Bank BPH is due to report 1Q06 results on May 11. We expect the bank to report net earnings of PLN 282.6m up 37.6% y/y but down 9.1% q/q. This is higher than the consensus estimate of PLN 279.4m (with a range of PLN 247m-316m, according to PAP). We expect the results to be driven by the first-time consolidation of BPH Zarzadzanie Funduszami, which is a parent company of BPH TFI mutual fund company. In our view, this should help boost fee and commission income to PLN 323.7m up 40.7% y/y and 12.3% q/q. The market share of BPH TFI in AUM increased from 6.2% to 7.3% in 1Q06, growing its AUM by 39.9% q/q, while the market grew by 18.7% q/q.
We expect retail lending volumes to remain strong, with Bank BPH to grow in line with the market, although slightly losing market share in FX-denominated mortgages, due to aggressive price competition. Operating costs are expected to rise substantially, as the bank’s policy is to budget costs for the full-year at the beginning of each year and the revision of the budget comes only in 2Q. Additionally, Bank BPH has opened 4 new branches in 1Q06, and paid part of its annual employee’s bonuses, which were not provisioned in 4Q05. Net provisioning is expected to come in at PLN 66.3m, which equates to some 45bp (annualised) over average assets.