Erste Group Bank AG (EBS) rose in Vienna trading after Goldman Sachs Group Inc. said investors fail to appreciate the potential for profit growth at the Austrian bank, the third-biggest lender in eastern Europe.
Erste gained as much as 3.7 percent, and was 3.6 percent higher at 21.87 euros by 11:16 a.m., giving the Vienna-based lender a market value of 9.4 billion euros ($12.4 billion). The stock, which Goldman Sachs kept on its “Conviction Buy” list, was the best performer in the 40-member Bloomberg Europe Banks and Financial Services Index, which advanced 0.9 percent.
“Erste’s current underlying profitability and the progress made on its group restructuring are misunderstood,” analysts led by London-based Pawel Dziedzic said in a note to clients dated yesterday. “We believe that a tripling of reported returns by 2015 is not far-fetched.”
Chief Executive Officer Andreas Treichl has pledged to bolster earnings this year, mostly by turning around the bank’s debt-ridden Romanian unit. Erste, trailing only Italy’s UniCredit SpA (UCG) and Austria’s Raiffeisen Bank International AG (RBI) in eastern Europe, is struggling to balance declining lending revenue with cost cuts and lower bad debt charges as central and eastern European economic growth sputters.
The bank is improving earnings with the sale of its money-losing Ukrainian unit and with the repayment of state aid scheduled for Aug. 6, funded by a 661 million-euro share sale this month, Goldman Sachs said in the note. The Romanian unit’s restructuring is on track and lowering tax payments and cost cuts in Austria provide further potential, the analysts said.
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