BACB - 2Q09 earnings summary

BACB reported net earnings of EUR 5.2m (down 24.3% q/q and 36.8% y/y) in 2Q09. Results reflect weaker lending and core banking revenues. Following a sharp increase in the 1Q09, net interest margin (over average earning assets) bounced back to 10.0% (down 104bp q/q and 126bp y/y). There has been a substantial increase in NPLS, from 5.6% in 3Q08 and 8.3% in 1Q09 to 9.4% in 2Q09. Net provisioning to average gross loans increased to 293bp (up 20bp q/q), while pre-provisioning profit to gross loans declined to 9.1%. Even so, BACB´s earnings remain exceptionally resilient to deterioration of asset quality, and therefore, despite the mounting cost of risk we expect BACB to remain one of the most profitable banks in the sector. The bank generated ROE of 19.8% in 2Q09, down from 27.8% in 1Q09. There is no consensus estimate available. Overall, do not expect the results to have a major trading impact.