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Erste Jumps Most Since 2010 After Goldman Report: Prague Mover

Jan. 23 (Bloomberg) -- Erste Group Bank AG jumped the most since May 2010 in Czech trading after Goldman Sachs Group Inc. said the valuation of the Austrian lender’s shares relative to its peers represents a buying opportunity.

The stock surged for an eighth day, the longest rally since March 2009, rising 12 percent to 425 koruna at the 4:24 p.m. close in Prague. Almost 1.4 million shares changed hands today, or 269 percent of the three-month daily average. The PX index, where the bank has a 21 percent weighting, rose 2.3 percent.

Erste’s eight-day, 34 percent rally still leaves the stock down by more than half compared with a year ago. That’s cut the price to 7.8 times expected earnings from 11 and lowered the market value to 6.5 billion euros ($8.4 billion). The market value of the Czech Republic’s Komercni Banka AS, which last traded at 10.2 times expected earnings, has declined 18 percent in the past 12 months to 134.5 billion koruna ($6.9 billion).

“A valuation opportunity has arisen in our view, with Erste’s total market cap now broadly similar to that of Komercni,” Goldman analysts led by Heiner Luz in New York said in a report to clients today. The U.S. bank kept its “buy” rating on Erste shares, according to the report.

In Vienna, its home market, Erste shares last traded up 11 percent to 16.875 euros.

European stocks and the euro rallied as finance ministers gathered in Brussels to discuss new budget rules and a Greek debt swap. Bondholders negotiating the swap with Greece have made their “maximum” offer, leaving it to the European Union and International Monetary Fund to decide whether to accept the deal, said Charles Dallara, managing director of the Institute of International Finance, who represents the private creditors.

“The financial sector has benefited from reports that talks between the Greek government and its creditors on debt-restructuring terms are successfully progressing,” Miroslav Adamkovic, an analyst at Prague-based Komercni Banka, wrote in a report to clients today.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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