July 25, 2012 | Cbonds
Raiffeisen Bank Aval (BAVL UK) reported tiny net income of USD 0.7 mln as it kept allocating nearly all of its pre-impairment profit (which declined 28% yoy in 2Q12 and 15% yoy in 1H12) to loan loss reserve. Aval’s net interest income was down 7% yoy in 2Q12 as its net loan book contracted 6% qoq and 12% yoy. The decline in net interest revenues was only partly offset with stronger net fees and commissions (+9% yoy).
Olena Zuikova, analyst: The key concerns about Aval’s 2Q12 financials is continued rapid declines in assets and net loan book. Growth in operating expenses against weaker revenues is also a disappointment – the bank’s Cost/Income was up from 55% in 2Q11 to 67% in 2Q12. We expect the bank will report a nearly zero bottom line under UAS, but its net income under IFRS should be much stronger, with ROE expected to be near 10% with the discrepancy mainly attributed to different provisioning policies. We maintain a HOLD recommendation on the stock as the bank is facing risks of further contraction in its balance sheet and a related decline in revenue.
Company: Concorde Capital
|Full company name||Concorde Capital|
|Country of risk||Ukraine|