Erste bank group

Fundamental analysis

Erste group Bank AG is an Austrian financial group focused on banking and related services (private banking, asset management, retail and corporate banking). The group operates in Central and Eastern Europe. It has more than 16 million clients and a physical presence in seven countries. The Group’s roots date back to 1819 in Vienna, when the First Austrian Savings Bank was founded and grew through acquisitions into the Group it is today. Erste group has been the name used for the group since 2008. The shares are traded on the Vienna, Prague and Bucharest stock exchanges.

EPS: €6.80 (2023), €4.80 (2022)

ROTE: 17.2% (2023), 13.8% (2022)

Net interest margin: 2.50% (2023), 2.21% (2022).

Although this is an Austrian group with a focus on Central Europe, the shareholders are from all over the world. 61% is held by institutional investors. The geographic distribution of investors is:

– 33% Austria
– 28 % North America
– 15 % UK and Ireland

– 17 % Continental Europe

Currently operating in 7 countries: Austria, Czech Republic (Česká spořitelna), Slovak Republic, Hungary, Serbia, Croatia and Romania. The company is profitable in all countries.

For 2023, the group earned €2.998 billion, of which €680 million was earned by the Austrian branch, €679 million by the Czech branch and €300 million by the Slovak branch.

The company is carrying out an unspecified share buyback. In 2023, it bought back just under 9 million shares.

Results

For the first half of 2024, the group earned Euro 1.692 billion (Euro 1.490 billion in 2023).

ROE: 16.2% 2024, 16.2% 2023.

The company is growing both interest and fee income.

Based on the positive results from the first half of 2024, the company raises its ROTE estimate to 15%. It also raises its estimate for fee income growth to 10% (it was originally 5%).

Technical analysis

Average volume is above 500,000 shares traded per day.

The stock is in an uptrend according to the moving averages (roughly from November 2023), but the spread between the moving averages is narrowing.

The RSI is in the neutral zone.

The nearest support is at a price slightly above €40 per share. Stronger support is a flip at a price of around €37.

Conclusion

A profitable banking group from Central Europe with a positive outlook for earnings growth until the end of 2024. This is how the group’s half-year report looks. The share price is now below €50 per share, a strong psychological threshold. It is also the highest in more than 2 years.

Geopolitically, the group is not dependent on the US dollar (they use the Euro as their transaction currency), nor on the war in Ukraine and the problems in the Middle East.

On the other hand, if there is a global downturn, the stock will react. The current price may act as a strong resistance for further growth. And announced economic results may be factored into the price. The spread between moving averages is narrowing. All of this may point to a possible future price decline.