Profit of "Banca Transilvania" increases 58%

• The price of the stock rose to 1.4 lei/unit

In 2010, Banca Transilvania (TLV) posted a net profit of 97.85 million lei, up 58% over 2009, thanks to interest revenues and cost control, according to the preliminary financial report released by the company. Robert Rekkers, the managing director of Banca Transilvania, said that in 2010, the company focused on healthy growth: "It was a difficult year, but in spite of this, BT has been going up in the ranks of the Romanian banking system. We have reached 1.5 million active customers and we have come up with a cautious development plan, adapted to the times. We have paid attention to adequate risk management, as we set up provisions in excess of what we were required. We have improved the correlation between our activities in order to better integrate the retail part and prudentiality ".

In 2011, Banca Transilvania intends to continue lending to the traditional sectors - industry, SMEs, agriculture, services. Robert Rekkers added: "2011 will be extremely challenging, amid an uncertain national and international economic context. We expect non-performing loans to peak, and margins to drop. However, we are ready, and the bank"s approach will be to continue to grow our business, focus on lending, increase market share, and adapt our offers to market conditions, together with a strict cost management".

The operating result of Banca Transilvania was 27% compared to last year, reaching 775 million lei, in 2010. The operating revenue of 1,487 million lei, up 15% over 2009, was due first and foremost to interest revenue, and from securities trading and commissions.

• Analysts: The earnings of TLV reflect a marked improvement of risk cost

"The earnings reported by Banca Transilvania in Q4 2010 are in line with our expectations and reflect a marked improvement in the cost of risk (due to the fact that provisions dropped 29% over Q4 2009)", said Elena Petrescu, analyst with "NBG Securities". She said that, for the entire year, TLV succeeded in compensating the high costs of provisions by increasing the net interest margin, which helped increase net interest revenue by 31%. Mrs. Petrescu estimates that the earnings of the bank are good, given the modest growth of lending in 2010. She also says that the bank"s earnings show that the balance sheet seems to be following a positive trend (due to a boost in lending), as is profitability, due to the ongoing downward trend in risk cost.

The analyst of NBG Securities estimates that the bank will continue to cut back provisions, especially in the second semester. Mrs. Petrescu said: "As a result, we expect the bank"s profitability to improve significantly in 2011. Given the fact that provisions account for more than 70% of the operating profit before booking the cost of risk, it will have a major impact on profitability".

Radu Ciofu, financial analyst at "IFB Finwest" considers that the bank"s financial statements will have no effect on the price of the bank"s stock. He warns that as long as the stock has returned just 5% whereas the interest on bank deposits is 6%, unless the profit of the bank improves, the bank could see investor interest wane. Radu Ciofu expects the bank"s stock to stagnate or even drop slightly.

Florian Irimin, broker at "Intercapital Invest", said that, following the publication of the financial statement, the liquidity of the bank"s stock actually decreased. He expect bank stocks to rise in the future, due to correlations with the foreign markets. The shares of TLV have risen significantly in the second half of December, from 1.2 to 1.4 lei/share, gaining 0.07% yesterday, to 1.4 lei/share, on a turnover of 2.42 million lei.

• The loan portfolio has been growing constantly

The bank"s gross profit in 2010 was 135.02 million lei, up from 86.02 million in the previous year. The gross profit of the bank amounted to 90% of the budgeted figure for the year 2010.

Operating expenses increased 4%, to 711.98 million lei on December 31st, 2010, up from 683.13 million lei at the end of 2009. The net provision expenses reached 640 million lei in 2010, compared to 524 million in 2009.

The bank"s on-balance sheet assets increased 11% in 2010, to 21,589 million lei, up from 19,472 million lei, at the end of last year.

The loan portfolio maintained a steady growth rate, amounting to 13,365 million lei, at the end of 2010, up 10% since the beginning of the year, with companies accounting for 60.22% of the total volume of loans, and individual borrowers accounting for 39.78%. 61.83% of the total loans were granted in lei and 38.17% were denominated in foreign currencies. Non-performing loans (more than 90 days overdue), represent 7.37% of the total loan portfolio.

The loan / deposit ratio remains at 0.78, as deposits attracted from customers amounted to 15

% in 2010. At the same time, the solvency ratio stands at 13.66%, including profits, significantly above the 8% level required by the Romanian National Bank.