עידו אסייג
25/05/2014
Q1-14 results preview Change in consolidation perimeter in Q1 We expect Discount Bank to deliver weaker results q/q influenced by negative top line trends as well as by the deconsolidation of FIBI, albeit the latter is just an accounting impact. We expect NII to be down 2.4% q/q but flat y/y, supported by loan mix shift towards retail segment, fees broadly stable, other income 2% up q/q but significantly lower y/y leading to total income decline of 1.7% y/y. We expect costs to decline 4% q/q but to increase 1.6% y/y. We forecast asset quality improvement and decline in provisions by 20% y/y to 40 bps, which is still above average for the peers. We also estimate an increase in tax rate to c 37.7%, in-line with peers.
FIBI is getting moved to AFS at market value
The deconsolidation of FIBI, which was an affiliated company of the Bank until 13 March 2014 and is now moved into AFS portfolio, implies a decrease in income from associates. We also note that in Q4-13 Discount booked a one off provision of NIS158m for impairment of the value of the investment in shares of FIBI, which are now being accounted for at market value. As a result, we expect Discount to report net income of NIS190m, down 28% y/y.
Waiting for new business plan in August
Discount Bank expects to present a new strategic plan in August. The plan should provide more visibility on targets and strategy as well as a potential return to dividends. We believe the plan will focus on retail segment growth and efficiency management.
Valuation: is undemanding
As a result of adjustment for FIBI deconsolidation and to reflect recent operating trends we decrease our numbers by 8.2% for 2014 and c5% for 2015-16, we also adjust our PT by 5% to NIS7. Discount bank is trading on 0.5x P/TBV and 7.3x PE 14E, at a discount to European and domestic peers. Our PT is GGM based (CoE 10%, g 3%). .
