Banca Transilvania confirmed at HOLD, TP RON 2.25 - Model update - Bit more clarity, but not enough
We decided to update our models for Romanian banks following 1Q 20 results, but mainly as chances for the worst case scenario for the debt moratorium are getting smaller by the day. The Constitutional Court rejected a law which would have imposed a debt moratorium without any interest due for this period. The issue has since vanished from the public debate, although the legal procedures for having these changes were not formally closed yet. Since the current version of the debt moratorium sees the interest due for up to nine months either capitalized or deferred starting from 2021e, we expect adjustments to the carrying value of TLVs loans well below RON 100 mn at this stage. However, the political risk remains quite high, as only the Constitutional Court could prevent at this stage caps on interest rates for mortgages and consumer loans. A ruling could come in early July. Moreover, the opposition (Social-Democratic Party) might reject in Parliament the abolition of the banking tax, among others. Thus, we confirm our HOLD recommendation, with a 12m cum-dividend TP of RON 2.25 (RON 2.05).
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