Raiffeisen - In Line Results, Improving NIM, NII Are Key Positives

RBI – Instant Earnings Comment

Recommendation:  Buy (unch.)

Target price (12M): EUR 30.0 (unch.)

 

• RBI reported net income came to EUR 303 mln in the third quarter, in line with analyst estimates of EUR 305 mln. In the first 9M, RBI posted a return on equity of 10.4%, down from 14.4% a year ago, but this was attributed to less risk provision reversals, weaker net trading and hedge accounting results. The other net operating line also included provisions for Romanian settlement in the quarter to the tune of EUR 39 mln.
• Net interest income improved on a quarterly basis by 3.1% and y-o-y 1.2% on the back of volumes (loan book expanded 4.6% q-o-q but NIM also improved slightly on a quarterly basis (y-o-y still down by 5 bps). CZ, Russia and Croatia contributed to the higher margin.
• OPEX was down 3.2% q-o-q and thus cost-to-income improved from 60.6% to 57.6% in the quarter partially due to seasonality, nevertheless y-o-y development was still +1.9% after the Polish operation carve-out.
• Risk cost increased significantly as a result of EBA definition change affecting Hungary and Czech Republic, this impact should continue in the next quarter. NPE ratio more or less remained stable at 2.3% with the coverage slightly climbing up to 60.2%.
• Loan growth was driven by Group corporates, Russia and Romania. Deposits also grew but not at a same pace, up by 0.6% q-o-q.
• Capital ratio including interim results came to 13.7% (slightly down from 13.8% level in the previous quarter).
• Opinion: RBI reported mainly in line results in the third quarter, improving NII and NIM are key positives. Russia remains a strong player in RBI’s figures while positive trends stay in general across the Group. In light of first 9M results, RBI may come somewhat below our FY estimate of EUR 1.2 bln (9M stood at EUR 874 mln) on lower net trading results. Also, higher bank tax in Slovakia (roughly EUR 0.66 per share) and Polish risk could impact the Bank, nevertheless RBI remains one of the cheapest names in the region (6.75x PE, 0.59x PBV).

 

 

Hai Thanh Le Phuong, CFA
Head of Research

CONCORDE SECURITIES LTD.

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