Erste Bank: Romania could be first beneficiary after investors decide to reconsider smaller markets

The Central and Eastern European markets still have a significant growth lag separating them from Western markets and this card could be well played in a scenario that sees the Western markets breaking away from the influences of the US economy, says Erste Bank’s Central and Eastern Europe Capital Market Research Manager Henning Esskuchen.
Erste Bank analysts claim that most of the participants in their polls are expecting an economic slowdown, but 20 percent of them are foreseeing an acceleration of mergers and acquisitions, and mention Romania and Poland as their most attractive destinations.
Erste Bank is prudent in South-Easter Europe, but it believes Romania would be the first that could benefit from a wider bounce back after investors decide to reconsider smaller markets, says Esskuchen.
Romania’s market, known as an expensive one, has paid back many of the acquisition premiums, while transactions are now conducted at price-per-earning ratios of 13.2 and 95.5 percent in the revenues of 2008 and 2009, respectively. According to the same Erste Bank analysts, there are some risks attached to Romania – such as the current-account deficits and their impact on the local currency – but these may seem acceptable to a market at this stage of development and would be acceptable in any other environment. Foreign direct investment covers the currentaccount deficit to a large extent, and it will contribute to improving profitability and exports in the medium and the long run, the analysts say.
Erste Bank Group is among the largest providers of financial services in Central Europe. Its over 52,000 employees are providing services to almost 16 million customers at almost 3,000 subsidiaries in eight countries (Austria, the Czech Republic, Slovakia, Romania, Hungary, Croatia, Serbia and Ukraine). As of December 31, 2007, its total assets were standing at 200.5 billion euros, its net profit at almost 1.18 billion euro, with a return on equity ratio of 14.6 percent.

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