IC Market Espresso 23 Aug 2019

 
Takeaways from NLB 1H 2019 Results Pre-publication Call
As NLB held a H1 2019 pre-publication call, we are bringing you some key takes from it. Note that the company will publish their H1 results on 6 September 2019.

When looking from the strategy perspective the management has been working of finalizing state-aid process that is coming to an end in the next period. In the last period the Supervisory Board has been fulfilled with three new independent board members which is part of the process of fulfilling all corporate governance requirements. From other state-aid process requirements, ban on acquisition is still in place and divestment of bank’s equity holding of insurance business in NLB Vita is still pending.

When it comes to M&A opportunities the bank is currently looking at different M&A targets and it is in the process of analyzing these opportunities thoroughly. The bank sees that once it fulfills all the state-aid requirements, acquisition ban will be lifted, and it will be it the position to do an acquisition. The management has reiterated several times that they are looking to do an acquisition only if will allow them to improve shareholder value and to keep the dividend story unharmed to the largest extent possible. In any potential M&A process the management is committed to high-discipline in order to keep performance indicators on the planned level in line with their mid-term strategy that they have announced. They are also looking at further possibility of issuance of bond in the form of Tier II and/or AT1 capital that will help them also to preserve dividend pay-out capacity. In the market of Serbia, the bank is also looking to grow inorganically so they are not eager to do an acquisition at any cost and they will proceed with any acquisition only if they see it as highly feasible and shareholder value creating.

When looking at financial results that are going to be published on 6 September, the management has announced that in 1H 2019 loan growth was healthy and that top-line has achieved growth in single-digit numbers. Corporate loan book in Slovenia has evidenced a mix between run-off and build-up of portfolio which is in line with expectations as this segment is highly seasonal and is planned on an annual level. On the other hand, retail segment is growing nicely in Slovenia as employment level is at its high and consumer spending is strong. Housing loan segment in Slovenia has not picked up so significantly as supply in the real-estate is limited while there are a few big real estate development projects in the pipeline that are to be realized in the next 18 months. Cross-border lending has started to kick-in, and solid growth of subsidiaries was also evidenced. Also, a lot of effort was put on the sale of non-bank products like leasing and factoring. There is continuation in trend of strong influx of deposits which together with negative yield environment puts pressure on NIM. Volume growth sustains top line growth so in 1H 2019 NII and NFI dynamics is yoy positive. Management is further focused on cost containment and improvement of cost/income ratio. In 1H 2019 costs are due to increase in low one-digit territory on the year level due to expected increase in labor costs.

The results are in line with the medium-term strategy target which is getting harder to achieve due to continuation of the low-yield environment. The current environment is now expected to be prolonged further and the management is looking at different measures in order to achieve announced budgeted results, i.e. repricing of basic accounts to accommodate for increase in deposit costs. Cost of risk is under control and there will be one one-off in 1H 2019 stemming from positive revaluation of non-equity stake in financial operations. Details will be disclosed in the results published on the 6th of September. One-offs from the past are limited so there is no indication of major revaluations or devaluations in the future. The start of NLB Vita 50% equity stake sale process will be announced soon when more details will be given.

Telekom Slovenije Receives Dividend Counterproposal

Telekom Slovnije announced yesterday that they have received a dividend counterproposal in the amount of EUR 5.50, which translates into a DY of 8.5%.

Telekom Slovenije announced yesterday that they have received a dividend counterproposal in the amount of EUR 5.50 per share, which translates to a dividend yield of 8.5%. As a reminder, the initial dividend proposal amounted to EUR 4.50 per share and gave a dividend yield of 7%. With this counterproposal the pay-out ratio rises to 92% from the initially proposed ratio of 75%.

As a reminder in FY 2018 Telekom Slovenije recorded flat sales revenues YoY, increase in EBITDA of 10% and net income of EUR 33.3m. The increase in both EBITDA and net income could be attributed to a low 2017 base as Telekom Slovenije recorded provisions for lawsuits of EUR 25m in 2017. Besides that, the regular part of the business did not shine in 2017, which could be seen when observing their 2017 adjusted EBITDA which decreased by 4.4%.         

Dividend Per Share (2010 – 2019) (EUR)
Dividend Yield (2010 – 2019) (%)