CEE Equity Research | Banks and Financials | Romania

01 August 2024

BRD
Recommendation: Neutral (unch.)
Target price (12M): RON 18.4
RON ths 2023 Q2 2024 Q1 2024 Q2
NII 658,530 716,217 709,504
Net F&C 188,236 186,115 197,922
Risk cost 14,678 -54,263 -36,538
OPEX -435,560 -529,470 -498,476
Net profit 416,174 324,183 365,681
NIM 3.52% 3.40% 3.33%
Cost of risk -0.15% 0.52% 0.33%
Net loans (ths) 37,991,030 41,641,033 43,153,033
Deposits (ths) 58,440,681 62,953,579 65,460,598
Cost-to-Income 47.86% 53.77% 50.64%

Share price as of 7/31/2024 RON 20.8 Bloomberg BRD RO

Number of shares [million] 697 Free float 39.8%
Market capitalization [RON mn/EUR mn] 15,402/3,093 52-week range RON 13.6-22.5
Daily turnover 12M [EUR million] 0.570 EURRON 4.98

BRD continued its solid performance in Q2

Equity Analyst  BRD’s reported net income came to RON 366 mln in the second quarter, down
Krisztian Karikas, CFA by 12% YoY mainly driven by higher operating expenses, while moderated risk
+361 489 2213 costs and lower contribution to Guarantee Scheme and Resolution Fund
k.karikas@con.hu resulted in a 13% QoQ increase in net income.
55-61 Alkotas Street,  NII was up by 7.7% YoY thanks to positive volume effect, but there was a
Budapest slight decline of 0.9% QoQ as a result of higher cost of funding, therefore NIM
www.con.hu also declined by 0.1%ppt to 3.3%.

 Operating expenses were also up by ca. 14% YoY due to implemented salary
increases, levy tax on turnover and increased IT expenditures. Thanks to the
reduced contribution to Guarantee Scheme and Resolution Fund, operating
costs fell by 5.9% on a quarterly basis.

 Provisioning was still a negative contributor to earnings, reflecting a closer to

“through the cycle” level, but asset quality stayed benign, NPE ratio increased
a little bit to 2.2% and coverage was basically unchanged at 77%.

 Net loan portfolio grew by +14% on a yearly basis, with a strong contribution
from all business segments, retail grew by 8.5% YoY, while net loans
outstanding in the corporate segment increased by 22.3% YoY. Deposit base
also increased in Q2 by 12% YoY, additionally BRD AM reached RON 5.1bn
AUM, grew by 46% YoY.

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 Total adequacy was strong at 23.1%, showing a 1%pt decline QoQ including
retained earnings or ca. 50% of net profit.

 Overall, BRD reported sound results, which translates into a 2.1%pt increase
in ROE on a quarterly basis.

Quarterly results
[RON ths] 2023 2024 Difference
Q2 Q3 Q4 Q1 Q2 Y-o-Y Q-o-Q
P&L
Net interest income 658,530 680,643 715,443 716,217 709,504 8% -1%
Net fees 188,236 202,615 187,062 186,115 197,922 5% 6%
Total revenues 926,113 969,413 1,003,358 984,664 983,381 6% 0%
Operating costs -435,560 -446,570 -505,009 -529,470 -498,476 14% -6%
Operating profit 490,553 522,843 498,349 455,194 484,905 -1% 7%
Risk provisioning 14,678 30,257 21,891 -54,263 -36,538 -349% -33%
Pre-tax profit 505,231 553,100 520,240 400,931 448,367 -11% 12%
Net profit 416,174 460,684 425,487 324,183 365,681 -12% 13%
EPS 0.60 0.66 0.61 0.47 0.52 -12% 13%

2023 2024 Difference

Balance sheet highlights Q2 Q3 Q4 Q1 Q2 Y-o-Y Q-o-Q
Balance sheet total 76,960,645 79,484,586 83,848,961 84,187,772 86,210,676 12% 2%
Loans, net 37,991,030 39,673,660 40,613,391 41,641,033 43,153,033 14% 4%
Deposits 58,440,681 60,584,823 62,405,609 62,953,579 65,460,598 12% 4%
Net Loans/deposits (%) 65.0 65.5 65.1 66.1 65.9 0.0 0.0

2023 2024 Difference

KPIs Q2 Q3 Q4 Q1 Q2 Y-o-Y Q-o-Q
NIM (NII/total assets) 3.5% 3.5% 3.5% 3.4% 3.3% -0.2 -0.1
ROE 21.1% 21.8% 19.5% 14.5% 16.6% -4.6 2.1
ROA 2.2% 2.4% 2.1% 1.5% 1.7% -0.5 0.2
Cost-income ratio 47.9% 46.1% 50.3% 49.4% 50.6% 2.8 1.2
Cost of risk -0.1% -0.3% -0.2% 0.5% 0.3% 0.5 -0.2
NPL ratio 2.2% 2.1% 1.9% 2.1% 2.2% 0.0 0.1
NPL coverage 74.0% 76.2% 75.9% 76.4% 77.0% 3.0 0.6
CET1 ratio 18.8% 17.8% 21.5% 24.1% 23.1%* 4.3 -1.0
Source: BRD, Concorde Research

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Concorde Securities Ltd. does and seeks to do business with companies covered in
its research reports. As a result, investors should be aware that the firm may have a
conflict of interests that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. For
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section at the end of this report.
DISCLAIMER
This research report has been prepared by Concorde Securities Ltd., a full-service Hungarian investment banking,
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ANALYSTS CERTIFICATION

The research analysts undersigned and responsible for the preparation of this report hereby certify that (i) the views
expressed in this research report accurately reflect their personal views about any and all of the securities or issuers
referred to in this research report; (ii) no part of the analysts’ compensation was, is or will be directly or indirectly related
to the specific recommendation or views expressed in this report and (iii) no part of their compensation is tied to any
specific investment transactions performed by Concorde Securities Ltd.

Name and job title of individuals involved in the production of this report are disclosed at the end of this report.

Concorde Securities Ltd. is a leading manager and underwriter of Hungarian equity offerings. We have investment
banking and other business relations with a substantial percentage of the companies traded on the Budapest Stock
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position in these securities, which may change at any time.

Concorde Securities Ltd. acted as Lead Manager of the private and public share placement of the shares of FHB in
2003, Masterplast in 2012 and Duna House in 2016. Concorde Securities Ltd. acted as the Co-lead Manager of Gedeon
Richter’s exchangeable bond issue in September 2004. Concorde Securities Ltd. has provided financial advice to
Magyar Telekom.

EXPLANATION OF RATINGS AND METHODOLOGY

Rating Trigger
Buy Total return is expected to exceed 20% in the next 12 months
Accumulate Total return is expected to be in the range of 10-20%
Neutral Total return is expected to be in the range of 10%-(-10%)
Reduce Total return is expected to be in the range of -10-(-20%)
Sell Total return is expected to be lower than -20%
The stock is put Under Revision if covering analyst considers new information may
Under Revision
change the valuation materially and if this may take more time.
Coverage in transition Coverage in transition rating is assigned to a stock if there is a change in analyst.

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Securities prices:

Prices are taken as of the previous day’s close on the home market unless otherwise stated.

Valuations and risks:

Analysis of specific risks to set stock target prices highlighted in our investment case(s) are outlined throughout the
report. For details of methodologies used to determine our price targets and risks related to the achievement of the
targets referred to in the main body of the report or at Rating Methodology on our website. (https://www.con.hu/wp-
content/uploads/2016/04/Methodology_concorde_research.pdf?tstamp=201710021038)

Research disclosures:

Concorde Securities Ltd. may have published other investment recommendations in respect of the same
securities/instruments recommended in this report during the preceding 12 months. Disclosure of previous investment
recommendations produced by Concorde Securities Ltd. in the previous 12 months can be found at Rating history.
(https://www.con.hu/wp-content/uploads/2016/04/Rating-history.pdf?tstamp=201710021038)

GENERAL

This report is provided for information purposes only and does not represent an offer for sale, or the solicitation of any
offer to buy or sell any securities.

The information, and any opinions, estimates and forecast have been obtained from sources believed by us to be
reliable, but no representation or warranty, express or implied is made by us as to their accuracy or completeness. The
information, opinions, estimates and forecasts may well be affected by subsequent changes in market conditions. This
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