cee equity monthly

8/14/2019 CEE Equity Monthly

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CEE Equity MonthlyDecember 2009

That's it for 2009

Sentiment fades a bit but remains at

reasonable levels

Markets strong enough to somehow digest

Middle East disturbance

Expectations of positive performance remain

modest through year-end

Valuations at fair levels overall, or just below


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Summary

Erste Group Research - CEE Equity Monthly, December 2009 Page 1

Summary 2

Top picks 4

Changes in Ratings and Target Prices 5

One Month Performance 6Top 20 Dividend Yield 6

Top 20 P/E 6

Top 20 by Turnover 7

Stock Market Performances 8

Sector Performance 9

3Q Reporting Summary 12

Macroeconomy 14

Real Economy 14

Interest Rates and Currencies 15Special Events 16

Sector Insight 17

Banks 17Basic Resources 29Chemicals 35Construction 42Food & Beverages 49Healthcare 56Industrial Goods & Services 65Insurance 74

Media 77Oil & Gas 85Personal & Household Goods 95Real Estate 99Retail & Distribution 109Technology 115Telecom 122Travel & Tourism 128Utilities 132

Looking Ahead 137

Contacts 140

Disclosures 141

Share prices are as of December 3, 2009.

Source for all charts and tables is Erste Group, Bloomberg, Factset. Consensus data are taken from Factset-Excel-Connect.

In the sector insights the companies relative valuation multiples are comparisons to those for their CEE sectors.

All aggregate measures are calculated as a median. Negative valuation multiples have been excluded fromaggregate measures.

Table of Contents


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Summary


While confessions in Dubai have triggered some rather unexpected corrections, this contributed to the marketmovement that we described in our latest quarterly strategy report. Overall, we continue to expect some ratheruninspiring sideways movement for the rest of the year. Nevertheless, the news from Dubai did prove two things.First of all, the crisis is not over yet and further surprises might be waiting for us down the road. Growth should belooked at carefully, and sustainability remains the challenge. This might be also the guidance for some Asian

markets, which have delivered quite some impetus to overall emerging market developments. Secondly this isthe positive news markets still want to remain positive, and sentiment has been strong enough to help equitymarkets digest the disturbance from the Middle East rather quickly so far. However, in case of further positivenews flow such as recent US employment data, we might even have a chance for a moderate year-end rally.

GDP data released for the third quarter indeed confirmed our categorization of CEE countries into two groups.Czech Republic and Slovakia did suffer from the sudden decrease in exports and bottomed out earlier this year, incontrast to Romania, Hungary, Croatia and Serbia, where adjustment of external imbalances hindered this earlybottoming out. Consequently, this situation will also influence expected growth in 2010. The first group shouldhave recovered early enough to see y/y growth in 1Q 2010 and reasonable FY growth. Poland remains in a classof its own, totally avoiding recession.

The ZEW/Erste sentiment indicator has basically been showing ever-improving economic expectations since its

low in Oct/Nov last year. In the latest issue, the outlook for the next six months remains clearly positive, butnevertheless the balance has lost about 20 points for CEE. Given the earlier strong base effect fading out now, wedo not see this as too alarming, but rather as a reasonable judgment. At the same time, the current situation hasstarted to improve, while in total still remaining on a negative balance. We would see this as further proof of thebase effect argument for long-term expectations. In particular, the current situation in Poland is seen as improvingnicely, while unsurprisingly, Hungary is still at the bottom of the list. Expectations on inflation have continued torise as well, this time with the Czech Republic and Austria taking the lead. Summing up, sentiment remainspositive overall, but expectations on stock market performance have again became more sober.

For fund flows, the positive picture for emerging markets continues, with October again bringing nice inflows forglobal emerging markets as well as for regionally dedicated markets including CEE. Hence, the total inflows for alldedicated emerging market equity funds have reached a total of USD 66bn, more than compensating for theoutflows seen in 2008. Both developed markets as well as emerging markets enjoyed net buying in October, while

emerging markets outperformed developed markets by far, based on this measure. In terms ofallocations/weightings, Turkey and Russia lost some stature, mostly to the benefit of Poland, while other marketsin our region gained very moderately or remained flat.

Valuation-wise, markets have calmed down a bit in recent days. The consensus forward P/E is back to its long-term average for the region. While already exceeding implied fair valuations based on risk premiums, recentcorrections have brought CEE markets back to what may actually be a slight undervaluation, with the exception ofPoland. Overall, implied P/E based on spreads between earnings yields and risk free rates indicate a slightundervaluation of about 6% for the region. Here, the Austrian and Czech markets offer the highest impliedundervaluation of 7% and 14%, respectively.

Among our top picks, we see some interesting possibilities in the media sector (as already published in our recentCEE media sector report). We would argue that expectations for ad market declines and reductions in advertisingspending have actually exceeded the levels suggested by the GDP decline. Our favorites are Agora and TVN,while our previous darling, CME, was downgraded from Buy to Reduce, with its recent rally exceeding its short-term potential. We also remain positive on the technology sector, as indicated in our latest CEE Equity strategy for4Q 2009. Consequently, we remain buyers of Kapsch TrafficCom and have upgraded S&T and Asseco Poland toBuy.

While we mentioned earlier that the air is getting thinner for basic resources and chemicals, we remain positive onSemperit, voestalpine and RHI, which should all still have some more headroom in terms of their respective targetprices. Voestalpine posted fine quarterly numbers, and its steel division is already back to 100% capacityutilization, while its specialized steel division is expected to follow with some delay. Semperit not only presentedsound quarterly figures, but the outlook for its Sempermed division remains appealing, with further capacitiesplanned. With losses on revaluations potentially coming to an end, we also still see some possibilities in the realestate sector, namely ECO Business-Immo and S-Immo.


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Summary


Regional index versus CDS

0

100

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06/01/2008

30/01/2008

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09/05/2008

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24/07/2008

19/08/2008

12/09/2008

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27/11/2008

23/12/2008

20/01/2009

13/02/2009

11/03/2009

06/04/2009

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26/05/2009

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29/09/2009

23/10/2009

18/11/2009

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Median CDS ex UA (lhs) NTX (rhs)

Regional forward P/E

11.9

5.0

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15.0

17.0

31/10/1998

30/04/1999

31/10/1999

30/04/2000

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Average 11.8

Implied valuation

-60%

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0%

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28/02/2002

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28/02/2009

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30/10/2009

0.0

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Over/undervaluation (lhs) NTX (rhs)

Regional numbers based on A, CZ, HU, PL, RO (HR for CDS spreads); Source: Bloomberg, Factset, own calculations


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Summary


Top PicksCurrent price (LC) Target price (LC) Recommendation Upside

A-Tec 9.7 16.0 Buy 64.6%

Krka 68.8 103.0 Buy 49.7%

Sojaprotein AD 1,057.0 1,569.0 Buy 48.4%CEZ 855.0 1,230.0 Buy 43.9%ECO Business-Immo 4.5 6.4 Buy 41.0%

Kapsch TrafficCom 25.6 36.0 Buy 40.8%OMV 28.9 39.0 Buy 35.1%

Vienna Insurance Group 36.1 48.0 Buy 33.1%

Torfarm 71.4 95.0 Buy 33.1%

S&T 15.4 20.2 Buy 31.0%

Trakcja Polska 3.9 5.1 Buy 29.4%

BWT 20.0 25.5 Buy 27.2%

RHI 16.7 21.0 Buy 25.6%

Sparkassen Immobilien 5.1 6.3 Buy 24.8%

TVN 12.9 16.0 Buy 24.0%

Intercell 26.0 31.7 Buy 22.0%

Cersanit 15.3 18.5 Buy 21.0%Asseco Poland 61.0 73.8 Buy 20.9%

Semperit 28.3 33.4 Buy 18.0%

voestalpine 24.8 29.0 Buy 17.1%

Agora 22.2 24.0 Buy 8.0% Changes in estimatesChanges inforecasts

2009e 2010e 2011e 2009e 2010e 2011e

A-Tec 1.94 0.84 1.33 2.26 0.89 1.33Agora 0.88 1.10 1.38 0.70 1.38 1.88

Andritz 1.77 2.08 2.58 1.78 2.29 2.70

Asseco Poland 5.26 5.35 5.58 5.45 5.51 5.60

BWT 1.08 1.05 1.45 1.36 1.26 1.62CA IMMO International -2.20 0.11 0.24 -2.73 0.14 0.26

CAToil 0.08 0.37 0.29 0.27 0.41 0.37Cersanit 0.16 0.59 1.11 -0.27 0.66 1.27

CME 1.27 1.73 2.05 -1.01 -0.21 0.19

CNG 0.24 0.22 0.29 0.21 0.25 0.39Cyfrowy Polsat 1.00 1.18 1.78 0.79 1.06 1.29

Danubius Hotels -176.91 -43.15 44.80 11.50 6.48 79.77ECO Business-Immo -0.50 0.62 0.76 -0.06 0.72 0.72

Emperia Holding 4.13 4.24 4.52 4.67 5.04 5.40Eurocash 0.8 0.8 0.9 0.7 0.9 1.0

Farmacol 3.38 4.29 4.53 3.12 3.72 3.97Intercell 0.13 0.48 0.97 -0.26 0.11 0.56

Jutrzenka 0.19 0.25 0.33 0.25 0.26 0.33

Magyar Telekom 78.36 70.18 68.85 75.52 72.14 76.34Mayr-Melnhof 4.48 4.85 5.32 4.64 4.85 5.16Palfinger -0.57 0.48 1.29 -0.31 0.49 1.31

PGF 3.17 3.59 3.88 4.12 3.43 3.64S&T -0.07 0.81 1.97 0.06 1.40 1.78

SBO 0.99 1.21 2.03 0.91 1.18 1.98Semperit 1.58 1.76 2.00 1.88 2.11 2.28

Sparkassen Immobilien 0.03 0.56 0.88 -0.96 0.43 0.87STRABAG 1.46 1.16 1.23 1.52 1.41 1.17

Sygnity -6.74 0.14 0.48 -6.81 0.10 0.44T-Hrvatski Telekom 24.89 21.33 23.69 25.05 21.40 23.42

Telekom Austria 0.81 0.89 0.96 0.11 0.71 0.75Telekom Slovenije 8.17 8.60 9.12 6.23 4.97 6.18

Torfarm 5.33 8.65 8.99 9.23 8.48 9.53

TVN 0.97 1.02 1.21 0.85 0.91 0.82Vienna Insurance Group 3.03 3.60 4.43 2.70 3.60 4.43

Vienna Int. Airport 3.28 3.40 2.96 3.31 3.30 3.23Wienerberger -2.55 0.17 0.94 -3.12 0.08 0.81

PreviousEPS (local currency)

CurrentEPS (local currency)


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Summary


Changes in Ratings and Target PricesChanges in Previous Current Date of

recommendation change

Agora Hold Buy 20-Nov-09

Antibiotice not rated Reduce 06-Nov-09

Asseco Poland Accumulate Buy 17-Nov-09

Biofarm not rated Hold 06-Nov-09

CAToil Hold Accumulate 02-Dec-09

Cersanit Hold Buy 23-Nov-09

CME Buy Reduce 19-Nov-09

CNG Buy Accumulate 23-Nov-09

Eurocash Hold Accumulate 03-Dec-09

Farmacol Accumulate Sell 23-Nov-09

Immoeast Buy Accumulate 26-Nov-09

Jutrzenka Accumulate Hold 30-Nov-09

S&T Hold Buy 03-Nov-09

TVN Under review Buy 20-Nov-09

Changes in Ratings and Target Pricestarget price change

A-Tec 15.0 16.0 11-Nov-09

A ora 15.5 24.0 20-Nov-09

Andritz 38.5 45.0 10-Nov-09

Antibiotice not rated 0.6 06-Nov-09

Asseco Poland 72.1 73.8 17-Nov-09

Biofarm not rated 0.2 06-Nov-09

BWT 21.0 25.5 16-Nov-09

CA IMMO International 6.9 6.3 27-Nov-09

CAToil 7.6 8.0 02-Dec-09

Cersanit 11.5 18.5 23-Nov-09CME 35.3 27.0 19-Nov-09

CNG 3.7 3.9 23-Nov-09

Cyfrowy Polsat 16.6 16.0 20-Nov-09

Danubius Hotels 3,750.0 3,650.0 18-Nov-09

Emperia Holding 47.5 56.0 19-Nov-09

Eurocash 13.5 16.5 03-Dec-09

Farmacol 45.0 35.0 23-Nov-09

Intercell 33.5 31.7 17-Nov-09

Jutrzenka 4.2 4.5 30-Nov-09

Magyar Telekom 700.0 800.0 12-Nov-09

Mayr-Melnhof 70.0 71.0 16-Nov-09

Palfinger 17.0 17.3 06-Nov-09

PGF 23.5 26.0 25-Nov-09

S&T 12.9 20.2 03-Nov-09

Sanochemia 1.8 0.0 11-Nov-09

SBO 27.2 32.0 25-Nov-09Semperit 29.0 33.4 25-Nov-09

Sparkassen Immobilien 7.1 6.3 30-Nov-09

STRABAG 26.0 25.0 01-Dec-09

Sygnity 16.2 13.2 16-Nov-09

T-Hrvatski Telekom 260.0 300.0 05-Nov-09

Telekom Austria 13.2 12.0 13-Nov-09

Telekom Slovenije 140.0 125.0 26-Nov-09

TVN under review 16.0 20-Nov-09

Vienna Insurance Group 44.0 48.0 11-Nov-09

Vienna Int. Airport 33.0 38.0 20-Nov-09

Wienerberger 15.7 14.0 12-Nov-09


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Summary


One Month Performance (in EUR terms)Outperformer 1M YTD Underperformer 1M YTD

Sanochemia 58.4% 74.9% Austrian Airlines -25.4% -56.0%

Graal 45.0% 64.3% CA IMMO -15.6% 88.8%

Ambra 37.1% 333.1% ZCh Police S.A. -14.6% 6.4%

ComArch 36.2% 54.1% Telekom Slovenije -8.2% 15.4%

Emperia Holding 29.7% 62.3% RHI -7.6% 48.6%

Banca Transilvania 27.3% -14.9% Austrian Post -7.6% -24.1%

Lotos Group 27.1% 172.0% CNG -7.5% 21.1%

Cinema City 26.1% 54.5% PGF -7.2% 46.4%

Agora 23.8% 37.2% Komercijalna Banka -6.9% 20.5%

BZ WBK 20.7% 57.5% Aik Banka AD Nis -5.1% 6.0%

Top 20 Dividend Yield2008 2009e 2010e

Atlantska plovidba 10.5% 11.7% 7.9%

Magyar Telekom 14.6% 9.8% 10.2%Telefnica O2 CR 12.7% 9.6% 9.9%

T-Hrvatski Telekom 15.4% 9.2% 7.9%

TPSA 9.2% 8.6% 9.1%

Austrian Post 10.4% 8.5% 8.7%

KGHM 48.7% 8.2% 7.4%

Philip Morris CR 10.0% 8.0% 9.7%

Transgaz 9.4% 7.7% 7.5%

CEZ 6.9% 6.8% 5.8%

Telekom Austria 7.3% 6.4% 6.4%

Vienna Int. Airport 8.2% 5.8% 5.8%

Ciech S.A. 21.4% 5.6% 3.5%

Pegas Nonwovens 9.8% 5.4% 5.4%

Cyfrowy Polsat 1.5% 5.2% 4.4%

CNG 0.0% 4.9% 5.9%

Uniqa 2.2% 4.7% 2.9%

Lotos Group 14.7% 4.4% 4.6%

TVN 4.3% 4.2% 2.6%

Top 20 P/E2008 2009e 2010e

Atlantska plovidba 2.4 2.1 3.2

ECM nm 3.1 1.1

A-Tec nm 4.3 11.0

ZA Pulawy S.A. 7.6 6.1 10.1

Sojaprotein AD 10.0 7.4 6.0

Pegas Nonwovens 5.4 7.7 8.6

Torfarm 9.3 8.2 8.4

CWT nm 8.3 32.0

CEZ 8.4 8.7 9.7

KGHM 1.6 9.1 10.2

BRD - Group SG 3.3 9.2 8.9

Magyar Telekom 5.7 10.0 10.0

Mostostal Warszawa 10.7 10.0 10.7

Ericsson Nikola Tesla 7.6 10.1 9.6

Transgaz 5.4 10.2 10.4

PGF 5.7 10.3 11.7

Vienna Int. Airport 7.3 10.5 10.5

OTP 3.0 10.7 9.0


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Summary


Top 20 by Turnover

Av era ge turnover (EUR)* Av era ge volume (pi eces )

OTP 56,379,900 2,830,088

CEZ 31,953,668 920,026Telefnica O2 CR 26,576,523 1,584,867

PKO BP 26,143,907 3,176,189

KGHM 23,259,243 995,677

Bank Pekao 22,221,254 561,152

Raiffeisen International 16,490,258 393,971

OMV 16,344,197 572,530

CEDC 16,313,182 764,390

TPSA 15,378,720 3,783,344

voestalpine 14,369,448 593,453

Wienerberger 12,893,490 958,981

Aik Banka AD Nis 12,529,230 413,141

Immoeast 11,528,358 2,749,552

Telekom Austria 10,189,470 849,565

PKN Orlen 10,023,606 1,362,357

MOL 9,051,687 156,405

Komercni banka 8,608,221 61,969

CME 8,408,072 423,231

Richter Gedeon 7,728,967 52,786

* Average turnover is based on 3M daily average volume multipled with 3M average share pricein EURSource: Factset, Erste Group Research


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Summary


Stock market Performances CEE in Comparison

(EUR terms) 1M 3M 6M 12M YTD

New Europe Blue Chip Index 7.7% 8.9% 26.9% 38.6% 38.1%

ATX (Austria) 3.7% 5.1% 19.3% 49.3% 45.8%

BELEX 15 (Serbia) -7.8% 0.2% 13.1% 25.8% 17.4%BET (Romania) 13.5% 19.9% 39.9% 51.1% 60.9%

BUX (Hungary) 9.4% 13.4% 46.7% 61.4% 68.8%CROBEX (Croatia) -0.1% 4.0% 0.8% 36.2% 23.0%

PX (Czech Republic) 3.0% -1.3% 27.1% 37.1% 36.7%SBI (Slovenia) -2.2% 2.2% -0.5% 3.9% 14.1%

PFTS (Ukraine) 4.5% 37.5% 20.6% 67.0% 79.9%WIG (Poland) 12.3% 12.7% 43.1% 41.4% 48.4%

WIG 20 (Poland) 13.7% 13.7% 36.1% 31.7% 34.1%

IRTS (Russia) 5.1% 24.0% 17.5% 96.5% 105.5%

ISE National 100 (Turkey) 5.8% 3.5% 38.6% 83.7% 77.0%SOFIX (Bulgaria) 2.9% 1.3% 19.6% 26.3% 26.5%

MSCI Emerging Asia 5.6% 7.3% 14.1% 62.2% 55.3%

MSCI Emerging Europe 4.7% 14.6% 20.5% 58.6% 65.8%

MSCI Emerging Far East 1.6% -4.2% 1.0% 5.5% 4.2%MSCI Emerging Latin America 7.6% 22.3% 30.5% 86.0% 86.3%MSCI Emerging World 6.2% 10.8% 18.2% 64.8% 60.2%

MSCI W orld Index 2.9% 4.2% 10.4% 14.8% 17.5%

DJ EURO STOXX 50 6.0% 6.6% 15.8% 21.4% 17.3%

DJ EURO STOXX Banks 4.9% 2.7% 26.1% 50.3% 51.2%DJ EURO STOXX Basic Resources 12.3% 11.3% 12.9% 37.7% 38.0%

DJ EURO STOXX Chemicals 13.3% 21.8% 27.0% 52.0% 38.1%DJ EURO STOXX Construction & Material 6.5% 7.0% 16.4% 32.8% 27.0%

DJ EURO STOXX Food & Beverage 4.9% 14.0% 28.3% 36.9% 33.2%DJ EURO STOXX Health Care 6.4% 11.5% 14.9% 16.0% 13.3%

DJ EURO STOXX Industrial Goods & Services 6.4% 9.5% 22.2% 37.7% 29.9%DJ EURO STOXX Insurance 2.7% 2.6% 14.3% 15.8% 5.9%

DJ EURO STOXX Media 4.9% 5.3% 9.8% 1.2% 0.7%DJ EURO STOXX Oil & Gas 3.2% 6.6% 4.2% 13.3% 12.6%

DJ EURO STOXX Personal & Household Goods 8.5% 16.4% 28.7% 36.6% 33.1%DJ EURO STOXX Retail 9.2% 10.5% 13.7% 26.4% 25.2%DJ EURO STOXX Technology 1.2% -4.5% -1.1% 10.0% 8.1%

DJ EURO STOXX Telecommunications 4.8% 9.2% 22.2% 5.5% 7.2%DJ EURO STOXX Travel & Leisure 3.9% 2.3% -1.6% 2.7% -3.5%

DJ EURO STOXX Utilities 4.4% 0.2% 6.7% 2.0% -5.3%

S&P 500 2.4% 3.6% 11.0% 6.3% 12.2%DAX 7.8% 8.8% 14.2% 26.3% 20.0%

1M 3M 6M 12M YTD

Currencies

RSD -1.8% -2.9% -2.0% -14.0% -

RON 2.1% 1.0% 0.3% -8.7% -

HUF 2.5% 1.1% 6.2% -2.4% -

HRK -0.8% 0.3% 0.4% -1.6% -

CZK 1.5% -1.3% 4.3% -0.2% -UAH 0.4% 4.7% -12.9% -23.2% -

PLN 4.2% 0.1% 9.8% -4.8% -

TRY -1.4% -4.8% -4.0% -10.2% -

Indices in local currency

BELEX 15 (Serbia) -6.1% 3.0% 15.1% 31.6% 25.6%

BET (Romania) 11.1% 19.0% 39.9% 65.6% 67.9%

BUX (Hungary) 6.6% 11.5% 38.1% 67.3% 71.4%

CROBEX (Croatia) 0.7% 3.6% 0.4% 38.5% 22.1%

PX (Czech Republic) 1.4% -0.5% 22.1% 37.8% 31.4%

SBI (Slovenia) -2.2% 2.2% -0.5% 3.9% 14.1%

PFTS (Ukraine) 4.1% 32.1% 34.5% 116.5% 103.3%

WIG (Poland) 7.5% 11.6% 29.6% 50.9% 47.6%

WIG 20 (Poland) 8.9% 12.6% 23.3% 40.5% 33.5%ISE National 100 (Turkey) 7.2% 7.7% 42.2% 107.5% 84.9% Source: Factset


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Summary


Sector Performance (EUR terms)

Sector* 1M 3M 6M 12M

Real Estate 8.9% 10.2% 66.9% 215.9%

Basic Resources 11.6% 15.2% 38.3% 111.0%Industrial Goods & Services 6.0% 16.7% 31.3% 90.8%

Chemicals 5.7% 2.8% 19.3% 51.0%

Oil & Gas 9.2% 11.0% 11.7% 48.3%

Banks 15.5% 22.0% 62.8% 39.6%

Food & Beverages -4.3% -5.2% 5.5% 36.8%

Healthcare 2.6% 4.6% 17.5% 33.8%

Retail & Distribution 13.2% 3.0% 56.2% 32.6%

Erste Universe 7.0% 5.7% 23.2% 31.7%

Insurance -3.5% 1.9% 13.1% 29.0%

Construction & Materials 4.5% -7.6% 25.1% 26.0%

Technology 12.0% 7.6% 20.5% 23.9%

Personal & Household Goods 1.0% 4.0% 33.4% 17.5%

Travel & Tourism 3.0% -3.6% 5.5% 13.2%

Telecom 1.9% -3.2% 9.6% 3.2%Utilities 0.4% -10.9% -5.5% 3.1%

Media 0.6% -7.2% 8.8% -1.6%

*based on Erste Group Research Coverage

Erste Coverage Universe Sector Banks

Sector Basic Resources Sector Chemicals

1,000

1,200

1,400

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2,200

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

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Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

1,000

1,500

2,000

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3,000

3,500

Dec-0

8

Jan-09

Feb-

09

Mar-0

9

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

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Oct-0

9

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9

Dec-0

9

800

1,000

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Dec-0

8

Jan-09

Feb-

09

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-09

Apr-0

9

May

-09

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Jul-0

9

Aug-09

Sep-09

Oct-0

9

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9

300

400

500

600

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800

Dec-08

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-0

9

Dec-0

9


11/143

Summary


Sector Construction & Materials Sector Food & Beverages

Sector Health Care Sector Industrial Goods & Services

Sector Insurance Sector Media

Sector Oil & Gas Sector Personal & Household Goods

200

300

400

500

600

700

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-0

9

Dec-0

9

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

700

800

900

1,000

1,100

1,200

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

800

1,000

1,200

1,400

1,600

1,800

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

Dec-08

Jan-09

Feb-09

Mar-09 Ap

r-09May-09Ju

n-09 Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

600

700

800

900

1,000

1,100

1,200

Dec-08

Jan-09

Feb-09

Mar-09Ap

r-09May-09Ju

n-09 Jul-09Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

600

700

800

900

1,000

1,100

1,200

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9


12/143

Summary


Sector Real Estate Sector Retail & Distribution

Sector Technology Sector Telecom

Sector Travel & Tourism Sector Utilities

Source: Factset, Erste Group ResearchBased on Erste Group Research Sector Aggregates. Prices for aggregates are based on d/d performance for each individual stock within therespective aggregate, which are then weighted by market capitalization to form a weighted average. For composition of aggregate see sectorpart of this report.

0

200

400

600

800

1,000

1,200

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

2,300

2,800

3,300

3,800

4,300

4,800

5,300

5,800

Dec-08

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-09

700

800

900

1,000

1,100

1,200

1,300

1,4001,500

1,600

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

1,300

1,350

1,400

1,450

1,500

1,550

1,600

1,650

1,700

1,750

1,800

Dec-0

8

Jan-09

Feb-

09

Mar

-09

Apr-0

9

May

-09

Jun-09

Jul-0

9

Aug-09

Sep-09

Oct-0

9

Nov-09

Dec-0

9

200

250

300

350

400

450

500

550

600

650

Dec

-08

Jan

-09

Feb

-09

M

ar-09

A

pr-09

May

-09

Jun

-09

Jul-0

9

Aug

-09

Sep

-09

O

ct-09

Nov

-09

Dec

-09

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

D

ec-08

J

an-09

F

eb-09

M

ar-09

A

pr-09

M

ay-09

J

un-09

Jul-09

A

ug-09

S

ep-09

O

ct-09

N

ov-09

D

ec-09


13/143

Summary


3Q Reporting Summary

Country Company Sector 3Q 2009* Outlook

Austria A-Tec INDUSTRIAL GOODS & SERVICES + improved

Andritz INDUSTRIAL GOODS & SERVICES = con rmeAT&S TECHNOLOGY + n.a.Austrian Post MEDIA - con rmeBWT PERSONAL & HOUSEHOLD GOODS + mproveCA IMMO FINANCIAL SERVICES - n.a.CA IMMO Interna tional FINANCIAL SERVICES - n.a.CAToil OIL & GAS + mproveconwert FINANCIAL SERVICES = mproveCWT INDUSTRIAL GOODS & SERVICES - wea erECO Business-I mmo FINANCIAL SERVI CES + mproveImmoeast FINANCIAL SERVICESIntercell HEALTH CARE - weakerKapsch TrafficCom TECHNOLOGY = con rmeOMV OIL & GAS + con rmePalfinger INDUSTRIAL GOODS & SERVICES + n.a.Pankl Racing INDUSTRIAL GOODS & SERVICES - n.a.Raiffeisen I nternational BANKS + n.a.RHI BASIC RESOURCES = con rmeS&T TECHNOLOGY = mproveSanochemia HEALTH CARE n.a. n.a.SBO OIL & GAS - n.a.Semperit CHEMICALS + n.a.Sparkassen Immobil ien FINANCIAL SERVICES - n.a.STRABAG CONSTRUCTION & MATERIAL + con rmeTelekom Austria TELECOMMUNICATIONS - wea erUniqa INSURANCE - n.a.Verbund UTILITIES = wea erVienn a In su ra nce Group INS URA NCE = con rmeVienna Int. Airport TRAVEL & LEISURE = con rmevoestalpine BASIC RESOURCES + con rmeWienerberger CONSTRUCTION & MATERIAL - n.a.

Croatia Atlantska plovidba INDUSTRI AL GOODS & SERVICES - im rovedEricsson Nikola Tesla TECHNOLOGY = confirmedINA OIL & GAS - n.a.Institut IGH CONSTRUCTION & MATERIAL - confirmedPodravka FOOD & BEVERAGE = n.a.T-H rvatski Telekom TELECOMMUNICATIONS = con rme

Czech Republic CEZ UTILITIES - con rmeCME MEDIA - confirmedECM FINANCIAL SERVICES - con rmeKomercni banka BANKS = n.a.New Wo rld R esources BAS IC R ESOURCES - mproveOrco FINANCIAL SERVICES = con rmePegas Nonwovens CHEMICALS + mproveTelefnica O2 CR TELECOMMUNICATIONS + con rmeUnipetrol OIL & GAS - con rme

Hungary Danubius Hotels TRAVEL & LEISURE + im rovedEgis HEALTH CARE - confirmedFHB BANKS - con rmeMagyar Telekom TELECOMMUNICATIONS = confirmedMOL OIL & GAS = confirmedOTP BANKS + con rmePannErgy CHEMICALS + confirmedRFV INDUSTRIAL GOODS & SERVICES + confirmedRichter Gedeon HEALTH CARE = confirmed


14/143

Summary


3Q Reporting Summary

Poland Agora MEDIA + mproveAmbra FOOD & BEVERAGE + mproveAmRest TRAVEL & LEISURE - con rmeApator UTILITIES = con rmeAsseco Poland TECHNOLOGY + mproveBank Pekao BANKS + n.a.Bioton HEALTH CARE = n.a.BRE Bank BANKS - n.a.BZ WBK BANKS + n.a.CEDC FOOD & BEVERAGE = con rme

ersan - mproveCiech S.A. CHEMICALS - con rmeCinema City MEDIA = con rmeCNG CONSTRUCTION & MATERIAL = mproveComArch TECHNOLOGY + mproveCyfrowy Polsat MEDIA = con rmeDuda FOOD & BEVERAGE - wea erEmperia Holding RETAIL + mprove

Empik RETAIL - wea erEurocash RETAIL = con rmeFarmacol HEALTH CARE - wea erGraal FOOD & BEVERAGE + con rmeGTC FINANCIAL SERVICES - wea erInter Cars AUTOMOBILES & PARTS - con rmeJutrzenka FOOD & BEVERAGE + con rmeKGHM BASIC RESOURCES - con rmeKoelner CONSTRUCTION & MATERIAL = con rmeLotos Group OIL & GAS + con rmeLPP RETAIL + mproveMosto st al Warszawa CONSTRUCTION & MA TER IAL = con rmeNG2 RETAIL + con rmePBG S.A. CONSTRUCTION & MATERIAL - wea erPGF HEALTH CARE - con rmePKN Orlen OIL & GAS = con rmePKO BP BANKS + n.a.Polimex CONSTRUCTION & MATERIAL = con rmeRafako INDUSTRIAL GOODS & SERVICES + con rme

ygn y -Synthos CHEMICALS = mproveTorfarm HEALTH CARE = con rmeTPSA TELECOMMUNICATIONS - con rmeTrakcja Polska CONSTRUCTION & MATERIAL + mproveTVN MEDIA - mprove

s u a roup - wea erZA Pulawy S.A. CHEMICALS = wea erZCh Police S.A. CHEMICALS - wea er

Romania A&D Pharma HEALTH CARE n.a. con rmeAntibiot ice HEALTH CARE + con rmeBanca Transilvania BANKS + n.a.

Biofarm HEALTH CARE = con rmeBRD - Group SG BANKS + con rmePetrom OIL & GAS + con rmeTranselectrica UTILITIES = con rmeTransgaz UTILITIES = con rmeTurbomecanica INDUSTRIAL GOODS & SERVICES - wea er

Serbia Aik Banka AD Nis BANKS + n.a.Komercijalna Banka BANKS - n.a.Sojaprotein AD FOOD & BEVERAGE - con rme

Slovenia Gorenje PERSONAL & HOUSEHOLD GOODS + mproveKrka HEALTH CARE - wea erTelekom Slovenije TELECOMMUNICATIONS - wea er

Switzerland Winterthur INDUSTRIAL GOODS & SERVICES n.a. n.a.

*signs indicate below/in-line/above expectations

Source: Company data, E rste Group Research


15/143

Macroeconomy


Real Economy

GDP growth (%) 2008 2009 2010f 2011f Ind. production growth (%) 2008 2009 2010f 2011f

Austria 2.0 -3.4 1.0 1.5 Austria 3.9 -9.5 1.5 1.9

Croatia 2.4 -5.5 0.0 2.1 Croatia 1.6 -9.0 2.0 5.0Czech Republic 2.6 -4.9 1.4 2.4 Czech Republic -0.5 -10.1 7.9 7.4

Hungary 0.6 -6.2 0.3 2.6 Hungary -1.1 -14.5 4.5 6.5

Poland 4.8 1.2 2.6 3.4 Poland 5.2 -6.2 2.3 4.9

Romania 7.1 -7.2 0.6 1.8 R omania 0.9 -7.0 1.5 1.9

Serbia 5.4 -4.2 0.0 1.8 Serbia 1.1 -16.0 1.0 0.0

Ukraine 2.1 -13.1 2.0 5.0 Ukraine -3.1 -21.7 5.0 11.0

C/A (% of GDP) 2008 2009 2010f 2011f CPI (%) 2008 2009 2010f 2011f

Austria 3.5 1.9 1.9 1.9 Austria 3.2 0.5 1.3 1.6

Croatia -9.4 -4.8 -4.4 -5.0 C roatia 6.1 2.9 3.9 4.0

Czech Republic -3.1 -1.4 -1.6 -1.7 Czech Republic 6.4 1.1 1.7 1.7

Hungary -7.2 -1.6 -2.0 -2.3 Hungary 6.1 4.2 4.1 2.9

Poland -5.0 -2.0 -3.1 -4.8 Poland 4.2 3.4 2.2 3.5

Romania -12.3 -4.6 -4.8 -5.0 Romania 7.9 5.6 4.4 3.9

Serbia -17.4 -7.0 -6.0 -7.8 Serbia 11.7 8.3 6.4 6.5

Ukraine -6.7 0.0 0.0 2.0 Ukraine 25.2 16.2 12.0 11.0

The recently released 3Q09 GDP data supported our categorization of CEE countries into twogroups - economies which, after a sudden collapse of exports, bottomed out quickly (CzechRepublic and Slovakia), and economies which have lagged in recovery (Romania, Hungary,Croatia, Serbia). The Polish economy was the outlier in the region, avoiding recession entirelyand growing 1.7% y/y (0.5% q/q) in 3Q 2009. The Czech Republic and Slovakia both showedrenewed growth in 3Q in seasonally adjusted q/q terms even at an accelerating pace (0.8% q/qand 1.6% q/q, respectively). No doubt, external demand was supported by incentive programs in

Western European countries, particularly the German scrap premium, which ended inSeptember. At the same time, the most recent monthly data illustrates some resilience of theeconomies to fading stimulus programs, showing that the upswing has some strength of its own.The y/y GDP growth will almost certainly switch to black figures in both countries in 1Q10 due tothe base effect.

The second group is comprised of countries which had to remove their external imbalances inorder to stabilize their currencies and still feel the pain of collapsing domestic demand. TheHungarian economy contracted further, albeit at a slightly slower pace -1.8% q/q than in 2Q. TheRomanian economy shrank too, but only 0.6% q/q, while Ukraine and Croatia remained stuck in3Q09 at -15.9% y/y and -5.8% y/y respectively. These countries likely reached the bottom in 3Q(or 4Q at the latest), and a sharp reversal of y/y growth dynamics is expected in next twoquarters due to the base effect and diminishing depletion of inventories.

Despite the fact that external imbalances have been substantially reduced since the beginningof year, CEE currencies remain volatile and vulnerable to sudden changes in global sentiment.In the first half of November the Polish Zloty, Czech koruna and Hungarian forint gained 5-7%,but in the second half they lost 3-4%. Sensitivity to EUR/USD developments and global riskaversion is extremely strong in Hungary and Poland. Any widening of emerging market spreadsor fall in stock prices triggers a reaction in CEE currencies. The Romanian leu and Croatiankuna are partially decoupled from the regional developments for a couple of months as theircentral banks have been active and influenced the currency development.


16/143

Macroeconomy


Real GDP growth (y/y) CPI (y/y)

Sources: Central statistical offices. Ifos business sentiment index (right scale).

Retail sales (y/y) Industrial production (y/y)

Interest Rates & Currencies

Currency/EUR (avg.) 2008 2009 2010f 2011f Currency/USD (avg.) 2008 2009 2010f 2011f

Croatia 7.22 7.40 7.42 7.44 Austria 1.46 1.41 1.52 1.42

Czech Republic 25.0 26.3 24.5 22.9 Croatia 4.94 5.21 5.19 5.95

Hungary 251 280 270 265 Czech Republic 16.8 19.2 17.4 18.4

Poland 3.50 4.30 3.84 3.60 Hungary 172 199 179 187Romania 3.68 4.20 4.18 4.00 Poland 2.40 3.11 2.77 2.57

Serbia 81.4 94.0 95.0 92.0 Romania 2.52 3.00 2.72 2.82

Ukraine 7.67 11.35 12.7 11.9 Serbia 58.1 66.2 64.8 0.0

Ukraine 5.25 8.05 8.40 8.40

3M interest rate (%) 2008 2009 2010f 2011f 10Y interest rate (%) 2008 2009 2010f 2011f

Austria 4.6 1.2 1.3 2.1 Austria 4.50 4.00 4.05 4.48

Croatia 7.0 9.1 7.5 6.8 Croatia 6.17 7.90 7.25 7.00

Czech Republic 4.0 2.2 1.9 2.7 Czech Republic 4.64 4.75 4.80 5.00

Hungary 8.9 8.7 5.5 5.3 Hungary 8.23 9.10 6.70 5.90

Poland 6.3 4.3 4.3 5.3 Poland 6.10 5.52 5.26 5.35

Romania 13.0 11.1 9.2 7.9

Serbia 15.6 14.5 9.5 10.0

Ukraine 14.8 18.0 11.0 7.0

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

Q12007

Q22007

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Czech Republic Hungary

Poland Romania

-2

0

2

4

6

8

10

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Czech Republic Hungary

Poland Romania

-20

-15

-10

-5

0

5

10

15

20

25

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Poland (nominal) Czech Republic

Hungary Romania

-30

-25

-20

-15

-10

-5

0

5

10

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Czech Republic HungaryPoland (nominal) Romania


17/143

Macroeconomy


Rumor has it that the Romanian central bank has been intervening frequently on the FX marketin order to keep the EUR/RON below 4.30. The Romanian authorities still have to adopt a fiscalconsolidation plan before they get another tranche from the IMF. The recent decision to cutminimum reserve requirements on FX liabilities to 25% from 30% was aimed at supporting the

local currency and adding extra liquidity (about EUR 1.2bn) for financing the mounting fiscaldeficit. After the presidential elections are over (Dec. 6), we expect a more constructivediscussion on the budget in parliament and a restarting of talks with the IMF.

Inflation has been on a downward trend in the whole region in recent months. Inflationtemporarily slipped into negative territory in the Czech Republic and Slovakia, but a hike ofindirect taxes in the Czech Republic and a change in the base of fuel prices from a year agoshould move consumer prices away from deflationary threats in coming months. Inflation alsocollapsed in Romania and Hungary, opening the door to further monetary easing. TheHungarian central bank cut rates by another 50bps to 6.50% in November, and we expect thecentral bank to continue to reduce the key rate to 5.50% by March 2010. On the other hand, theRomanian central bank had to postpone a rate reduction until the pressure on currency easesand bold steps are taken in the fiscal area. The current government (with its restricted powers)

was able to present a budget for next year, but the chances of an austerity budget being passedby parliament will increase significantly after the presidential elections. The Polish central bankcurrently has neutral bias, while the Czech National Bank has been flirting with idea of anothercut in order to stop currency appreciation.

Exchange Rates & Interest Rates

Source: Bloomberg

100

150

200

250

300

350

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

HUF/EUR

HUF/USD

3m interbank rate, r.s.

Hungary

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

PLN/EUR

PLN/USD


Poland

10

15

20

25

30

35


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

CZK/EUR

CZK/USD


Czech Republic

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

HRK/EUR

HRK/USD

Croatia


18/143

Sector Insight Banks


- CEE banks 3Q09 earnings season: 8 above, 3 below, 1 in line with estimates- CEE banking sector more or less fairly priced at about 1.7x BV10e and 15.2x EPS10e,taking the remaining insecurities into account- Neutral stance on the sector with 6 banks at Hold, 2 at Reduce and 2 at Accumulate

- Top picks: BRD GSG and OTP, both with an Accumulate recommendation

Looking at the 3Q09 earnings season of the CEE banking sector, the positive surprises clearlyoverweight the negative ones. Out of 12 covered banks, 8 surprised on the positive side,whereas 3 came in below expectation and 1 was more or less in line with our estimates. Thequarterly development of the main income sources was mixed as the development in netprovisioning, whereas the trend to lower operating expenses was prolonged in 3Q09. CEEbanks have picked up considerably from there lows in March this year and are currently at about1.7x BV10e and 15.2x EPS10e more or less fairly priced in our opinion, taking the remaininginsecurities into account. We therefore take a neutral stance on the sector, with 6 banks at Hold,2 at Accumulate and 2 at Reduce. Our current top picks are BRD GSG and OTP, both with anAccumulate recommendation.

After a relatively weak 2Q09 with a quarterly drop in pre-tax profit by 66%, AIK Banka manageda rebound in 3Q09 and improved its pre-tax profit by 46% q/q to RSD 814.1mn. Despite theimprovement q/q, the bottom line in the third quarter is still 56% below 3Q08 figures. Thequarterly improvement in pre-tax profit was mainly driven by lower net provisions, which droppedaround 56% q/q. Despite net interest income weakened by 17% q/q, risk / earnings ratiodeclined considerably to 31.9% vs. 60.0% in 2Q09. Risk costs dropped 2.97% vs. >60% we sawin the first two quarters. As the company does not publish NPLs and NPL coverage on aquarterly basis it is hard to asses the quality of the loan book of the bank and the cautiousnessof its provisioning. On the income side the picture was mixed. While net interest income declined(-9% y/y, -17% q/q) on a lower NIM (5.87% vs. 7.28% in 2Q09) and net trading result diminishedfurther by 43% q/q, net fee & commission income jumped back to RSD 155.2mn after the slumpin 2Q09. Based on an overall drop in total income (-14% q/q) and increase in total expenses(+6% q/q) CIR further rose to 26.1%, but remained overall still on a low level compared to itspeers. ROE improved to 8.9% vs. 6.2% in 2Q09.

Banca Transilvania came in with a 3Q09 net profit of RON 37.2mn, which is above our andconsensus estimates. 3Q08 figures include a net gain from the disposal of a 25% stake ininsurer Asiban of around RON 225mn. Main deviations to our estimates came from a better thanexpected net interest income and net fee & commission income, whereas net provisions and nettrading result surprised on the negative side. The surprisingly strong performance in net interestincome (+39.1% y/y, +33.9% q/q) was mainly driven by improving margins (4.54% vs. 3.28% in2Q09), supported by a moderate loan growth (+2.5% q/q). Net fee & commission income alsodeveloped positively rising by 4.1% q/q to RON 90.5mn, whereas net trading result dropped10.9% q/q to RON 52.0mn.

Driven by further deterioration in loan book quality, net provisioning remained on a high level ofRON -136.9mn (risk costs of 4.97%, risk / earnings ratio of 64.2%). Based on the strongdevelopment on the income side (+15.8% q/q) and an only moderate growth in operatingexpenses (+2.3% q/q) CIR improved to 48.4% (vs. 54.8% in 2Q09). Loan / deposit ratio alsoimproved further (78.5% vs. 81.2% in 2Q09) on successful deposit campaigns (+6.0% q/q) andmoderate loan book growth (+2.5% q/q).

Bank Pekao for 3Q09 reported a net profit of PLN 620.5mn (-26% y/y, -19% y/y on adjustedbasis, but +1.2% q/q), which is 15% above our estimates and 16% better than consensusexpectations. The main divergence to our forecasts came from net provisions (23% lower thananticipated), which were flat compared to 2Q09 despite a further rising NPL ratio of 7.0% (6.7%in 2Q09), however, at a diminishing NPL growth rate of only 1% q/q vs. 8% q/q in the previousquarter. On the other hand, the NPL coverage ratio in 3Q09 further decreased to 76.4%, from78% in 2Q09. As a result, the risk/earnings ratio still stands at moderate levels of 15.6% (vs.16.2% in 2Q09) which is also the case for cost of risk amounting to 78bp vs. 76bp in 2Q09. In

Positivesurprisesoutweigh

Rebound fromlow level,based on lowerprovisioning

Positivesurprise basedon strong NIIand net F&C

Still highprovisioning

3Q09 bottomline aboveexpectationson lowprovisioning


19/143



the CC the management pointed out that it expects net provisions to consolidate on currentlevels but not to decrease further mainly due to the deteriorating consumer loan book.

In our view, Pekao in 3Q09 reported good numbers with net profit 15% above expectations

mainly due to provisions on low levels (again low risk/earnings ratio of 15.6% vs. 16% in 2Q09)despite a rising NPL ratio and decreasing NPL coverage ratio. But this time the quality of theresults is better than in 2Q09 since it was not driven by the trading result. Good news againcame from net interest income which was 6% above expectations due to slightly improvingmargins to 3.08%. Moreover, F&C income came back to growth path driven by financial marketsand banking fees. The remaining questions for the next quarters for us comprise whether thelow provisioning levels may remain and whether sustainable income sources can keep or extendsequential growth despite the decreasing volumes. With 1-3Q09 contributing 82% to our FY09estimates we feel quite comfortable at the moment, even if NPLs and provisions furtherincrease. With the Pekao share currently trading at 2.6x BV10e vs. the peers 1.8x (55%premium) we see Pekaos better risk profile compared to most peers as more than adequatelypriced in. However, in a recovery scenario Pekaos more conservative profile may also limit itspotential to grow and improve profitability. We maintain our Reduce recommendation and PLN

157 target price.

With 3Q09 net profit of RON 235mn (-21.5% y/y, +9.2% q/q), BRD GSG came in above ourestimates (+11.0%). 3Q08 figures include a net gain from the disposal of a 25% stake in insurerAsiban of around RON 225mn The positive surprise vs. our estimates came from net interestincome and net trading income whereas net fee & commission income was lower than expectedand net provisions overstated our expectations. The good performance in net interest incomewhich advanced to RON 428.2mn (+10.6% y/y, +11.6% q/q) was based on a further uptick inNIM compared to 2Q09 (3.52%, vs. 3.02%), despite a decline in the loan book of around 1.5%q/q. Net fee & commission income improved further to RON 259.6mn (+ 3.9% y/y, +2.6% q/q)and net trading income rose by 5.8% q/q to RON 198.9mn. Negative surprise came from netprovisions, which rose further to RON -299.3mn (+245% y/y, 65.4% q/q) on diminishing loanbook quality. Risk costs jumped to 3.86% (vs. 2.51% in 2Q) and risk /earnings ratio rose to69.9% (vs. 52.8% in 2Q). Based on lower operating costs (-16.1% q/q) and a good performanceon the income side (+8.1% q/q) CIR improved to 37.6% (vs. 46.0% in 2Q). Based an increase incustomer deposits (+3.6% q/q) and a slightly lower customer loan basis (-1.5% q/q), the loan todeposit ratio prolonged its downward trend started in 1Q09 and declined by -5.3%p to 102.6%.

BRD GSG again managed to beat our estimates by 11.0% in 3Q09. The main reason for thiswas the better than expected development in net interest income and net fee & commissionincome, whereas net provisions surprised on the negative side increasing by 65.4% q/q. Nettrading income was below expectations, but rose 5.8% q/q. Overall, the net profit decline of18.9% y/y in 1-3Q09 perfectly fits with our full-year bottom line estimate of RON 1,070mn (-20.2% y/y, based on 2008 net profit adjusted for the gain on the disposal of a 25% stake ininsurer Asiban). We therefore remain positive on the stock of BRD GSG.

After a one-off driven loss in the second quarter, mainly due to option provisions for corporateclients holding large exposures under derivative instruments, BRE Bank returned with a netprofit of PLN 72.5mn (-64.2% y/y) to profitability in 3Q09, but missed our and consensusestimates by 7.6% and 4.6%, respectively. The main divergence to our estimates came fromlower than expected net interest income (-2.4%), net fee & commission income (-3.7%) and nettrading result (-17.7%), a higher than expected effective tax rate, partly compensated by positivesurprise from operating expenses (-7.6%). The quarterly performance of income sources wasmixed with declines in net interest income (+13% y/y, -4.5% q/q) and in net trading result (-40%y/y, -1.4% q/q), but an improving net F&C income (+10,6% y/y, +2.9% q/q). Provisioningreturned to normality, but was at 60% risk / earnings and 1.85% risk costs above 1Q09 level.The higher net provisions compared to 1Q09 is a combined effect of a further increasing inNPLs to 5.9% (vs. 4.8% in 2Q09) and an increase in NPL coverage ratio to 56% (vs. 53% in2Q09).

Reduce

recommendationand PLN 157target pricemaintained

Gooddevelopment inall incomesources, aboveexpectations

On track toreach our FY09estimates

Back in blackbut belowestimates


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In 3Q09, BRE Bank returned to profitability, but came in below our and consensus expectations.Negative surprises came from net interest income, net F&C income and net trading result,whereas total expenses dropped more than estimated. Net provisions were more or less in linewith estimates. Compared with 2Q09, the development on the income side was mixed, with a

decline in net interest income and net trading result, but a further improving net F&C income.Besides lower provisioning the improvement in bottom line was also supported by lower totalexpenses. Based on the results, we currently stick to our Hold recommendation and our targetprice of PLN 290.

BZ WBK reported a 3Q09 net profit of PLN 264mn (+6.7% y/y, +2.2% q/q), which is 8% aboveour forecasts and 39% more than the consensus had expected. The main divergence to ourforecasts came from net interest income (-3.9% y/y, +16% q/q) which is 24% above ourforecasts mainly due to a better net interest margin of 2.93% (vs. 2.44% in 2Q09) as well as30% lower than expected provisioning (-21% q/q) despite further rising NPL ratio of 5.4% (vs.4.5% in 2Q09). Net fee & commission income was in line with expectations (flat y/y and +3%q/q) mainly due to 17.7% q/q higher investment banking fees and the trading result came down26% q/q which was slightly worse than expected.

In the analyst meeting the BZ WBK management basically elaborated on NPLs/risk costs,operating costs, margins and F&C income. The ongoing strong 130bp increase of the NPL ratioin the property loan book to 6.9% (vs. 5.6% in 2Q09) was mainly due to land acquisitionexposure (25.7% NPL ratio) and residential development (14.5% NPL ratio). The decrease inthe NPLs coverage ratio to 39.9% (vs. 40.6% in 2Q09) reflects the well secured increase ofproperty cases and low LTVs. The management sticks to the guidance for cost of risk of about150bp for FY09e (1-3Q09: 144bp). The excellent performance of operating costs (-3.8% q/q, ofwhich personnel +2.4% q/q) is seen as a result of the staff restructuring program effective as ofMay (only 100 layoffs, 100 FTE natural fluctuation) and lower bonus accruals. Concerningmargins BZ WBK still sees only small improvements in the next few quarters on the asset side(competition on lending might rise) but stabilization of deposit prices on high levels.

In our view, the results are a positive surprise due to 49bp higher margins of 2.93% and volume-driven top line and lower provisioning despite further rising NPL ratio of 5.4% (vs. 4.5% in2Q09). However, we have also seen further decreasing NPL coverage ratio of 39.9% (vs. 40.6%in 2Q09) which might be justified by the quality of the property portfolio. A risk/earnings ratio ofonly 24% vs. 35% in 2Q09 is rather low as well as an NPL coverage ratio below 40%, whichmight not be sustainable with consumer loan quality deteriorating in the next few quarters. With1-3Q09 contributing 96% to our FY09 estimates, we have to slightly adapt our forecasts. Wemaintain our Hold recommendation and PLN 171 target price.

After a strong second quarter, FHB came in with 3Q09 net profit of HUF 1,443mn (-9.9% y/y, -44.6% q/q), below our estimate (-21.6%). A negative surprise came from net provisions and netprofit from financial transactions, whereas net interest income and net F&C income were betterthan expected. The good performance in net interest income (+6.8% y/y, 4.7% q/q) was basedon a further increase in NIM (3.32%, vs. 3.25% in 2Q09) and a stable development in the loanbook (+0.6% q/q). The downward trend in net F&C income slowed considerably and stoodalmost at the level seen in 2Q. After strong performance in the last couple of quarters, net profitfrom financial transactions turned negative and came in at HUF -144mn in 3Q09. Netprovisioning increased further to HUF -2,316mn (risk/earnings ratio of 34.8%, risk cost of2.81%), due to a further deterioration in the loan book quality (NPL ratio of 3.55%, vs. 2.80% in2Q09) and an increase in NPL coverage ratio to 50.6% vs. 44.2% in 2Q09. Nevertheless,momentum in NPLs slowed considerably to 27% q/q from 54% q/q in 2Q09. Based on a slightlyweaker total income and stable total expenses, CIR rose slightly to 45.1% vs. 42.2% in 2Q09.ROE dropped back to 12.7% and capital adequacy stood at 10.3%.

After the 2Q, FHBs 3Q09 net profit dropped back to the 1Q09 level and came in below ourestimate. The main reasons for the underperformance were higher than expected net provisionsand weaker net profit from financial transactions, whereas sustainable income sources (net

Negativesurprise frommain incomesources

3Q09 resultsbetter thanexpected onlowprovisioning

Quarterly dropbased onprovisions andtrading result,belowexpectations

Holdmaintained,target price:HUF 1,440


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interest income and net F&C income) were better than expected. With a net profit contribution in1-3Q09 of around 80% to our FY estimates, FHB is (despite the weaker 3Q09) on the way toreaching our forecasts. We therefore stick to Hold and our target price of HUF 1,440.

Komercijalna Banka came in with a mixed 3Q09 result. While net interest income improvedfurther to RSD 1,766.6mn (+15.3% y/y, +10.9% q/q), net fee & commission income dropped toRSD 743.3mn (+1.1% y/y, -31.2% q/q) and net provisioning more than doubled compared with2Q09 to RSD -358,5mn. Reaching RSD 322.6mn, pre-tax profit declined by 16.3% q/q, the fifthquarterly decline in a row, but at a diminishing pace. The strong performance in net interestincome was mainly driven by a further increasing NIM (+0.27%p q/q), despite a more or less flatdevelopment in customer loan (+0.3% q/q). Net fee & commission income returned to a moresustainable level, after the jump in the second quarter, and came in more or less on 3Q08 level.Net trading result took also a rollercoaster ride. After a strong trading income in 4Q08 and 1Q09,it turned negative in 2Q09 and came in at the base line this quarter. Net provisions more thandoubled compared with 2Q09, but remained below the levels we saw in 4Q08 and 1Q09. Also incomparison with its CEE peers, risk / earnings ratio of 20.3% or risk costs of 1.27% do not looknot dramatic. As the company does not publish NPLs on a quarterly basis it is however hard to

asses the quality of the loan book of the bank and the cautiousness of its provisioning. Thanksto an increase in total income (+2.1% q/q) and a decline in total expenses (-5.3% q/q), CIRdiminished to 73.8% from 79.6% in 2Q09, but is still on a high level. ROE stood at 4.9% vs.5.9% in 2Q09.

A contract on a EUR 120mn recapitalization of Komercijalna Banka could be signed onDecember 17, according to Deputy Prime Minister Mladjan Dinkic. At yesterday's session, thegovernment adopted a draft of the contract, which will be signed with the EBRD, IFC,SwedFund, and German development bank KfW's subsidiary DEG. According to earlierannouncements, the recapitalization will be done through preferred convertible shares. Thegovernment, which owns 42.6% of Komercijalna, but controls a majority stake through stateowned firms, will have three years to pay its own share of Komercijalna recapitalization in orderto keep its stake unchanged. However, the sum Serbia must pay will grow over time given thatthe contract will set interest on delays. After that, the EBRD will increase its current 25% holdingin Komercijalna to 34.6% diluting the small shareholders.

Komercni banka reported a 3Q09 net profit of CZK 2,676mn (-22.7% y/y, -8.3% q/q), which isin line with our and consensus estimates. The biggest divergence came from net trading resultwhich dropped 21% q/q, all other P&L items performed more or less as expected. Net interestincome (+3.9% y/y, -1.5% q/q) and net F&C income (-3.9% y/y, -0.4% q/q) also showed amoderate decline compared to 2Q09, due to a decline in the asset base by -2.6% q/q, despite arelatively stable development in NIM (3.29% in 3Q09 vs.3.27% in 2Q09). Loan book volume anddeposit base remained relatively stable q/q and loan to deposit ratio stood almost unchanged at70%.

Deterioration in loan book quality moderated considerably and NPL ratio reached 6.9% in 3Q09vs. 6.4% in 2Q09. Despite a further slight reduction in NPL coverage ratio (54.0% in 3Q09 vs.55.3% in 2Q09), net provisioning increased further by 6% q/q to around CZK 1,327mn.Nevertheless, with risk costs of around 1.44% and a risk / earnings ratio 24.2% KB still ranks onthe lower end of CEE peers. After the increase in the second quarter, operating costs dropped-3.1% q/q (-1.3% y/y), resulting in combination with the slight decline in top line in a more or lessstable CIR of around 41.9% (vs. 41.7% in 2Q09).

In our view, the 3Q09 figures came in more or less in line with our and consensus estimates.The lower bottom line performance compared with 2Q09 was driven by slight erosion in netinterest income and net F&C income, a drop in net trading result and a further increase in netprovisioning, only partly compensated by lower operating expenses. Despite a further increasein NPLs the momentum decreased considerably, which is a positive sign in our opinion.

Further declinein pre-tax profit

Quarterlydecline in netprofit in linewith estimates

Recapitalization underway


22/143



As the 3Q09 results were more or less in line with our estimates, we see currently no need tochange our estimates. We therefore stick to our Hold recommendation and our target price ofCZK 3,850.

OTP reported 3Q09 net profit of HUF 45.9bn (-14.4% y/y, +9.9% q/q), which is clearly above our(+21.7%) and consensus estimates (+28.1%). The outperformance was mainly driven by one-offitems. The one-off gain on the repurchase of upper tier 2 capital of HUF 2.65bn in 3Q09 (vs.HUF 5.5bn in 2Q09 and HUF 19.6bn in 1Q09) was more or less expected, but the positive taxeffect of HUF 11.7bn stemming from legal changes concerning goodwill write-offs caught us bysurprise. Based on this effects income tax turned positive to HUF 5bn. The above mentionedgoodwill amortization will not have further effects on the IFRS tax amount payable. Theperformance of main income sources was good and basically in line with our expectations. Netinterest income slightly declined by 2.4% q/q, based on a slightly lower NIM (5.74% vs. 5.76% in2Q09) and a decreasing customer loan base (-1.8% q/q). Due to an overall lower activity, netF&C income diminished by around 1% q/q. Other non-interest income surprised on the positiveside (+21% q/q), driven not only by the one-off gains from the repurchase of upper tier 2 capital,

but also due to a good trading result. Main negative surprise came from net provisioning, whichincreased to HUF -66.6bn (+20.1% q/q), based on a further increase in NPLs (NPL ratio of 8.9%vs. 7.4% in 2Q09) and a more or less stable NPL coverage ratio of 68.5% (vs. 71% in 2Q09).Risk costs rose to 3.84% (vs. 3.02% in 2Q09) and risk/earnings reached 48.4% (vs. 39.3% in2Q09). Especially the loan book quality in UA (NPL ratio of 19.4% vs. 11.2% in 2Q09) and BG(NPL ratio of 7.9% vs. 5.7% in 2Q09) diminished further, whereas we recognized a considerabledecline in momentum in HU (NPL ratio of 6.8% vs. 6.2% in 2Q09) and a slight decline in RU(NPL ratio of 13.8% vs. 13.9% in 2Q09). Total expenses decreased by 5.6% q/q and CIRreached 42.7% (vs. 45.2% in 2Q09). Reaching around 87% of its full-year net profit guidance ofHUF 150bn in 1-3Q09, the profit target appears attainable, but slight deviations are possibleaccording to the CFO of OTP, depending on the further development of loan book quality.Looking at the performance so far, we feel comfortable with our FY09 net profit estimates ofHUF 143bn.

OTP came in with mixed 3Q09 results all in all beating our and consensus net profitexpectations. The outperformance was mainly driven by one-off items (gain from repurchase ofupper tier 2 capital and positive tax effects from goodwill write-off). Net interest income and netF&C income came in as expected, whereas net trading result surprised on the positive side andnet provisions were higher than expected. On segment level, the development in HU, BG andRU was positive, whereas the subsidiary in UA came in with a loss of HUF 19.2bn, mainly drivenby high net provisions. Reaching around 87% of its full-year net profit guidance of HUF 150bn in1-3Q09, the profit target appears attainable, but slight deviations are possible according to theCFO of OTP, depending on the further development of loan book quality. Looking at theperformance so far, we feel comfortable with our FY09 net profit estimates of HUF 143bn. Wetherefore remain positive on the stock of OTP and stick to our Accumulate recommendation.

PKO BP came in with a 3Q09 net profit of PLN 639mn (-29% y/y, +4.7% q/q), which is 14%above our and consensus expectations. The main divergence to our estimates came from (1) netinterest income (-16% y/y, +20% q/q), which was 20% better than we had expected mainly dueto income from derivative hedging instruments of PLN 174mn, (2) net fee & commission income(+16% y/y, +13% q/q) which was 11% above our estimates mainly due to better bank accountrelated fees and payment card fees, and (3) net provisions (+45% y/y, -6.7% q/q) which came in9% lower than expected. Operating expenses were in line with expectations, up 3.6% q/q but1.7% lower than in 3Q08 mainly due to 2% wage increase as of July 2009.

The volume growth dynamics in 3Q09 accelerated vs. 2Q09, namely to 3.7% q/q (vs. 1.3% q/q in2Q09) for gross customer loans, of which consumer loans showed the highest sequential growthof 5% (vs. 3.5% q/q in 2Q09), followed by corporate loans (3.9% q/q vs. 1.6% q/q) and mortgageloans (2.9% q/q vs. 0.2% q/q). Deposit growth in 3Q09 was stable at 3.3% q/q (vs. 3.4% q/q in2Q09). As a result, the loan/deposit ratio slightly deteriorated to 95% (vs. 94% in 2Q09). The

Net profit up10% q/q, aboveexpectations,partly due toone-off items

Accumulatemaintained,target price:HUF 6,550

3Q09 net profit14% aboveexpectationson betterincome


23/143



Ukrainian subsidiary Kredobank in 3Q09 further decreased its net loss to PLN -20.3mn, fromPLN -54mn in 2Q09 and PLN -72mn in 1Q09. In hryvnia terms, Kredobanks gross loansincreased 1.8% q/q, while term deposits grew by 6.6% q/q.

In our view, the 3Q09 numbers are better than expected, which is mainly due to higher netinterest income (also based on accelerating volume growth), better net fee & commissionincome as well as lower provisioning resulting in a 27% risk/earnings ratio vs. 35% seen in 2Q09(cost of risk decreased to 1.33%, from 1.46% in 2Q09). However, the strong outperformance onthe top line is mainly due to derivative hedging and might not be sustainable. The main questionfor the coming quarters is, whether the lower provisioning levels will be sustainable since weexpect NPL growth on the retail side to accelerate in the next few quarters. With 1-3Q09contributing 85% to our FY09 estimate we feel quite comfortable at the moment, even ifoperating costs increase in 4Q09 and provisions go up again. We maintain our Holdrecommendation and PLN 38 target price.

Raiffeisen International reported a 3Q09 net profit of EUR 77.5mn (-74% y/y, +254% q/q),which is better than our EUR 43mn forecast, however, significantly above consensus who had

expected a loss of EUR 7mn. The main divergence to our forecasts came from 18% lower thanexpected net provisions, which decreased 24% q/q despite further rising NPLs (NPL ratio of7.9% vs. 6.8% in 2Q09), however, at a diminishing growth rate of 12% q/q vs. 37% q/q in 2Q09.The most significant decrease of NPL growth was observed in Russia where NPLs grew only13.5% q/q in 3Q09 (vs. 94% q/q in 2Q09) and CIS Other with 5.9% sequential NPL growth (vs.33% in 2Q09). But also the CE and SEE regions showed diminishing NPL growth rates of 18%q/q and 7.6% q/q, respectively. The NPL coverage ratio further decreased to 67% (vs. 69% in2Q09). As a result, the risk/earnings ratio came down to moderate 54% levels, from 72% in2Q09.

Another positive surprise was net fee & commission income which was 12% above our forecaststurning around to positive sequential growth in 3Q09 (+11% q/q, -19% y/y) mainly due to FX andprecious metals business (+12% q/q) and slightly accelerating payment transfer business(+6.5% q/q) as well as loan administration business (+7.3% q/q). Net interest income was fully inline with our expectations and flat vs. 2Q09 (-13.7% y/y) due to further decreasing grosscustomer loans (-3.1% q/q), flat deposits (+0.8% q/q) but slightly better margins (3.75% vs.3.70% in 2Q09), mainly driven by CIS other (7.3%, +60bps q/q) and the CE (3.0%, +20bps q/q)regions. Operating costs (-22% y/y, -6% q/q) came in 6% lower than expected and were due to a8.3% y/y headcount reduction and the optimization of the branch network.

In our view, the 3Q09 bottom line is better than we had expected but it is EUR 85mn better thanmarket expectations. The lower provisioning (54% risk / earnings ratio vs. 72% in 2Q09) basedon diminishing NPL growth in all regions and the 6% sequential decrease of operating costswere the positive surprise as well as the sustainable income sources which were in line (NII) orbetter than expected (F&C income). From the regions we have seen positive signs from Russiawith EUR 69mn pre-tax profit due to very low provisioning and from CIS Other (includingUkraine) which lowered the quarterly pre-tax loss to EUR -27mn, from EUR -49mn in 2Q09mainly due to 22% q/q lower operating costs. The questions in the conference call will be thestatus of loan restructuring in the regions and whether the slowdown of NPL growth is already atrend. As the 3Q09 result cannot be seen as a benchmark for 4Q09, we stick to our FY09eforecast of EUR 59mn, indicating a loss in 4Q09. We maintain our Hold recommendation andEUR 51 target price.

3Q09 resultsbetter than

expected dueto lowprovisioning inRussia


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Company Curr. Mcap

(EURmn) 2008 2009e 2010e 2011e 2008 2009e 2010e 2011e 1M 3M 6M 12M

Aik Banka AD Nis RSD 206 16.7% -2.1% -1.9% 12.0% 6.7% -0.9% -0.8% 5.4% -5.1% 7.7% 8.2% 32.3%

Banca Transilvania RON 561 25.8% 3.1% 7.5% 8.5% 2.4% 0.3% 0.7% 0.9% 27.3% 46.0% 95.6% -22.3%

Bank Pekao PLN 11,210 25.3% 12.6% 13.7% 14.7% 3.0% 1.6% 1.8% 2.0% 20.0% 24.5% 69.5% 49.1%

BRD - Group SG RON 2,317 44.9% 22.6% 20.5% 21.2% 3.6% 2.0% 2.0% 2.3% 15.3% 20.6% 70.8% 58.7%

BRE Bank PLN 1,783 26.1% 4.6% 9.3% 15.7% 1.4% 0.2% 0.5% 0.9% -1.0% 5.7% 66.3% 9.7%

BZ WBK PLN 3,106 20.2% 12.0% 12.2% 17.0% 2.1% 1.2% 1.3% 1.9% 20.7% 35.4% 107.2% 63.6%

FHB HUF 311 19.1% 15.2% 15.0% 14.7% 1.1% 0.9% 0.9% 1.0% 11.9% 25.8% 91.2% 63.5%

Komercijalna Banka RSD 284 12.8% -2.7% -0.6% 6.2% 1.7% -0.4% 0.5% 1.5% -6.9% -9.0% -0.9% 33.1%

Komercni banka CZK 5,655 26.7% 17.6% 17.8% 20.4% 2.1% 1.5% 1.6% 2.0% 13.7% 15.9% 49.6% 36.7%

OTP HUF 5,755 25.7% 12.9% 14.2% 16.4% 2.7% 1.5% 1.7% 2.2% 13.8% 20.3% 68.3% 84.7%

PKO BP PLN 11,616 26.5% 11.6% 12.5% 17.4% 2.8% 1.4% 1.8% 2.6% 18.7% 29.0% 74.0% 24.6%

Raiffeisen International EUR 6,576 17.2% 1.1% 4.8% 11.5% 1.4% 0.1% 0.5% 1.1% 10.0% 25.0% 47.9% 116.4%

Median - - 25.5% 11.8% 12.4% 15.2% 2.3% 1.0% 1.1% 1.9% - - - -

Unicredit SpA EUR - 39,235 8.2% 3.2% 4.1% 7.2% - - - - -1.0% -7.7% 18.5% 70.3%

KBC Groupe SA EUR - 11,876 -22% -20% 12.5% 13.1% - - - - 9.8% 14.4% 124.3% 29.7%

Svenska Handelsbank SEK - 12,397 15.2% 12.4% 10.6% 11.8% - - - - 11.6% 14.7% 55.7% 50.6%

Erste Group Bank AG EUR - 10,733 10.7% 8.8% 7.7% 9.3% - - - - -2.9% -1.2% 49.0% 67.1%

Societe Generale EUR - 35,803 6.2% 2.8% 7.9% 11.0% - - - - 6.0% -2.2% 17.6% 57.8%

Median - - 8.2% 3.2% 7.9% 11.0% - - - - - - - -

Euro Stoxx Banks 538,153 6.4% 4.6% 7.4% 9.3% - - - - 12.3% 11.3% 12.9% 37.7%

CEE to Peer, Prem/Disc - 212% 275% 57% 38% - - - - - - - -

ROE ROA Performance (EUR terms)

2008 2009e 2010e 2011e 2008 2009e 2010e 2011e 2008 2009e 2010e 2011e

Aik Banka AD Nis 3.3 nm nm 4.7 1.8% 0.0% 0.0% 1.3% 0.5 0.6 0.6 0.5

Banca Transilvania 6.5 45.2 17.9 14.6 2.0% 0.0% 0.0% 1.0% 1.7 1.4 1.3 1.2

Bank Pekao 8.0 22.1 19.1 17.1 0.0% 2.3% 3.1% 4.1% 2.1 2.7 2.6 2.5

BRD - Group SG 3.3 9.2 8.9 7.5 9.7% 3.3% 3.4% 5.3% 1.4 2.0 1.7 1.5

BRE Bank 5.8 40.1 18.6 10.0 0.0% 0.0% 0.0% 4.0% 1.5 1.8 1.7 1.5

BZ WBK 8.1 20.2 17.9 12.0 0.0% 0.0% 2.8% 4.2% 1.6 2.3 2.1 2.0

FHB 6.4 12.6 11.0 9.8 0.0% 0.0% 0.0% 2.1% 1.1 1.7 1.5 1.3

Komercijalna Banka 7.2 nm nm 15.0 0.0% 0.0% 0.0% 5.3% 0.9 0.9 1.0 0.9

Komercni banka 8.0 14.5 12.9 10.5 6.5% 3.5% 4.6% 5.7% 2.0 2.4 2.2 2.1

OTP 3.0 10.7 9.0 6.8 0.0% 0.0% 0.0% 3.0% 0.7 1.4 1.2 1.0

PKO BP 9.0 20.3 18.0 11.8 3.6% 1.7% 2.2% 3.4% 2.3 2.3 2.2 2.0

Raiffeisen International 3.0 111.4 24.0 9.6 4.9% 0.6% 2.9% 2.1% 0.5 1.2 1.1 1.0

Median CEE 6.4 20.2 17.9 10.2 0.9% 0.0% 1.1% 3.7% 1.4 1.8 1.6 1.4

Unicredit SpA 8.2 21.3 16.2 9.0 0.0% 1.3% 2.1% 4.6% 0.4 0.7 0.7 0.6

KBC Groupe SA 8.7 7.8 0.0% 0.0% 2.3% 3.1% 0.7 1.2 1.1 1.0

Svenska Handelsbanken AB 11.9 12.8 14.0 11.7 3.2% 3.4% 3.4% 3.4% 1.0 1.6 1.5 1.4

Erste Group Bank AG 10.4 11.4 12.1 8.9 2.3% 1.9% 2.0% 2.5% 0.6 1.0 0.9 0.8

Societe Generale 14.2 34.1 11.7 8.0 2.4% 1.3% 3.1% 4.8% 0.6 0.9 0.9 0.9

Median 11.1 17.0 12.1 8.9 2.3% 1.3% 2.3% 3.4% 0.6 1.0 0.9 0.9

Euro Stoxx Banks 8.4 14.1 12.6 8.9 2.4% 1.9% 3.1% 4.5% 0.7 1.0 0.9 0.9

CEE to Peer, Prem/Disc -42% 19% 48% 15% -61% -100% -52% 8% 125% 77% 68% 62%

Div yield P/BVP/E

Source: JCF Quant, Erste Group Research


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2008 2009e 2010e 2011e 2008 2009e 2010e 2011e 2008 2009e 2010e 2011e

Aik Banka AD Nis -16.0% -19.3% -24.9% -28.4% 8.3% 6.4% 5.5% 5.3% 138% 134% 128% 128%

Banca Transilvania -68.5% -60.0% -65.7% -71.8% 3.9% 3.4% 3.5% 3.5% 96% 97% 97% 97%

Bank Pekao -48.2% -54.0% -50.8% -51.4% 3.9% 2.6% 3.0% 3.1% 95% 100% 96% 99%

BRD - Group SG -44.0% -44.6% -47.3% -47.4% 4.3% 3.9% 3.8% 3.6% 118% 117% 117% 117%

BRE Bank -60.0% -54.1% -53.5% -58.5% 2.2% 1.9% 2.1% 2.1% 140% 140% 136% 144%

BZ WBK -51.6% -53.1% -53.6% -53.5% 3.6% 2.2% 2.4% 2.7% 84% 84% 83% 83%

FHB -55.7% -49.1% -49.4% -52.2% 2.6% 2.7% 2.8% 2.7% - - - -

Komercijalna Banka -63.9% -53.6% -54.5% -57.7% 4.3% 4.0% 4.1% 4.1% 90% 90% 91% 92%

Komercni banka -43.2% -43.6% -41.6% -42.7% 3.3% 3.1% 3.2% 3.3% 68% 68% 68% 71%

OTP -64.6% -49.8% -53.8% -58.9% 5.0% 5.7% 5.5% 5.2% 134% 134% 133% 133%

PKO BP -47.0% -51.3% -48.0% -43.6% 5.5% 3.0% 3.5% 4.1% 101% 103% 104% 105%

Raiffeisen International -57.7% -57.0% -51.4% -63.5% 4.1% 3.7% 3.9% 3.8% 131% 114% 113% 109%

Median CEE -53.7% -52.2% -51.1% -52.8% 4.0% 3.3% 3.5% 3.6% 101% 103% 104% 105%

Unicredit SpA - - - - 1.8% 1.7% 1.8% 1.8% - - - -

KBC Groupe SA - - - - 1.4% 1.6% 1.6% 1.5% - - - -

Svenska Handelsbanken AB - - - - 0.9% 1.1% 1.0% 1.0% - - - -

Erste Group Bank AG - - - - 2.4% 2.5% 2.5% 2.5% - - - -

Societe Generale - - - - 0.8% 0.8% 0.8% 0.8% - - - -

Median - - - - 1.4% 1.6% 1.6% 1.5% - - - -

Euro Stoxx Banks - - - - 1.9% 1.6% 1.6% 1.7% - - - -

CEE to Peer, ppt - - - - 2.57 1.67 1.88 2.00 - - - -

Cost/income ratio Net interest margin Loans/deposits ratio

Source: JCF Quant, Erste Group Research


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Aik Banka AD Nis Reduce Target price RSD

Price (RSD) 2,704.0 CIR (2008) -16% 08 09e 10e 11e

Mcap (RSD mn) 19,768 ROE (2008) 16.7% Total assets (RSD mn) 83,912 79,717 78,920 82,866

Mcap (EUR mn) 206 L/D ratio (2008) 138% Total income (RSD mn) 10,512.5 9,197.6 8,287.8 8,489.1

Free float (%) 79.7% Equity ratio (2008) 41.2% Net interest income (RSD mn) 6,449.5 5,317.9 4,362.5 4,246.9Free float (EUR mn) 164 BVPS CAGR 08-11e 5.1% Risk provisions (RSD mn) -2,795.4 -8,165.8 -6,850.9 -1,090.9

Shares outst. (mn) 7.3 EPS CAGR 08-11e -2.4% Tot. equity/Tot. assets 41.19% 42.42% 42.06% 44.85%

EPS (RSD) 700.22 -101.59 -85.50 577.69

BVPS (RSD) 4,727.43 4,625.84 4,540.34 5,083.37

Net interest margin 8.26% 6.42% 5.50% 5.25%

Cost/income ratio -15.97% -19.29% -24.88% -28.44%

P/BV 0.54 0.58 0.60 0.53

P/E 3.31 nm nm 4.68

Dividend yield 1.80% 0.00% 0.00% 1.28%

P/BV rel. 0.4 0.3 0.4 0.4

P/E rel. 0.5 - - 0.5

Performance 1M 3M 6M 12M

Absolute (RSD terms) -3.4% 10.8% 10.1% 38.5%

Rel. to sector (EUR, ppt) -20.6 -14.3 -54.7 -7.3Rel. to universe (EUR, ppt) -12.2 2.0 -15.0 0.6

Banca Transilvania Reduce Target price RON 1.660

Price (RON) 2.230 CIR (2008) -68% 08 09e 10e 11e

Mcap (RON mn) 2,363 ROE (2008) 25.8% Total assets (RON mn) 17,149 17,835 18,191 19,283

Mcap (EUR mn) 561 L/D ratio (2008) 96% Total income (RON mn) 1,088.8 1,304.1 1,250.1 1,243.2

Free float (%) 85.0% Equity ratio (2008) 9.6% Net interest income (RON mn) 582.4 612.2 630.5 655.8

Free float (EUR mn) 477 BVPS CAGR 08-11e 10.9% Risk provisions (RON mn) -157.5 -459.6 -273.0 -158.8

Shares outst. (mn) 1,060 EPS CAGR 08-11e -16.6% Tot. equity/Tot. assets 9.60% 9.52% 10.06% 10.20%

EPS (RON) 0.37 0.05 0.12 0.15

BVPS (RON) 1.55 1.60 1.73 1.86



P/BV 1.69 1.39 1.29 1.20

P/E 6.46 45.23 17.93 14.63Dividend yield 1.97% 0.00% 0.00% 1.03%

P/BV rel. 1.2 0.8 0.8 0.8

P/E rel. 1.0 2.2 1.0 1.4


Absolute (RON terms) 24.6% 44.8% 95.6% -14.9%

Rel. to sector (EUR, ppt) 11.8 23.9 32.8 -62.0

Rel. to universe (EUR, ppt) 20.2 40.3 72.4 -54.1

Bank Pekao Reduce Target price PLN 157.0

Price (PLN) 175.2 CIR (2008) -48% 08 09e 10e 11e

Mcap (PLN mn) 45,948 ROE (2008) 25.3% Total assets (PLN mn) 131,941 135,239 132,534 143,137

Mcap (EUR mn) 11,210 L/D ratio (2008) 95% Total income (PLN mn) 8,115.8 7,365.8 8,023.7 8,655.7

Free float (%) 40.7% Equity ratio (2008) 12.1% Net interest income (PLN mn) 4,509.6 3,660.6 4,042.1 4,290.7

Free float (EUR mn) 4,566 BVPS CAGR 08-11e 6.2% Risk provisions (PLN mn) -293.7 -682.0 -979.3 -858.2Shares outst. (mn) 262 EPS CAGR 08-11e -4.4% Tot. equity/Tot. assets 12.09% 12.61% 13.59% 13.15%

EPS (PLN) 13.46 8.39 9.16 10.24

BVPS (PLN) 60.82 64.92 68.43 71.29



P/BV 2.08 2.70 2.56 2.46

P/E 8.00 22.13 19.13 17.12

Dividend yield 0.00% 2.26% 3.13% 4.08%

P/BV rel. 1.5 1.5 1.6 1.7

P/E rel. 1.2 1.1 1.1 1.7


Absolute (PLN terms) 14.9% 23.4% 53.5% 59.1%

Rel. to sector (EUR, ppt) 4.5 2.5 6.7 9.5

Rel. to universe (EUR, ppt) 12.9 18.9 46.3 17.4

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BRD - Group SG Accumulate Target price RON 14.5

Price (RON) 14.0 CIR (2008) -44% 08 09e 10e 11e

Mcap (RON mn) 9,757 ROE (2008) 44.9% Total assets (RON mn) 50,920 52,956 54,016 57,256

Mcap (EUR mn) 2,317 L/D ratio (2008) 118% Total income (RON mn) 3,249.1 3,312.7 3,234.0 3,503.5

Free float (%) 40.8% Equity ratio (2008) 8.3% Net interest income (RON mn) 1,895.8 2,077.5 2,032.5 2,002.9Free float (EUR mn) 945 BVPS CAGR 08-11e 20.7% Risk provisions (RON mn) -297.2 -570.0 -401.9 -305.0

Shares outst. (mn) 697 EPS CAGR 08-11e 6.1% Tot. equity/Tot. assets 8.29% 9.38% 10.62% 11.37%

EPS (RON) 2.26 1.53 1.58 1.86

BVPS (RON) 6.06 7.13 8.23 9.34



P/BV 1.36 1.96 1.70 1.50

P/E 3.34 9.22 8.89 7.53

Dividend yield 9.66% 3.25% 3.38% 5.31%

P/BV rel. 1.0 1.1 1.1 1.1

P/E rel. 0.5 0.5 0.5 0.7


Absolute (RON terms) 12.9% 19.7% 70.7% 73.9%

Rel. to sector (EUR, ppt) -0.1 -1.4 7.9 19.1Rel. to universe (EUR, ppt) 8.3 14.9 47.5 27.0

BRE Bank Hold Target price PLN 290.0

Price (PLN) 246.2 CIR (2008) -60% 08 09e 10e 11e




Free float (EUR mn) 538 BVPS CAGR 08-11e 9.9% Risk provisions (PLN mn) -269.1 -1,167.3 -1,002.0 -445.3


EPS (PLN) 28.89 6.51 13.24 24.55

BVPS (PLN) 131.17 136.78 149.06 163.79



P/BV 1.50 1.80 1.65 1.50

P/E 5.80 40.07 18.60 10.03

Dividend yield 0.00% 0.00% 0.00% 3.99%

P/BV rel. 1.0 1.0 1.0 1.1

P/E rel. 0.9 2.0 1.0 1.0


Absolute (PLN terms) -5.2% 4.8% 50.6% 17.1%

Rel. to sector (EUR, ppt) -16.5 -16.3 3.4 -29.9

Rel. to universe (EUR, ppt) -8.0 0.1 43.1 -22.0

BZ WBK Hold Target price PLN 171.0

Price (PLN) 174.5 CIR (2008) -52% 08 09e 10e 11e




Free float (EUR mn) 916 BVPS CAGR 08-11e 10.6% Risk provisions (PLN mn) -364.6 -578.9 -510.3 -188.7Shares outst. (mn) 73 EPS CAGR 08-11e 2.7% Tot. equity/Tot. assets 8.56% 9.34% 9.84% 9.74%

EPS (PLN) 11.72 9.17 9.73 14.58

BVPS (PLN) 67.88 77.04 81.91 89.20



P/BV 1.63 2.26 2.13 1.96

P/E 8.06 20.17 17.94 11.97

Dividend yield 0.00% 0.00% 2.79% 4.18%

P/BV rel. 1.1 1.3 1.4 1.4

P/E rel. 1.3 1.0 1.0 1.2


Absolute (PLN terms) 15.6% 34.1% 87.6% 74.6%

Rel. to sector (EUR, ppt) 5.2 13.4 44.4 24.0


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FHB Hold Target price HUF 1,440.0

Price (HUF) 1,271.0 CIR (2008) -56% 08 09e 10e 11e

Mcap (HUF mn) 83,886 ROE (2008) 19.1% Total assets (HUF mn) 689,627 827,553 848,242 890,654

Mcap (EUR mn) 311 L/D ratio (2008) - Total income (HUF mn) 24,465.7 28,953.8 29,388.3 29,772.0

Free float (%) 87.4% Equity ratio (2008) 5.8% Net interest income (HUF mn) 16,681.4 21,240.5 23,461.1 23,475.1Free float (EUR mn) 272 BVPS CAGR 08-11e 18.3% Risk provisions (HUF mn) -805.1 -4,367.2 -3,470.3 -1,450.0


EPS (HUF) 101.45 105.28 115.86 129.83

BVPS (HUF) 623.23 727.35 846.22 953.02



P/BV 1.10 1.75 1.50 1.33

P/E 6.41 12.56 10.97 9.79

Dividend yield 0.00% 0.00% 0.00% 2.09%

P/BV rel. 0.8 1.0 1.0 0.9

P/E rel. 1.0 0.6 0.6 1.0


Absolute (HUF terms) 9.1% 23.6% 80.0% 69.5%

Rel. to sector (EUR, ppt) -3.6 3.8 28.4 23.9Rel. to universe (EUR, ppt) 4.9 20.1 68.0 31.8

Komercijalna Banka Reduce Target price RSD

Price (RSD) 31,340.0 CIR (2008) -64% 08 09e 10e 11e

Mcap (RSD mn) 27,295 ROE (2008) 12.8% Total assets (RSD mn) 183,828 189,193 194,869 204,613

Mcap (EUR mn) 284 L/D ratio (2008) 90% Total income (RSD mn) 12,590.9 14,349.1 14,865.6 15,432.1

Free float (%) 32.4% Equity ratio (2008) 14.3% Net interest income (RSD mn) 7,069.3 7,537.4 7,873.3 8,189.4

Free float (EUR mn) 92 BVPS CAGR 08-11e 10.8% Risk provisions (RSD mn) -1,691.2 -7,502.0 -5,851.6 -3,299.5

Shares outst. (mn) 0.87 EPS CAGR 08-11e -13.5% Tot. equity/Tot. assets 14.28% 15.25% 14.71% 14.72%

EPS (RSD) 3,286.03 -858.64 -212.95 2,088.20

BVPS (RSD) 30,134.02 33,126.90 32,913.95 34,584.54



P/BV 0.86 0.95 0.95 0.91

P/E 7.18 nm nm 15.01Dividend yield 0.00% 0.00% 0.00% 5.27%

P/BV rel. 0.6 0.5 0.6 0.6

P/E rel. 1.1 - - 1.5


Absolute (RSD terms) -5.2% -6.4% 0.9% 39.3%

Rel. to sector (EUR, ppt) -22.4 -31.1 -63.7 -6.6

Rel. to universe (EUR, ppt) -13.9 -14.7 -24.1 1.3

Komercni banka Hold Target price CZK 3,850.0

Price (CZK) 3,840.0 CIR (2008) -43% 08 09e 10e 11e

Mcap (CZK mn) 145,958 ROE (2008) 26.7% Total assets (CZK mn) 699,046 709,532 695,341 737,062

Mcap (EUR mn) 5,655 L/D ratio (2008) 68% Total income (CZK mn) 33,876.0 33,574.1 35,779.1 37,347.2

Free float (%) 30.5% Equity ratio (2008) 8.0% Net interest income (CZK mn) 21,262.0 21,946.0 22,387.9 23,361.0

Free float (EUR mn) 1,722 BVPS CAGR 08-11e 9.5% Risk provisions (CZK mn) -2,970.0 -6,139.5 -6,873.5 -3, 883. 5


EPS (CZK) 346.25 271.96 297.18 367.13

BVPS (CZK) 1,471.02 1,607.00 1,725.87 1,872.72



P/BV 2.02 2.39 2.22 2.05

P/E 7.97 14.48 12.92 10.46

Dividend yield 6.52% 3.45% 4.64% 5.74%

P/BV rel. 1.4 1.3 1.4 1.4

P/E rel. 1.2 0.7 0.7 1.0


Absolute (CZK terms) 12.1% 16.9% 43.7% 37.3%

Rel. to sector (EUR, ppt) -1.7 -6.1 -13.2 -2.9


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