Significantly lower than expected COR (62 bps – pre acquisition) and negative goodwill of KB acquisition (EUR 137m) led to a very strong bottom line performance of the Group.
NLB Group published their preliminary results according to which total net operating income amounted to EUR 504.5m, representing a 2% decrease YoY.
Profit before impairments and provisions amounted to EUR 210.5m, a mere 1% decrease YoY, supported by non-recurring income (the sale of NLB Vita and debt securities). Profit after tax amounted to EUR 268.9m (+38.95 YoY), strongly affected by the acquisition of Komercijalna banka, which had a net positive impact of negative goodwill in the amount of EUR 137.0m, and additionally established EUR 13.4m for expected credit losses on the performing portfolio for the Komercijalna banka group.
Excluding the impact of the acquisition, Group profit would amount to EUR 141.3m, representing a decrease of 27% YoY. Such a result significantly exceeded previous forecasts by the Group, mostly because of better-than-expected COR performance. We note that such a result is above our expectations as well, due to the same reason mentioned.
In total, NLB Group established impairments and provisions in the amount of EUR 71.4m, mostly related to the COVID-19 outbreak. The COR related to credit risk stood at 74 bps (NLB Group pre-acquisition 62 bps) – and was lower than guidance, mainly due to very solid asset quality trends in Slovenia and continuously successful NPL workout from legacy NPL stock. The Group applied very strict discipline to cost mitigation activities, driving costs down by 4% YoY, totalling EUR 293.9m and leading to a CIR of 58.3%.
CAR at 16.6%, with EUR 92.2m from 2020 profits already anticipated for dividend distribution, while excess capital above the regulatory requirement provides a robust basis for continued growth. Also important was the negative goodwill recognised in profits that is still subject to validation by the regulator prior to inclusion into the capital base.
The acquisition of Komercijalna banka Beograd at the end of December 2020 added EUR 4.3bn to the Group’s balance sheet, bringing NLB Group’s total assets to nearly EUR 20bn (EUR 19.6 billion).
We are very happy to see such a strong performance of the bank in very challenging times. The results are above our esimates and we find these quite supportive for the share price.
