Standard & Poor’s said yesterday that the acquisition of the Hungarian Postabank by Erste Bank would not affect Erste’s short-term rating (A-2), although it would put pressure on Erste's low capitalization, which remains the primary negative rating factor for Erste.
Erste is to pay EUR 339 bil. for a 99.97% stake in Postabank, which corresponds to a 2002 book-value multiple of 2.8.
As a result, Erste will have to amortize EUR 255 mil. of goodwill over 15 years, i.e., EUR 17 mil. annually. This will reduce Erste's reported net profit (Postabank, which is loss making, should be profitable as soon as in 2005) and will further burden its low capitalization and capital adequacy (a Tier I ratio of 6.6% in June 2003). Nevertheless, Erste will offset this by a higher retention ratio, S&P said. Note that Erste recently announced it intends to pay a 2003 gross dividend of EUR 1.50 per share (we expected 1.70 EUR), which indicates that the stock’s payout ratio will decline to approx. 27%, we estimate, compared with 29% last year.
Separately, Moody's also reiterated its ratings on Erste Bank yesterday (A1/P-1/C+) due to the limited size of Postabank and limited outstanding risks, the latter which result from Postabank’s state bailout in the late 1990s.
Neutral.
Jan Hájek