Erste Group (ERST.VI): Augmenting structural growth; reinstate at Buy

Research evidence excerpt

Erste Group (ERST.VI): Augmenting structural growth; reinstate at Buy

Goldman Sachs Erste Group (ERST.VI)

Executive Summary

Poland provides a compelling long-term growth opportunity. The acquisition of the

Erste Bank Polska stake extends Erste’s long-standing CEE strategy into a market

characterized by stronger economic growth and relatively low banking and asset

management penetration. Rather than building organically, Erste’s acquisitions have

accelerated the CEE growth narrative of the company, and expanded the TAM into which

it can grow.

Potential for further ownership increases. Given the strategic importance of the

franchise we expect Erste to seek opportunities, as management has indicated, to

increase its stake: the company has indicated that it estimates increasing its stake from

49% towards 75% over time could require c.120-130bps of additional CET1 capital, in

our view this could be funded through greater earnings retention, including a lower

dividend payout ratio. Based on our current estimates, moving to 75% ownership would

lift earnings by c.5% and appears comparable to share buybacks from a

return-on-capital perspective.

Broader growth outlook remains attractive. Beyond Poland, we believe Erste benefits

from favourable growth prospects across CEE and an improving Austrian operating

environment. Strong loan growth, resilient fee income and relatively low interest rate

sensitivity underpin a more sustainable growth profile than for many European peers, in

our view.

Our forecasts remain ahead of consensus. We are above consensus for both 2Q and

FY26 earnings, driven primarily by stronger net interest income, better cost efficiency

and lower-than-expected CHF mortgage-related provisions in Poland. We forecast FY26