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BRD-GSG 2Q 2007 results (positive)
- strong top line growth, improved underlying profitability and lower risk costs
BRD-GSG has released its 2Q 2007 unconsolidated results under the Romanian Accounting Standards (RAS) which came above our expectations. We remind that our valuation and TP are based on consolidated IFRS projections.
Balance Sheet
The balance sheet growth maintained its momentum, in line with our expectations, as total assets rose 38% yoy. As expected, the main driver was once again the loan book’s growth which recorded an increase of 50% yoy and 15% YTD. Loans to legal entities slightly outpace retail loans, with a 55% yoy growth rate versus 48% yoy for the latter. As a consequence, the loans to total assets ratio continued its ascending trend, getting to 66.3%.
On the liabilities side, once again the borrowings rose faster than deposits as the bank tried to access cheaper and longer term financing. We remind that the current high level of MRR constitution rates (especially for FCY denominated liabilities) hurts interest margins.
Profit and Loss
BRD-GSG performed ahead of competition on both top line growth and profitability side. Net interest income (NII) for the quarter stood at RON 282 mn, up 32% yoy and 11% qoq, above our expectations of 22% yoy and 2% qoq. Despite the general trend, the bank succeeded in increasing the net interest margin (NIM).
The non-interest income of RON 305 mn for 2Q 07 was 41% higher yoy and 17% qoq (our expected growth rates were 31% yoy and 8% qoq, respectively).
The biggest deviation from our expected figures came from for the risk costs, RON 33 mn against our expectations of RON 54 mn. Considering the 48% qoq decrease of bad debt charges, we suspect important non-performing loans recovery.
Not less impressive was the evolution on the costs side, with non-interest expenses coming in at RON 264 mn, 7% higher yoy and in line with our forecasts of a 7% yoy growth. As a result of such developments, the bank’s profitability improved further, costs/income ratio reaching 46.2% versus 51.1% as of end-2006. In our opinion a combined effect of economies of scale, break-even of recently opened outlets and a slow down of network expansion led to this favorable development.
The net profit stood at RON 249 mn, up an outstanding 50% yoy and 48% qoq, above our estimate of RON 189 mn.
Key figures, in RON mn
| 4Q 06 | 2Q 07 | ||
| Net loans | 17,797 | 20,440 | |
| Total assets | 28,026 | 30,807 | |
| Total deposits | 20,716 | 22,175 |
| 2Q 06 | 2Q 07 | ||
| NIM | 214 | 282 | |
| Non-interest income | 217 | 305 | |
| Risk costs | -2 | 33 | |
| Non-interest expenses | 248 | 264 | |
| Net income | 165 | 249 |
Source: BRD-GS, RCI research
We are reiterating our 'buy' stance on BRD-GSG stock with a 12-month TP of RON 29.2 per share.
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Copyright: 2007 Raiffeisen Capital & Investment SA. All rights reserved. For further Information please contact Raiffeisen Capital & Investment SA, 15, Charles de Gaulle Square, 4th Floor, Bucharest 011857, Romania, Authorized by CNVM decision 3083/09.09.2003
Tel. +40 21 306 12 33, fax: +40 21 230 06 84, e-mail: office.rci@rzb.ro, web site: http://www.rciro.ro
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