Yesterday, NLB held a call prior to announcing their Q1 2020 results, which is expected to be published on 14 May 2020.
Currently, all of the Group’s operations are running smoothly while the company is witnessing reopening of a couple more branches. By the next week 70 branches will be opening on full working hours. The company is currently seeing stable performance of their online services and did a significant shift to digital, while trying to migrate clients to the digital offering.
During the call the management stated that the bank is entered the current Covid-19 situation with a strong balance sheet when it comes to asset quality, very low NPLs and a solid CAR. We should expect to see a relatively normal Q1, with the addition of expenses for EUR 200m of issued subordinated debt kicking in.
Besides that, cost of risk is expected to be in a range between 20 – 40 bps, which is quite higher compared to the previous years, however this does not come as a surprise as it is not plausible to observe negative cost of risk going forward. Note that the positive this cost of risk could be attributed predominantly due to IFRS 9, not loan provisioning.
When looking at the bank’s portfolio, the management stated that it is on the conservative side as they have an under average exposure to Tourism sector compared to other banks and a relatively low exposure to Transportation. The company management stated in an earlier call that the most impacted industries (such as hotels, restaurants, transportation) account for less than 10% of the exposures. Meanwhile, roughly 20% of the entire portfolio could be considered to be medium impacted (industries like wholesale, retail, automotive).
The bank is in working closely with their clients, both corporate and retail and have already seen requests for moratoriums. On the corporate side roughly 600 have asked for a moratorium, while on the retail side roughly 3,300. It is important to note that the loans which were given a moratorium will not have to be initially provisioned. However, after the moratorium expires, we can expect that there will be borrowers who will unlikely pay, which will than be included in the NPLs. Therefore, it is plausible to assume to see part of these NPLs in 2021. The company states that we will see elevated number of NPLs this year as well, while this should completely be manageable for the bank and well within their control. Clearly, this will have an impact on the profitability, but it is currently hard to quantify it given a lot of uncertainties in the following period.
Regarding Komercijalna Banka, the bank states that we could expect the consolidation to occur in late Q3 or early Q4, while there does not seem to be a possibility of the renegotiation of the concluded price.
