Third largest bank in Bulgaria in terms of assets, First Investment Bank, booked best profit in history but missed on expected portfolio provisions – this showed in newly published unconsolidated unaudited FY 2016 financial statements.
First Investment Bank net profit sevenfold y/y
The Company’s net profit surged sevenfold y/y to BGN 90.2m on lower than post-AQR-expected provisions and rising net interest income. The bank booked BGN 155m in provisions on impairment losses, down 53% y/y, on a BGN 400m expected after the asset quality review of the banking system in mid-2016.
Net interest income rises 22%
Expectedly, First Investment Bank also reported 22% y/y rise in net interest income to BGN 307.6m while net commissions and fees income added only 6% y/y to BGN 86.6m for FY2016. Net revenues declined 22% y/y to BGN 440m on lower one offs. The bank booked c. BGN 28m from the VISA deal in FY2016.
Overall net operating income is up 4.78x to BGN 100.4m as administrative expenses declined 14% y/y. No changes made on the BGN 1.2bn other assets which include investment property from the Kremikovtzi property financing.
Bulgarian National Bank announced the results of the full banking system asset quality review (AQR) and stress test in August 2016.
First Investment Bank passed the AQR and stress test with the biggest balance sheet correction – BGN 419m adjustment to Dec. 31 2015 position due to loan provisioning and BGN 285.5m correction after taking into account June 30th 2016 operating results. To fill the capital gap, the bank and the regulator have agreed on a set of measures. These include profit retention, further exposure de-risking and portfolio diversification, sell-off of non-core, foreclosed and fixed assets and a capital raise by April 2017. In a statement, the bank announced it“will take necessary actions to arrange external capital raise on the financial markets in presence of favorably conditions”. Overall, post AQR adjustments value the bank’s equity at c. 466m as of June 2016 or 1.8x above current market cap of BGN 250m.