Fibank employs a more conservative approach to credit risk assessment; CET1 improves to 15.07%

Fibank continued following its strategy focused on retail, micro and SME lending. Gross loan book grew 3.4% on YtD basis to BGN 6.5bn (+6.8% YoY), sourced mainly from consumer lending (+14.1% in 9m’19, +17.3% YoY), mortgages (+13.4% in 9m’19, +20.4% YoY), SME (+7.9% in 9m’19, +4.3% YoY) and micro lending (+21.0% in 9m’19, +17.5% YoY). In Q3‘19 alone, the unconsolidated net interest income declined 14.9% YoY (-BGN 10.2m) due to the decline of the net interest margin to 3.26%, even though it reversed the down trend compared to the second quarter (3.20%). The non-interest income improved by 15.7% YoY, mainly on higher F&C and other operating income. TOI stood at BGN 91.6m, -5.8% YoY. The growth of administrative expenses was restrained at 0.6% while other operating expenses doubled. Following the results from the comprehensive assessment by the ECB, the bank reviewed its loan book thoroughly for compliance (CA) with the ECB methodology (used for the CA) and with IFRS. As a result, at the end of September, Fibank booked additional impairments costs of BGN 66m (compared to end-June). “Thus, the Bank has reflected through its accounting records a more conservative approach to credit risk assessment, in the wake of the asset quality review.” On an annual basis, the credit provisions increased by 179.8% bringing Q3 bottom line to a net loss of BGN 29.4m. 9m’19, net income registered 4.2% YoY growth to BGN 64.7m (EPS of 0.59) with TOI down 4.1% YoY, administrative expenses up 7%, BGN 52.6m positive net other operating expenses (BGN 72.9m revaluation of investment property) and 28.5% higher credit provisions. The 90-days overdue loans ratio increased to 15.9% compared to 13% at end-2018. Capital adequacy, however, remained comfortably above the capital requirements with total capital ratio at 18.01% (+1.7 p.p. YtD) while CET 1 was 15.07% (+1.7 p.p. over the same period).