Peaking earnings but dividend restoration supports Romanian rerating story

We set our new target price for BRD to RON 14.0 and maintain our Accumulate
rating, leaving a 26.4% upside including a div. yield of 11.4%.
 BRD’s investment case is shaped by stellar net interest income development with
costs more or less under control and rather low cost of risk for 2023. Net interest
income is expected to peak this year given weaker volumes and credit margins
ahead. Nevertheless moderately rising risk cost could still result in double-digit ROE
in our forecasted period. While risk cost is rising in 2024-2025 based on our
estimates, we see potential positive surprise here if macro outlook does not
deteriorate materially.
 We see two momentum midterm: (1) in the second half of the year communication
about 2023 dividend would come or potential restoration as a whole (2) the IPO of
Hidroelectrica may put the share price under pressure as fund managers are likely to
keep room for Hidro given that its large size guarantees its inclusion to main regional
indices. Nevertheless this is also a potential for rerating as thanks to the IPO,
Romania may be placed to the Emerging market universe finally.