IC Market Espresso 8 Feb 2019

Romanian BRD Bank Publishes 2018 Preliminary Financial Results
In 2018 BRD’s net interest income increased by 15.7% YoY, net fees and commissions increased by 4.5%. Operating income increased by 11.9%, while net income increased by 10.6%. The company also proposed a dividend of RON 1.64 per share (14% dividend yield).

BRD Group Published their 2018 preliminary financial results.

According to the report, in 2018, net interest income amounted to RON 1.9bn, which represents an increase of 15.7% YoY. This increase reflects volume growth in both customer loans and deposits, and the favorable interest rate environment. Net fees and commissions amounted to RON 797.1m (+4.5% YoY), mostly on dynamic trends on card activity and depository and custody services, as well as transaction volume growth.

Furthermore, BRD Group’s 2018 operating income reached RON 3.1bn, which is an increase of +11.9% YoY, on broad based revenue growth.

Total operating expenses totaled RON 1.4bn, increasing slightly by 1.1% YoY, with reduced cumulated contributions to Bank Deposit Guarantee and the Resolution Funds almost compensating higher staff expenses and increasing IT costs, driven by transformation related investments.

When observing the net income, in 2018, it amounted to RON 1.5bn, which represents an increase of 10.6% YoY. The rise in net income could be attributed to further business growth, improved operating performance and net cost of risk write-backs.

Source: Intercapital Research

Turning our attention to non-performing loans; the NPL ration kept its downwards trend and amounted to 4.6% in 2018, which is a decrease of 2.2 p.p. The decrease could be reflected in write-off operations and sales of non-performing loans as well as the good control of risk at loan origination. Coverage ratio remained at 74.2% at Dec 2018 end, unchanged compared to 2017 end.

Net cost of risk registered RON 230m write-backs in 2018, decreasing from RON 360m in 2017, with the one-off items’ contribution decreasing from RON 272m 2017 (insurance indemnities and gain on sale of NPL portfolio) to RON 95m in 2018.

Source: Intercapital Research

When observing the dividend policy, the company proposed a dividend of RON 1.64 per share, which is subject to the approval of the Supervisory Board at GMS in April 2019. Note that this would mean a dividend yield of 14%.

Source: Intercapital Research, Bloomberg

*compared to the share price a day before the dividend announcement

Institut IGH Signs a Deal Worth HRK 19m
The value of the deal accounts for 9.5% of the company’s T12 2018 revenues.

Institut IGH signed a deal with Zagorski Vodovod about the supervision of construction work regarding the sewerage network Zabok and Zlatar, and the recovery of main collector Gornja Stubica – Oroslavlje.

The contract was signed after conducting public procurement procedure and the expected duration of the work, which is subject to supervision, is 50 months.

Note that the value of the deal is HRK 19.17m, which accounts for 9.5% of the company’s T12 2018 revenues.

The value of the whole project is HRK 478m, of which 67% is financed through EU funding.