Bloomberg News

Erste Sinks a Fifth Day as Deutsche Bank Cuts Price Target

December 14, 2011

(Updates prices starting in second paragraph.)

Dec. 14 (Bloomberg) -- Erste Group Bank AG, eastern Europe’s second-biggest lender, fell a fifth day in Prague trading after Deutsche Bank AG cut its price estimate by 26 percent on lower earnings expectations and capital concerns.

Erste shares sank 4.7 percent to 293.6 koruna at the end of trading in Prague, dragging the benchmark PX Index 1 percent lower to 853.80.

“The markets are unsettled following the European summit,” said Marek Hatlapatka, an analyst at Cyrrus brokerage. “These are difficult times for a bank like Erste, which is balancing on the edge of capital adequacy.”

Deutsche Bank cut the Austrian lender’s price estimate to 14.50 euros from 19.50 euros, maintaining a “hold” rating on the stock, in a note dated yesterday. Earnings forecasts reflecting updated loan losses and costs led to a 3 percent reduction of Erste’s 2012 earnings-per-share projection and the lender’s target price was “adjusted” based on capital requirements, said Alexander Hendricks and Flora Benhakoun, Frankfurt-based analysts with Deutsche Bank.

“We acknowledge that this is a harsh approach in the case of Erste Group,” the analysts said in the note. “It nonetheless needs to up capital to new international standards if it doesn’t want to risk its competitiveness in the region.”

--Editors: Alex Nicholson, Peter Branton

To contact the reporters on this story: Linda Shen in New York at lshen21@bloomberg.net; Ladka Bauerova in Paris at lbauerova@bloomberg.net

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


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