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BRD-GSG First Impression 2Q 2010

BRD-GSG has reported its 2Q 10 unconsolidated results under RAS with a net profit below our and consensus estimate, mainly due to a weaker trading result.

The bank has not disclosed too much info on this but, most likely the blame should be on rapid RON depreciation in the last days of June and adverse mark-to-market of its T-bills portfolio, on the back of higher interest rates during the same month. In contrast, risk costs came in better than expected.

Inflated loan book: Loan growth was slightly higher than our estimate, but it has to be noted that the vast majority of the growth was due to RON depreciation against EUR. Loans/deposits ratio went up to 105.2% from 103.2% in 1Q 10.

Stable NIM: The quarterly NIM stayed flat at 5.4%, while we expected a slight increase to 5.5%, suggesting that the level reached in 1Q 10 was the peak for this cycle (funding costs reversed its trend lately). Operating expenses were roughly in line with our expectations (and salaries expenses were flat on yearly basis), while cost/income ratio for the quarter stood at 46.7%. We remind that due to the seasonal pattern of salaries expenses, 2Q is usually the weakest quarter from the operating profitability point of view.

Lower risk costs: Risk costs for the quarter come in at 322 bps, compared to 430 bps in 1Q 10 and our estimate of 399 bps. As usually, this set of results din not contained a NPLs metric. CAR according to local standards stood at 12.9%, which suggests a Tier1 ratio of 10.9%.

Outlook and recommendation: Even that the net profit was slightly below our estimate, we are pleased by the rapid decrease of risk costs and we would suggest putting more emphasis on this development versus the weaker trading result. We will revise our FY 2010 IFRS estimates, but we do not see a large impact from this weaker trading result. Part of the FX losses were reversed in 3Q 10, while under IFRS its T-bills are classified as AFS (the vast majority were classified as trading in these RAS statements). We suspend our TP but maintain our Buy rating for the stock and point out that BRD-GSG looks cheap relative to its peers.

Sursa: http://www.rciro.ro

Tags: brd costs car

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