Bloomberg News

Erste Jumps Most Since September on Goldman Report: Prague Mover

January 24, 2012

Jan. 23 (Bloomberg) -- Erste Group Bank AG jumped, heading for its best day in four months in Czech trading after Goldman Sachs Group Inc. said valuation of the Austrian lender’s shares relative to peers represents a buying opportunity.

The stock surged for an eighth day, the longest rally since March 2009, rising 11 percent to 419.4 koruna by 2:07 p.m. in Prague. A close at that level would mark Erste’s steepest one- day advance since September. The PX index, where the bank has a 21 percent weighting, rose 2 percent, a fourth day of gains.

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 market capitalization to 6.5 billion euros ($8.4 billion). The market cap of the Czech Republic’s Komercni Banka AS, which last traded at 10.2 times expected earnings, has declined 19 percent in the past 12 months to 134 billion koruna ($6.8 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 rose 9.1 percent to 16.60 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.

--With assistance from Boris Groendahl in Vienna. Editors: Linda Shen, Alex Nicholson

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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