WOOD Flash – Banca Transilvania: solid 2Q23 results, not better due to the high taxes booked

Banca Transilvania (TLV) reported its 2Q23 results on 25 August, delivering net profit of RON 744m, up 15% yoy, and implying an annualised ROE of 25.5% for the quarter, a moderation from the previous quarter’s ROE delivery, which was fully expected and in line with our forecast for 2023E. Healthy loan growth and NIM stabilisation helped the bank grow its top line, while net fees and commissions also exhibited solid growth, making us optimistic about the bank’s next few quarters. However, operating costs continue to feel the pressure from inflation, but the trend seems to point to a slowdown in the pace of increases. Asset quality continues to benefit from a resilient and improving economic backdrop, with the trends still benign and no deterioration being felt, or in sight. Nonetheless, the bank remains cautious and booked provisions for the quarter in line with what it has been guiding. The only negative we can see in TLV’s results are the taxes booked related to the Volksbank acquisition, which we were not expecting and which prevented the bank from delivering a better bottom line. We remain positive on the overall Banca Transilvania (TLV) story, after the solid set of results in 2Q23. We view the results as rather positive, in light of the good quality mix and benign asset quality trends. We rate TLV a BUY, with a PT of RON 27.0/share, still offering 29% upside. On our 2023E estimates, the bank is trading at 5.8x P/E and 1.4x P/TBV.