According to Romanian news portal, Laszlo Wolf, the deputy CEO of OTP Bank has reiterated yesterday that there is a very large discrepancy between what OTP Bank can offer and what the Romanian state demands.
Our view: It is likely that a full price is to be required to obtain CEC. The market is speculating that the price of the bank could exceed EUR 500m and the finance ministry has been reported as saying that it should value the bank at EUR 1bn (70% would equate to EUR 700m), suggesting a price of 4.5x - 6.3x. Given the level of restructuring required and the bank's limited profitability, we would expect a price towards the low end of this range. Whilst Erste Bank agreed to pay EUR 3.7bn or 5.8x historic book for a 61.9% stake in Romanian BCR, that bank had a much stronger market position and higher profitability. We expect the news to have a neutral impact on the stock price today, as the market is waiting for the final outcome of the bidding process. We reiterate our Buy rating on the stock with fair value of HUF 9,206.8 per share.