BRD - Excellent Results On Risk Cost, But Operating Results Also Good

BRD - Instant Earnings Comment

Recommendation:  Buy (unch.)

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

• BRD reported net income in H1 came to RON 787 mln, implying a Q2 net profit of RON 486 mln, up 61.4% q-o-q and 41.9% y-o-y.
• NII improved 3.5% q-o-q and 12.5% y-o-y thanks to NIM expansion by 9 bps (staying at 3.77% in Q2). Net F&C improved q-o-q and up y-o-y by 3.6% thanks to better card revenues.
• Costs were down on a quarterly basis by 2.2% but y-o-y still up (+2.3% y-o-y), adjusted for deposit guarantees, but thanks to strong income flow, CIR declined to 43.4%.
• Cost of risk added RON 118 mln to earnings, that was the largest positive surprise. On a sector breakdown, again non-retail segment was the contributor to this line.
• Volumes remained quite moderate partially explained by write-offs (+0.5% YTD), individuals grew by 1.7% offsetted by SME and Large Corporates.
• NPL ratio declined to 3.8% in June with a coverage of 75.7%, again comfortable.
• Capital adequacy improved to 20%, ample room for dividends again.
• Opinion: BRD posted strong results and earnings development justify our BUY rating. It is very likely that the Bank will exceed our previous FY profit forecast of RON 1.2 bln and could be in the range of RON 1.4 bln if trends remain in placeàEPS of RON 2.0. Political noises could put share price under pressure but apart from that, it is difficult to observe any weakness in earnings.
• Conf call 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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