The HVB Group of Germany said that it would float up to 25% of its Bank Austria unit (BACA, No.1 on the Austrian market) on the Vienna Stock Exchange this year to bolster depleted finances, Reuters reported yesterday. An expected inclusion of BACA shares in the ATX index should not affect Erste Bank share's weighting in the index (currently it is capped at 20%). Assuming a 25% free float for BACA, and a 2003 BVPS of EUR 44.4, BACA stocks would have to be traded at least at a 2.2 2003E PBV multiple to reduce Erste Bank's weighting in the ATX index below the cap of 20%, we estimate.
As BACA's 2002 ROE should drop below 10%, reaching this multiple is very unlikely. Nevertheless, the BACA floating might have an indirect adverse effect on Erste stock, as local stock-market investors will be offered another banking title besides Erste Bank.
Jan Hájek