EUR 44.20 For Business Accounts Only

Liberbank 2Q17 results: Good NPAs evolution

Net profit came out better than expected due to a lower tax rate

Liberbank 2Q17 net profit declined to €35mn (–0.8% yoy). Although this figure was higher than consensus estimates, the main reason was the lower tax rate effort as revenues were similar to consensus. It is noteworthy the evolution of NPAs that declined –6.3% qoq, to €5.7bn. NPL ratio improved to 11.3% (13.0% in 1Q16) and overall coverage rose to 39.9% (39.6% in 1Q17). The Texas ratio improved to 125% (from 131% in 1Q17). Performing loans amounted to €20.1bn (+1.7% qoq) and customer funds were €28.7bn (–2.5% qoq). CET 1 fully loaded was 11.3% (+25bp qoq).

The story repeats itself: Weak revenues, good cost control

Liberbank results were uninspiring, reflecting the difficulty of the bank to achieve adequate returns in the current interest rate scenario. The group’s important efforts to control costs and to improve asset quality are the two most remarkable features of the group. We expect the group to update on further cost cutting measures to offset the end of the ERTE and the possible sale of the real estate servicer. We maintain our target value (€1.05) and our Hold recommendation