Sector Report, CEE Banks: Raiffeisen Intl, PKO, OTP   

• We expect OTP to report a considerably lower net profit for 4Q09 than the figures for the previous one-off-loaded quarters. Nevertheless, the bank is on track to reach its HUF 150bn FY09 net profit guidance and our slightly more conservative FY09 net profit estimate of HUF 142.5bn. We left our 2009 estimate practically unchanged and made only minor adjustments in our mid-term forecasts.

• We maintain our Hold recommendation for PKO BP and keep our target price of PLN 38 (based on our DDM) unchanged. In our view, PKO BP’s “safe retail play” image together with its 10% annual asset growth ambitions until 2012 justify the current 2.1x BV10e valuation compared to the peers’ 1.5x. In fact, the further provisions for consumer loans and the Ukrainian subsidiary bear some risk.

• Following the recent share price decline, we have lifted our recommendation for the Raiffeisen International share to Buy (from Hold). The target price was slightly reduced to EUR 50 (from EUR 51), due to small adaptations made in our DDM model. In terms of peer group multiples, RI currently trades at 1x BV10e, which in our view is not justified, taking RI’s relatively conservative risk policy into account, as well as some signs of economic improvement in the CEE region with diminishing probability for negative surprise. However, in case of a return of negative macro and/or banking sentiment a significant setback of RI’s stock price is also possible.