(593 CZK, 0,95%) will report its 2Q13 figs tomorrow, July 30, B/Mkt. We expect the bank to report net income of 139 mln. EUR, up 30% y/y due to one-off tax gain. Operating income should, however, decline 1.5% y/y according to our estimates.
Erste Bank - 2Q13 preview
| Net interest income | 1 315 | 1 211 | 1 206 | -7,9% | -8,3% |
| Net commision income | 435 | 450 | 446 | 3,4% | 2,4% |
| Net trading result | 28 | 90 | 79 | 221,4% | 180,4% |
| Operating income | 1 778 | 1 751 | 1 725 | -1,5% | -3,0% |
| Operating expenses | (942) | (923) | (922) | -2,0% | -2,2% |
| Operating result | 836 | 828 | 806 | -1,0% | -3,6% |
| Risk provisions | (401) | (437) | (431) | 9,0% | 7,5% |
| Pre-tax profit | 241 | 149 | 136 | -38,2% | -43,6% |
| Net profit | 107 | 139 | 134 | 29,9% | 25,2% |
* consensus estimate as compiled by Erste's IR dep.
Conference call on Tues, July 30 @ 09:00 CE
Erste Bank - 1H13 preview
| Net interest income | 2 652 | 2 452 | 2 447 | -7,5% | -7,7% |
| Net commision income | 866 | 898 | 894 | 3,7% | 3,2% |
| Net trading result | 122 | 168 | 157 | 37,7% | 28,3% |
| Operating income | 3 639 | 3 518 | 3 492 | -3,3% | -4,0% |
| Operating expenses | (1 887) | (1 855) | (1 853) | -1,7% | -1,8% |
| Operating result | 1 751 | 1 663 | 1 641 | -5,0% | -6,3% |
| Risk provisions | (982) | (840) | (833) | -14,5% | -15,2% |
| Pre-tax profit | 728 | 451 | 437 | -38,0% | -40,0% |
| Net profit | 454 | 315 | 310 | -30,6% | -31,7% |
Low interest environment and subdued loan demand likely continued to weigh on bank’s operating results in 2Q13. Net interest income (NII) should come in lower by 7.9% to 1.21 bln. EUR. Net interest margin (NIM) should drop to 2.57% from 2.72% a year ago. On the other hand, revenues from commissions and trading should remain solid. We expect income from net fees and commissions at 450 mln. EUR, higher 3.4% y/y. Net trading result may even triple from a year ago to 90 mln. EUR.
Operating expenses may decline in 2Q13 by 2.0% y/y partly offsetting lower revenues. Operating result is thus expected to decline 1.0% to 828 mln. EUR. Other operating results should be negatively impacted by higher financial transaction tax (-16 mln. EUR), banking tax in Hungary booked in full year amount (-25 mln. EUR) and 80 mln. EUR loss on sale of Ukrainian assets closed in 2Q13. Bad loan provisions may increase to 135 bps over average total loans from 119 bps a year ago (or +9.0% to 437 mln. EUR). Bottom line is expected to be boosted by extraordinary tax item in amount of 120 mln. EUR.
The bank lowered its outlook on June 24. Erste sees pre-provision operating profit down 5% in 2013 as lower revenue won’t be completely offset by lower costs. Erste also predicts 15% decline of loan-loss provisions and a return to profit in Romania. Investors will focus on Romania which is a key swing factor for Erste’s 2013 result. We expect pre-provision operating profit down 4.4% in 2013 and provisions to decline 13.8%, both within Erste’s guidance. Note that recent spike in regional yields of fixed income assets could help stabilize Erste’s interest margin.