BRD-GSG First Impression 1Q 2010 (RAS, unconsolidated)

We were impressed by the reported cost/income ratio of 37.1%, 6.5 percentage points below 1Q 09 level and a bit disappointed by the 17.2% ROE.

Shrinking loan book: Loan book (net) contracted 1.9% on Dec-2009 and 6.5% on Mar-2009. According to bank management, in comparison with 1Q 09 retail loans (gross) posted a slight decrease of cc. 2%, while the corporate loans were flat. Deposits on the other hand went up 4% yoy, that resulted in below 100% loan/deposit ratio (97.4%), a level not seen since 3Q 08.

NIM remained strong: As we expected, the NIM remained at a strong level, 5.07%, the highest since 2006.

Weaker F&C, strong trading income: The evolution of F&C signals a still modest level of business. However a better non-interest cost control strengthened the cost/income ratio.

Outlook and recommendation: Overall we were positively impressed by the reported results. Lower provisions and risk costs (in comparison with Dec-2009) speak about healthier loan book that might make us review downward our 2010 provision estimates. The positive impact stemming from lower provisions would be probably offset by the downward revision of NII and F&C. Therefore, for the moment, we maintain our buy recommendation and the 12-month target price of RON 17.7 per share.