BRD - Low Risk Cost, Higher Expenses On Personels, Deposit Guarantees

BRD - Instant Earnings Comment

Recommendation: BUY (unch)

Target price (12-month): RON 16.1 (unch)

 

• BRD’s net income in the first quarter came to RON 301 mln, down significantly compared to both Q4 and Q1 last year (-28.6% and -27.3%, respectively). The lower results are attributed to lower operating results on higher personal expenses and higher deposit guarantee fees as well as lack of risk cost write-backs.
• NII was down q-o-q by 3.7% and up by 10.3% y-o-y. Q-o-q development is mainly due to lower margins (down 19 bps and in line with our forecasted range for the full yearà6%) and seasonality.
• Risk cost was again a positive contributor to earnings to the tune of RON 26 mln resulting in a CoR of 34bps. NPL ratio came down further to 4.0% with coverage of 75.4%.
• OPEX hiked significantly mostly on personal expenses and cost-to-income ratio including the Deposit Guarantee Fund amounted to 57.1% vs. 53.2% Q1 last year.
• Net loans were up by 0.6% q-o-q on the back of large corporates and retail volumes while SMEs remained weak.  
• LTD remained at low level of 67.2%.
• Capital adequacy remained at a comfortable 19.7%, net of approved dividends.
• Opinion: BRD came up with broadly in line results as our yearly forecast is at RON 1.2 bln, though costs are a little disappointing in our view. At the same time, the Bank remains overcapitalized and has a ROE of 15.3% despite higher deposit guarantee funds (which was booked in advance) vs. our full year forecast of 16%. BRD estimated the tax on financial assets for fiscal year 2019 at RON 79 million (RON 67 million, net of corporate income tax). We maintain our BUY rating on the stock.
• Conf call is set on May 6, 2019, starting at 9:30 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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