Erste Bank (EB) announced new targets for 2006 on Friday. Net income should reach EUR 720 - 750m, which translates into EUR 2.98 - 3.11 per share in 2006. The announced target exceeds our projections of EUR 695m. EB expects ROE to reach 18% vs. our 17.4% and the cost/income ratio should be at 61% (our forecast was 62.1.%). EB plans to achieve the set targets through high ROE in its CEE subsidiaries, i.e. Ceska sporitelna (over 20%), Erste Bank Hungary (over 25%), 20% for Slovenska sporitelna and 18-20% for Erste Bank Croatia. Expected productivity growth in EB's Austrian operations, together with group-wide synergies, which are expected to show in 2006 (and should amount to EUR 140 – 155m) should also help to meet the set goals. While the set targets surpass our projections, the time horizon is rather distant (2006), and we do not yet believe that it should be a factor modifying our target price.
Tomáš Gatěk, Patria Finance