November 30 (SeeNews) - Raiffeisen Capital & Investment said it has kept its recommendation on Romanian bank BRD [BSE:BRD] at 'hold'.
It also cut its 12-month target price for the BRD stock to 11.8 lei ($3.6/2.7 euro) from 13 lei, RCI said in a statement on Tuesday.
“We believe that the bank’s ROE [return on equity] has not yet finished its slide which means that for the moment any rally in its shares will be met with reticence. Moreover, its main competitive advantage on the domestic market, cheaper euro financing, might diminish in the short run,” RCI said.
It added it expects the bank's non-performing loans to peak in the first half of 2012 and end the next year modestly above the end-2011 figures, whereas its loan growth will be slightly outpaced by the market.
“The bank will be less aggressive but some headwinds that were faced for the past two years, like many maturing consumer loans or written-off SMEs [small and medium enterprises] loans, should fade away. The corporate segment is to be the main driver in 2012, as the retail segment, which was helped by the governmental program to prop up the real estate market, will lose momentum. In our view this is due to saturation and to the new regulation to curb FX loans,” RCI said.
“The 2011 bottom line (under IFRS) to shrink more than previously expected to 809 million lei, mainly due to a weaker operating profitability. The 2012 net profit will barely grow, as the squeeze on margins and higher expenses will neutralize the feeble decrease in risk costs.”
(1 euro= 4.3559 Romanian lei)
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