770/-depo-centralna-banka-bosne-i-hercegovine-central-bank-of-bosnia-and-herzegovina.jpg)
Bank Strategy CEE and Turkey...BRE Bank 97 BZ WBK 101 FHB 105 Garanti Bank 108 Halkbank 112 Isbank...
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Erste Group Research – Sector Report Page 1 All prices are those current at the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Erste Group Research Erste Sector Banks | BANKS | 19 September 2013 Bank Strategy CEE and Turkey CEE banks to tap the economic recovery, Turkish banks - attractive valuations? Mladen Dodig [email protected] Günter Hohberger [email protected] Magdalena Komaracka [email protected] József Miró [email protected] Adam Rzepecki [email protected] Can Yurtcan [email protected] Recommendations: We think that the Fed’s decision to refrain from the tapering process and maintain its bond purchases will be supportive for the EM asset class in the short-term. Given the region’s improving growth outlook, albeit on a gradual basis, we think that investors will be geared more towards growth orientation rather than risk aversion for CEE and Turkish banks. Among the banks that we cover, we prefer to have exposures mainly to Turkish and Polish banks. Our top picks are BZ WBK, Halkbank and Yapi Kredi Bank (all Buy recommendations), Bank Pekao, Komercni banka, PKO BP and Raiffeisen Bank International as well as Garanti Bank, Isbank and Vakifbank (all big caps with Accumulate recommendation). Scorecard model: In this report we provide a detailed analytical framework to assess the relative attractiveness of the banking sectors and the bank stocks in our coverage universe. Our framework is based on a balanced score card model, which takes into account country-based and bank specific parameters. As a result of our score card model, Turkish, Czech and Austrian banking markets appear at the top of the list on the country- based parameters. On the bank specific parameters, five Turkish banks stood out among the Top-10 banks, while the recovery theme of the Polish banks is worth looking at as the anticipated acceleration in GDP growth in 2014 should lead the banks to benefit at the first stage. Valuation: On average, the EG Sector Banks CEE are valued at 1.14x P/BV 13e and 1.08x P/BV 14e, with estimated ROE of 7.8% and 10.1%, respectively. Turkish banks, which offer higher ROE for both years (15.5% for 13e and 14.8% for 2014e) have a more attractive valuations (1.12x P/BV 13e and 0.98x P/BV 14e). In our view part of this discrepancy in valuation is explained by the earnings momentum. We expect a significant earnings and profitability increase in the EG Sector Banks CEE; excluding FHB, the CEE banks trade at 13x P/E for 13e and 10.2x for 14e due to their expected strong earnings momentum. The Turkish banks, on the other hand, trade at 7.6x of their 13e earnings and 7x of their 14e earnings.
