Net earnings came in at PLN 948.6m for 2Q12, down 3.7% q/q, up 6.9% y/y, broadly in line with our expectation of PLN 939.5m and the consensus estimate of PLN 937.5m (range from PLN 899m – PLN 994m, source: PAP), benefiting from higher fee income and other non-core revenues as well as lower operating costs. We would expect the results announcement to have a neutral trading impact.
Net interest income was down 3.7% q/q to PLN 1,983.1m, below the consensus expectations of PLN 2,027m. This implies declining net interest margin to 4.17% (down 16bp q/q) in 2Q12. This came on the back of pressure on cost of financing (+12bp to 3.13% over average interest bearing liabilities). Change in the loan portfolio mix is also putting pressure on the asset margin (-5bp q/q to 7.15% over average interest earning assets). Volumes has also disappointed with net loans increasing by just 0.3% q/q in 2Q12, while deposits increasing by 1.9% q/q in the period.
Non-interest income was up 3.6% q/q to PLN 972.5m, above consensus estimates of PLN 842m.
This was driven by better-than-expected net fee income (+7.7% q/q) recovering from low 1Q12 results. Net trading income came broadly in line with expectations (-38.3% q/q), however other income has exceeded expectations (+16.8% q/q).
Net provisioning came in at PLN 573.8m, up 8.8% q/q and 29.5% y/y, in line with the consensus expectation of PLN 575m and our estimate of PLN 579.2m. Net provisioning requirements came at 156bp in 2Q12 (over average gross loans), up from 143bp in 1Q12. Impaired loans increased to 8.7% in 2Q12 from 8.5% in 1Q12. PKO BP has also failed to build up its coverage ratio, which has slipped from 47.9% in 1Q12 to 47% in 2Q12.
Operating costs came in at PLN 1,094.0m, down 5.1% q/q up 2.3% y/y, below the consensus expectations of PLN 1,139.5m and our estimates of PLN 1,135.0m. As expected this was driven by 7.6% q/q decline in personnel costs which were elevated in 1Q12 by expenses connected with under-accrued full-year bonuses and 2.9% q/q decline in administrative