TLV - Q1 Marked By Relatively Low Risk Cost, Falling NII

TLV– Instant Earnings Comment

Recommendation:  BUY (unch.)

Target price (12M): RON 2.5(unch.)

 

• Banca Transilvania reported net income came to RON 261 mln in the first quarter vs. our estimate of RON 241 mln.
• Revenues were moderate on a quarterly basis with NIM coming lower to 294 bps from 334 bps which we believe is partially due to the lower interest rate environment after NBR rate cut. Net F&C also came down significantly q-o-q due to seasonality.
• Cost of risk of the Bank was moderately, amounting to 40bps vs. large reversal in the previous year. Due to this, on a yearly comparison, net profit was lower by 40%.
• Non-performing loan ratio came down further to 4.1% with coverage at 104%. Loans and deposit volumes remained sound, expanding by 1.9% q-o-q each, leading to a basically unchanged LTD at 52%, marking a comfortable financing position.
• Capital adequacy was at 18.7% including interim profit still at high levels. At the General Meeting of the BT Shareholders, which took place on April 29, 2020, the shareholders approved the proposal of Banca Transilvania’s Board of Directors, regarding the distribution of 2019 profit, including the capitalization of RON 1 billion (BT proposed RON 0.11 DPS).
• The Bank already released the budget for this year with profits expected to fall to RON 514 mln. Based on this, BT expects a large deterioration in the coming quarters. We are looking forward to the confcall on 4 May, 4pm Romanian time though we do not see major changes to the outlook to the negative side. While we expect BT to be resilient amidst COVID19 in terms of capital, the Bank outperformed regional peers recently thus on the other hand if recovery comes, we see BT to somewhat underperform.