Morgan Stanley has on Wednesday downgraded Hungary’s OTP Bank to ‘Underweight’ on rising macroeconomic and earnings risks, saying it sees more upside elsewhere. Morgan Stanley’s new target price for OTP is HUF 5,900, which implies 2% downside.
“We downgrade OTP to Underweight (new HUF5900 PT implies 2% downside) as earning and macro risks are building and we see more upside elsewhere (16% on average for EMEA banks) - we prefer OW-rated Komercni," said Hadrien De Belle and Magdalena Stoklosa, analysts at Morgan Stanley in a research note published on Wednesday.
They said the consensus numbers are 15% too high, as in their view “provisions will fall more slowly than consensus estimates and that top line will normalise in 2011 and 2012."
The analysts expect provisions to remain high “due to unfavourable business and geographic mix, higher share of legacy loans, and potentially higher LGD in a lower asset price environment."
De Belle and Stoklosa also said that equity markets “appear to be pricing in further good news in the macro turnaround of Hungary" while Morgan Stanley’s economist sees implementation risk of the fiscal package in 2012.
The economist is definitely not alone with this view:
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