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On Tuesday, Citi analysts revised their stance on Erste Group Bank (EBS:AV) (OTC: EBKDY (OTC:EBKDY)), downgrading the stock rating from Buy to Neutral, while simultaneously raising the price target to €66.00 from €66.00. The adjustment follows a remarkable period for the $28.9 billion bank, with shares surging 76.6% over the past year, significantly outperforming its European peers indexed in SX7E by approximately 19%. According to InvestingPro analysis, the stock is currently trading near Fair Value levels.
According to the analysts, Erste Group’s share price is expected to stabilize after a strong run, with the stock now trading near its 52-week high of $37.24. The bank’s new guidance suggests there is limited potential for the stock to exceed market consensus estimates, despite maintaining a healthy P/E ratio of 8.37. Additionally, the forecast is dampened by the anticipated introduction of higher bank taxes in Austria, which are expected to be in effect for the next two years, posing a challenge to the financial outlook in the near term. InvestingPro subscribers can access 12 additional key insights about Erste Group’s financial health and market position.
The decision to modify the rating and price target comes after Erste Group’s fourth-quarter financial results for 2024, which, despite robust revenue performance, fell short of expectations. The shortfall was attributed to a combination of negative other results and increased impairment charges that were not anticipated.
Despite the near-term earnings forecast reduction, Citi maintains a positive long-term outlook for Erste Group. Analysts expect that the roll of the bank’s securities portfolio and slightly higher Eurozone interest rate forecasts will benefit earnings in the coming years. The analysts also note a slight increase in the expected capital return over their forecast period, which contributed to the raised price target, despite the downgrade to a Neutral rating.
In other recent news, Erste Group Bank’s financial performance and future prospects have been the focus of analyst assessments. Deutsche Bank (ETR:DBKGn) has raised its price target for Erste Group Bank to EUR 72.00, maintaining a Buy rating. This decision follows the bank’s solid fourth-quarter 2024 performance, which saw improved net interest income and fees, although offset by higher costs and loan losses. Deutsche Bank’s optimistic outlook for 2025 suggests potential guidance upgrades, with their estimates currently about 3% above consensus.
Conversely, UBS has downgraded Erste Group Bank from Buy to Neutral, despite increasing the price target to EUR 65.00. This adjustment comes after a 7% drop in the bank’s shares following its quarterly results. UBS cites Erste’s robust capital position, with a pro-forma Basel IV CET1 ratio of 15.6% at the end of Q4 2024, and projects €3 billion in excess capital by the end of 2025. The bank’s management appears to be focusing on inorganic growth opportunities, with potential shareholder distributions expected with the full-year results next year.
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