NLB Bank 2018 Preliminary Results

In 2018, NLB observed a 1% increase in net operating income, a 2% decrease in earnings before tax, and a 10% decrease in net income.

Key Indicators	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
1	L/D ratio (%)	143	123	114,4	105,6	104,7	86,2	75,9	75,1	74,2	70,2	68,3
2	NPL ratio (%)	3,8	9	14,5	21,3	28,2	25,6	25,5	19,3	13,8	9,2	6,9
3	ROE* (%)	3,1	n/a	n/a	n/a	n/a	n/a	4,8	6,6	7,4	14,4	11,8
4	Net interest margin (%)	n/a	2,4	2,3	2,4	2,24	1,7	2,7	2,9	2,7	2,57	2,56
5	Cost of risk (bps)	n/a	200	255	315	n/a	n/a	171	75	38	-62	-43

*From 2009 – 2013 ROE is noted as “n/a”, as their net income was negative

As NLB published a short overview of their preliminary 2018 results, we are bringing you some key takes from it. According to the report, NLB has observed an increase in net interest income of 1% YoY, amounting to EUR 312.9m. This increase could be attributed to a rise in loan volume growth (mostly in retail) and lower interest expenses. Further, net non-interest income has also increased by 1%, amounting to EUR 180.4m, which can be attributed to a rise in fees and commissions. As a result the Group observed an increase in net operating income of 1%, amounting to EUR 493.3m.

When observing the company’s earnings before tax, they recorded a decrease of 2%, amounting to EUR 223.3m. Meanwhile, net income amounted to EUR 203.6m, which represents a decrease of 10%.The decrease in NLB’s net income could be attributed the lower release of credit impairments and provisions and higher income tax.

NLB Net Income (2008 – 2018)

Turning our attention to loans and deposits, since 2013, loans have mostly been decreasing, while deposits have continued to increase each year. This has resulted in each year lower L/D ratio, which amounts to 68.3%. Note that NLB’s management has set a target of L/D ratio to be below 95% for the years 2019 – 2023.

Furthermore, NLB continues the trend of the declining NPL ratio, which amounted to 6.9%, representing a decrease of -2.3 p.p. YoY. The management attributes the decrease to successful resolution measures and supportive macroeconomic environment.

NLB NPL ratio (2008 – 2018) (%)