Strong set of Q3 results

BRD reported net income for the first 9M came to RON 731 mln, Q3 profit figure of RON 322 mln (+88.8% q-o-q, -26.4% y-o-y) as the Bank performed well across all lines.

Operating result: The strong print stemmed from a rebound in revenues, net F&C +25.8% q-o-q and NII up by 4.8% q-o-q. Net interest margin expanded despite rate cut, increasing to 3.48% from 3.39% a quarter ago. Rise in OPEX mitigated the improvement in operating results, still, it was up by 9.9% q-o-q which implies a remarkable rebound during this pandemic environment.

Asset quality: NPL ratio declined to 3.4% with coverage at 76.4%. The Bank made low provisioning in the quarter, RON 28 mln, resulting in 0.36% CoR, putting 9M provisioning in the range of the guided 100 bps for the whole year.

Volumes: Lending activity was still subdued, up by 0.6% q-o-q on strong SME lending rising double digits q-o-q (+19.2%), individuals by 0.9% q-o-q while large corporates were weaker (-6.6%). Deposits showed similar trends across business segments, SME deposit inflow was stellar (this could have been related to loan disbursements).

Capital: CET1 ratio was at 28.2%, a massive figure with whole retained earnings from 2019. Return on equity in the first 9M was at 11.3% on elevated capital levels.

Opinion: BRD Q3 was strong despite the pandemic, provisioning and asset quality so far remained under control and revenues were also resilient relative to the challenging environment. Key questions will be (1) dividend outlook (2) risk cost projections for next year.