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ERSTE GROUP BANK AG
ERSTE GROUP BANK AG
Good Q3 16 results and doubled dividend outlook
04 Nov 16
Net profit attributable to shareholders increased by 22% to €337m for Q3 16 compared to Q3 15. Net interest income was down by 4% to €1.07bn for Q3 16 compared to Q3 15. Risk provisions for loan losses were down by 74% to €37m in the same period. Operating income declined by 3% to €1.64bn in Q3 16. General administrative expenses rose by 3% to €983m for Q3 16. Other operating result was down from a loss of €177m for Q3 15 to a loss of €60m for Q3 16. Pre-tax profit rose by 29% to €562m for Q3 16. The tax ratio was slightly up from 20% for Q3 15 to 22% for Q3 16. The Basel 3 phase in Core tier 1 ratio was 13.2% at the end of Q3 16 compared to 12.3% at year-end 2015. Erste released very early a doubled dividend per share outlook of €1.00 for FY2016 compared to €0.5 for FY2015.
Higher net profit for FY2016 expected
15 Jul 16
Erste Group announced yesterday that it expects to report Q2 16 net profit of about €560m, resulting in H1 16 net profit of about €830m. The Q2 16 performance was primarily driven by the releases of risk provisions of about €30m (mainly due to releases in Hungary and Romania and the declining risk costs in all other geographies), the P&L recognition of the VISA sale one-off with a pre-tax amount of about €139m and the significantly improved operating as well as other operating results vs Q1 16. In line with this year-to-date performance, Erste Group revises upward its outlook for 2016 net profit to ROTE >12% (from 10-11% previously). This guidance includes a buffer for a potential banking tax one-off payment in Austria in 2016 (pending parliamentary approval of the government proposal), which is a prerequisite for a banking tax reduction of about €110m pre-tax per annum from 2017, and assumes no material negative one-offs in H2 16. A full business update will be provided with the publication of the H1 16 results due on 5 August 2016.
Good Q1 16 results
04 May 16
Net profit attributable to shareholders increased by 22% to €275m for Q1 16 compared to Q1 15. Net interest income was unchanged at €1.1bn for Q1 16 compared to Q1 15. Risk provisions for loan losses were down by 69% to €56m in the same period. Operating income declined by 4% to €1.63bn in Q1 16. General administrative expenses rose by 6% to €1.0bn for Q1 16. Other operating result was down from a loss of €154m for Q1 15 to a loss of €140m for Q1 16. Pre-tax profit came up by 3% to €427m for Q1 16. The tax ratio declined from 29% for Q1 15 to 25% for Q1 16. The Basel 3 phase in Core tier 1 ratio was 12.1% at the end of March 2016 compared to 12.3% at year-end 2015.
Expected turnaround successfully achieved
26 Feb 16
Preliminary net profit attributable to shareholders was €968m for FY2015 compared to a loss of €1.4bn for FY2014. Net interest income was down by 1% to €4.4bn for 2015 compared to 2014. Operating income decreased slightly by 1.5% to €6.8bn for 2015. Risk provisions for loan losses were down by 65% to €729m in 2015 compared to 2014. General administrative expenses increased by 2% to €3.9bn in 2015. Other operating result decreased from a loss of €1.75bn for 2014 to a loss of €636m for 2015. Pre-tax profit was €1.64bn for 2015 compared to a loss of €728m for 2014. The tax ratio was 26% for 2015. The Basel 3 phase-in Core Tier 1 ratio improved from 10.6% (2014) to 12.3% at the end of 2015. Return on tangible equity (ROTE) was 10.8% and RoE 9.3% for 2015. The dividend proposal per share is €0.50 for FY2015 compared to no dividend for FY2014. As a result of the 2015 Supervisory Review and Evaluation Process (SREP) performed by the European Central Bank (ECB), Erste Group on a consolidated level is required to meet a transitional Common Equity Tier 1 (CET1) ratio of 9.5% as of 1 January 2016. This minimum CET1 ratio of 9.5% includes Pillar 1, Pillar 2 and capital conservation buffer requirements. In addition, the systemic risk buffer required by the Austrian Financial Markets Authority (FMA) to be applied on top of the SREP ratio is equal to 0.25% for the group from 1 January 2016, resulting in a prudential capital requirement of 9.75%, relating to total risk, for Erste Group as of 1 January 2016. The systemic risk buffer will increase in the following years to 0.5% (2017), 1% (2018) and 2% (2019).
Again, good quarterly results for Q3 15 lead to higher targets
06 Nov 15
Net profit attributable to shareholders was €277m for Q3 15 compared to a loss of €554m for Q3 14. Net interest income was down by 1% to €1.1bn for Q3 15 compared to Q3 14. Operating income was flat at €1.7bn for Q3 15 compared to Q3 14. Risk provisions for loan losses were down by 84% to €144m in the same period mainly due to higher risk costs in Romania for Q3 14. General administrative expenses increased by 8% to €956m for Q3 15. Other operating result rose from a loss of €357m for Q3 14 to a loss of €177m for Q3 15. The Q3 14 figure included charges of €231m resulting from the Hungarian consumer loan law. Pre-tax profit was €437m for Q3 15 compared to a loss of €414m for Q3 14. The tax ratio was 20% for Q3 15. The Basel 3 phase-in Core tier 1 ratio was 11.5% at the end of September 2015 and was 11.2% on a pro-forma fully applied basis. Management lifted its return on tangible equity (ROTE) from a target range of 8-10% to around 10% for 2015. ROTE was 12.2% for Q3 15 and 11.5% for 9M 15. It also released a new ROTE target for FY2016 which is 10-11%.
Good Q2 15 results after disastrous Q2 14
07 Aug 15
Net profit attributable to shareholders was €261m for Q2 15 compared to a loss of €1.03bn for Q2 14 and a profit of €226m for Q1 15. Net interest income was flat at €1.1bn for Q2 15 compared to Q2 14. Operating income declined by 1% to €1.71bn for Q2 15 compared to Q2 14. Risk provisions for loan losses were down by 56% to €191m in the same period. General administrative expenses increased by 2% to €949m for Q2 15. Other operating result rose from a loss of €1.15bn for Q2 14 to a loss of €47m for Q2 15. The Q2 14 figure was burdened by a write-down of intangible assets for a total of €956m, mostly in Romania (€854m). Pre-tax profit was €549m for Q2 15 compared to a loss of €781m for Q2 14. The tax ratio was 28% for Q2 15. The Basel 3 phase in Core tier 1 ratio was 11.6% at the end of June 2015 and was 11.3% on a pro-forma fully applied basis. Management confirmed its return on tangible equity (ROTE) target range of 8-10% for 2015. ROTE was 11.8% for Q2 15 and 11.2% for H1 15.
VPC Speciality Lending Investments PLC – sticking to your knitting pays dividends
05 Dec 16
A 25% discount on a dividend paying vehicle suggests either (a) lack of belief in the NAV, (b) lack of belief in the dividend, (c) concerns over future delivery, (d) a shareholder’s base not normally exposure to “closed end structures” or (e) some combination of (a) to (d). We had a first meeting with the management team and London representative of VPC Speciality Lending to try to better understand why the share price had fallen quite so much.
N+1 Singer - Grainger - Final results in line, further progress on PRS investment pipeline
01 Dec 16
Grainger has reported FY16 final results this morning with key NNNAV and recurring PBT metrics in line with our forecasts. Sales performance and rental income growth was strong in H2, as previewed in the positive FY trading update driving our 19% PBT upgrade in early October (11/10). The PRS investment pipeline continues to grow now standing at £389m secured and £347m in legals as Grainger pursues an £850m investment target by 2020. A 3.05p final dividend is in line with the revised policy to distribute 50% net rental income. The shares continue to trade on a significant, and unwarranted, 20%+ discount to NNNAV. We reiterate our BUY recommendation.
Better Capital – A tale of two funds
05 Dec 16
Our gut feel on the results is that BCAP’s Gardner disposal feels viable (albeit as a late Q1 transaction). Post Gardner, the exit profile for BCAP’s portfolio is slanted towards the years 2018/19 and not earlier; we view the market’s current pricing as cautious (14% disc to our estimate of FV). In contrast, BC12’s more consumer facing portfolio remains a work in progress and may well offer further disappointment before turning a corner; the market valuation (51% discount to NAV) is cautious but probably fair given the difficulties.
Meeting near-term headwinds
06 Dec 16
In its trading update IFG reported that performance has been in line with management expectations. The cooling effect of market uncertainty on growth in James Hay and financial advice client numbers, together with the impact of low interest rates, remain a near-term head wind for revenues. Even so, with Saunderson House continuing to increase profits, IFG expects to match 2015 earnings. The long-term growth opportunity presented by an ageing population and pension freedoms remains in place and to address this IFG is continuing investment to enhance its service and increase operational gearing.
Small Cap Breakfast
07 Dec 16
Creo Medical group—Schedule 1 update.. £20m raise. Expected market cap £61.2m, admission expected 9 December. ECSC—Schedule 1 from provider of cyber security services. Raising £5m. Vendor sale £0.8m. Target date 14 Dec. Expected market cap £15m. RM Secured Direct Lending - The secured direct lending fund intends to float on the Main Market on 15 December raising up to £100m
05 Dec 16
As we mentioned in our 18 November 2016 note, a continuation vote was expected to be announced before the end of 2016. The announcement last Friday included details of the continuation vote, and in particular, a recommendation by the Directors to replace the June 2015 strategy of selling non-core assets and developing the core projects, with a new strategy of an orderly sale of the Company’s assets, with a target of selling all assets by 31 December 2019 and a distribution policy for returning monies to shareholders following disposals. Alongside these recommendations, there are proposed changes to the remuneration for the investment manager.