Banif: Negative 4Q11 earnings

Banif posted a 4Q11 net loss of Eur -163.8mn (vs. a net loss of Eur 6.8mn in the 3Q and a net profit of Eur 10.5mn in the 4Q10), standing significantly below our estimates mostly on much higher than expected provisions, a worse than expected NII performance and FX&Trading losses in quarter. This quarter Banif booked provisions of Eur 90mn imposed by the Troika amidst the review of Portuguese banks loan books. At the same time, the transfer of the PF to the state led to a negative impact of Eur 6.8mn the bank's accounts.

We see this as negative set of results: The evolution of NII, asset quality and provisions persist as a significant concern for the bank. As such, we expect to revise downwards our earnings estimates for BNF. Furthermore, capital prevails as the stock main caveat (CT1 ratio stood at 6.8%% in Dec11), with the possibility of the bank resorting to the Eur 12bn recapitalization fund available for Portuguese banks being mentioned by the bank in the FY11 earnings release.

(-) CT1 ratio declined to 6.78%, from 8.0% in Sep, below the 9% threshold required by the BoP for YE11. All in all, the bank currently faces a Eur 382mn gap to the 10% CT1 required by the BoP by YE12 (394%% of current market cap). The bank highlighted that its parent company, Rentipar Financeira, is the company that need to comply with the minimum requirements imposed by the BoP. Still, in the FY11 press release, the bank stated that the group is considering all available options to meet with the capital requirements imposed by the regulator, among which the resort to the State recapitalization facility. RWAs declined 8% qoq, be driven by the bank's deleveraging efforts (gross loans to customers were down 2% qoq).

(-) Provisions stood Eur 131mn above expectations, posting a significant qoq and yoy increase. This quarter, the bank booked Eur 90mn in