BRD - BRD posts solid Q3, generous capital return expected to continue - Instant Earnings Comment from Concorde Ltd. (Hungary)

BRD - Instant Earnings Comment

Recommendation:  Buy (unch.)

Target price (12M): RON 16.1 (unch.)

• BRD reported net income came to RON 439 mln in the third quarter, better than our projection of RON 389 mln as a result of risk cost releases.
• Net interest income increased 3.9% q-o-q and 6.5% y-o-y to RON 552 mln on the back of further margin expansion while net F&C also increased nicely by 5.8% q-o-q and 2.4% y-o-y, respectively.
• Operating result declined by 1.6% q-o-q, amidst lower net trading results while costs increased 5.7% q-o-q and 4.4% y-o-y which development is under control given wage growth in the country.
• Net loan growth improved, up by 1.7% q-o-q and 2.3% y-o-y driven by corporates and households. Deposits declined mainly as a result of outflows from large corporates and LTD ratio as a result somewhat improved to 68.8%, still remaining at a very low level. NPL ratio stood at 4.0% quite a low level with coverage at 74.1%. Risk cost still contributes to earnings thanks to reversals.
• Capital adequacy remained robust at 20.9% which equals to the return on equity of the first 9m.
• Opinion: BRD posted very good results in the first 9M and is beyond our FY estimate on risk cost as other lines came basically in line with our annual forecast. This could also imply a higher dividend stream from this year than what we estimated before (RON 1.4à RON 1.7-1.9). It is also a question whether the bank tax will be maintained next year given the recent positive communication by the govt.

Confcall is set tomorrow at 11:00 am, local time.

 

 

Hai Thanh Le Phuong, CFA
Head of Research

CONCORDE SECURITIES LTD.

Hillside
55-61 Alkotás street, H-1123 Budapest.
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MEMBER OF THE CONCORDE GROUP

 

 

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