PANTELAKIS SEC- Eurobank (OW): Q3 2020 results above estimates on stronger trading gains and core PPI

Eurobank (OW): Q3 2020 results above estimates on stronger trading gains and core PPI

  • PANTELAKIS SECURITIES
* Eurobank reports E172m Q3 2020 clean (ex-one-off items) net income, vs our E98m call on stronger trading gains and, to a lesser, extent Core PPI
* Reported net profit at E85m, weighted by the E87.5m one-off cost of the latest voluntary exit scheme (reducing headcount by c10% or c800 FTEs)
* Core (ex-trading and one-offs) PPI -5% qoq (+2% yoy) to E213m (5% above exp E203m), as lower NII (E25m lower NPE accruals post-Cairo) is partly offset by higher fees and opex savings.
* NPE ratio drops to 14.9% (from 15.3% in Q2). Organic (ex-write-offs) NPE formation remains negative but barely so on reduced exits (curings and liquidations): Covid-19 impact on asset quality to become evident only in early 2021, when loan moratoria (E4.9bn vs E5bn in June and E4.2bn in May) expire.
* Quarterly provisions of E155m (exp E148m), with CoR at 170bps in Q3 compared to 153bps in Q2 and 140-160bps annual guidance.
* NPE coverage rises to 62.6% (from 60.6% in Q2). Latest available comparables: Alpha 44.4%, Piraeus: 45.1%, NBG 57.2%.
* Fully-loaded CET1 flat qpq at 11.2% (unchanged vs Q2 post 340bps Cairo hit).
  • This compares with latest-available 14.6% for Alpha, 13.2% for NBG (after frontloading in Q1 the entire 113bps Covid-19 credit impact) and 11.6% for Piraeus (6.8% ex-CoCos)