BRD - BRD Reports Decent Q4, DPS Miss Does Not Change

BRD- Instant Earnings Comment

Recommendation:  Buy

Target price (12M): RON 16.1 (unch., ex div)

 

• BRD reported net income came to RON 1.5 bln for the full year of 2019, net profit in the fourth quarter came to RON 273 mln, above our estimate of RON 261 mln on the back of lower provisioning.
• Net interest income improved 0.3% q-o-q and 3.9% y-o-y mainly thanks to better volumes as margin remained basically unchanged at 388 bps vs 392 bps a quarter ago. Net F&C still experiences continuous competition and pricing pressure, q-o-q was down by 4.3% and 1.9% y-o-y.
• General and admin expenses hiked significantly, 27.7% y-o-y but we assume this contains RON 75 mln bank tax. Adjusted for that, cost inflation was 8% y-o-y on wage pressure and higher amortization.
• There was risk cost in the quarter compared to write-backs in the previous periods, NPL ratio was at record low 3.1% with stable coverage at 74%.
• Loans remained flattish q-o-q and improved 2.3% overall YTD. Deposits improved 1.5% q-o-q thus loan-to-deposit ratio was 66%, still at rather low levels.
• Capital adequacy remained comfortable at 20.1% (excluding net results for the current year), still having room for dividend. BRD proposed RON 1.64 DPS from 2019 results (RON 1.5 bln), which came below our and market expectation of RON 1.75 per share. We believe the market may take this as a small negative though the proposed DPS still translates to 10% yield while capital remains ample.
• Opinion: BRD reported decent results for Q4 but mainly as expected. Dividend miss is a small negative but overall big picture and strategy remains in place.
• Confcall is set tomorrow at 11:00 am, local time.

 

 

Hai Thanh Le Phuong, CFA
Head of Research

CONCORDE SECURITIES LTD.

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55-61 Alkotás street, H-1123 Budapest.
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