TLV - Strong Results On Costs, Write-Backs

TLV - Instant Earnings Comment

Recommendation:  Buy (unch.)

Target price (12M): RON 2.7 (unch.)

 

• Banca Transilvania reported Q1 net profit came to RON 436 mln on an individual level vs. RON 240 mln in Q4 2018 and RON 366 mln in Q1 last year. Comparison of each P&L line is difficult due to acquisition one-offs during last year and also due to individual level figures vs consolidated figures (which will be released in early May).
• Better results mainly stem from provision write-backs and strict cost control as cost-to-income came down from 55% to 51% (taking into account the annualized Deposit Guarantee impact, the ratio would fall to 47%).
• Net loans expanded by 1.9% q-o-q and deposits remained basically unchanged leading to still very low, 59% loan-to-deposit ratio.
• Risk cost was a positive contributor by RON 116 mln vs write-back of RON 54.3 mln in Q1 2018 and a massive one-off risk charge in the last quarter. NPL ratio remained low at 4.9% and coverage at 94%.
• Net interest income is difficult to compare as well as NIM, but the latter is within the expectation of the mgmt. and is basically in line with our annual forecast of 3.5%.
• The Bank’s CAR came down to 19.7% including interim profit, still at comfortable levels, though as we mentioned, excess capital for acquisitions is fierce now.
• The Bank calculates with a bank tax of RON 136 mln and may recognize the expense at the end of 2019. Should TLV pay the bank tax from Q1, net profit would have amounted to RON 407 mln.

 

• Opinion: We believe BT’s Q1 results were strong, amounting to RON 436 mln in Q1 despite the upfront booking of the Deposit Guarantee vs. our annual forecast of RON 1.283 bln net profit (Q1 proportion is thus at 34%, adjusting for one-offs, standing at 29%). There could be some further adjustments due to individual figures vs. our practice of using consolidated figures, but trends should basically remain in place. Also, we still see an upside in loan growth vs. banking tax which could lead to only RON 68 mln bank tax payment vs. 136 mln expected, implying a 5.4% upside in earnings. The Bank releases consolidated figures on 8 May and conf call will be on 10 May.

 

 

Hai Thanh Le Phuong, CFA
Head of Research

CONCORDE SECURITIES LTD.

Hillside
55-61 Alkotás street, H-1123 Budapest.
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