Equity 13 June 2017, 2:20pm

Hungary OTP has not experienced this for over nine years

Portfolio

The share price of Hungary’s OTP Bank has been on a roller-coaster over the last few years, and so was the target prices analysts assigned to OTP. If you care to take a walk with us through the key stages, read on.

In 2007-2008, HSBC set its target price for OTP to HUF 12,308, which was the peak. After that target prices started to fall steeply as a consequence of the crisis. On 22 April 2008, HSBC slashed its target price by 25% to HUF 9,200, but maintained its 'Overweight' recommendation on the stock. Over the next year, OTP’s share price kept on falling and target prices were continuously set lower.
The average of the target prices was down at around HUF 3,300 by 3 March 2009. The most pessimistic investment bank was Bank of America, with HUF 1,222 TP, an absolute bottom. OTP turned around at HUF 1,232 on the Budapest Stock Exchange (BSE), and its share price nearly trebled (!) over less than 12 months. Target prices crept close to HUF 6,500. Goldman Sachs raised its own fair price estimate to HUF 9,541 at the end of April 2010.
After 2010, however, OTP started to face challenges on several fronts. The relief packages for FX mortgage holders, the implementation of the financial transaction tax, the Russia-Ukraine conflict ate into OTP’s profits, and also kept the share price under pressure, sending target prices lower. Until October 2012, KBC’s HUF 8,106 target price was the highest out there for OTP, but from then onward analysts had been turning increasingly bearish on the banking stock until early 2015.
OTP has been rallying since early 2015. Its share price has soared by more than 160% since then, in parallel with which target prices have also been raised sharply. J.P. Morgan was the boldest in 2015, as well, when it raised its target price for OTP to HUF 4,680 from HUF 4,430 in early March, and then revised it 49% (!) upwardly to HUF 6,950 in mid-March.
Over the last few weeks, analysts have been bombarding OTP with every higher target prices. In mid-May, Morgan Stanley set its TP to HUF 10,143 and Citi to HUF 9,965, and J.P. Morgan has today set its fair price estimate for the Hungarian banking stock to HUF 12,000, which is the highest since April 2008, i.e. more than nine years.