Following the early 2012 rally with a performance of our CEE bank coverage of 16% in January, the market turned to cautious mode again since February. Although in negative territory with -5.6% (1m) and - 2.7% (3m) the CEE banks have been outperforming the banks in the Eurozone with their -21% and -18%, respectively. At current valuation levels with an average of 0.96x BV12e and 8.5x EPS12e the sector with estimated 11.4% ROE12e seems slightly undervalued. Also from the 1Q12 reporting season we do not expect negative surprise potential. On the other hand, the slowing economies might trigger increasing risk costs with some delay and slowing loan growth during the course of the year. Maybe a little too early to look at 2013 but this would be a positive trigger not only for CEE banks.

Source: bne