FHB reported net earnings of HUF 1,979m for 4Q05, up 13.6% y/y and 0.4% q/q, slightly below both the consensus estimate of HUF 2,040m (source: Multex, based on full-year forecasts) and our expectation of HUF 2,009m. Net earnings for full-year 2005 reached HUF 8,481m, up 12.7% y/y. Both net interest income and revenues from financial transactions came in lower, whilst operating costs came in higher than expected. Nonetheless, we were impressed with the level of mortgage origination, which once again exceeded our expectations in 4Q05.
We reiterate our Sell rating on FHB, though its trading at a 2006F P/E of 10.4x and at a 34.6% discount to the CEE banks average of 16.0x. Given the challenges facing the FHB and its low prospective earnings growth, we do not believe it is an attractive to OTP, which trades at a 2006F P/E of 11.6x.