Erste Bank: SIFs are unlikely to distribute dividends for 2010

Erste Bank said that SIF’s profitability in 2010, and future cash positions in particular, would not allow financial investment companies to distribute dividends for fiscal year 2010.

SIFs anticipate three times lower profit this year. However the 2010 budget figures demonstrate SIFs’ reliance on minority holdings in the two largest Romanian banks, BCR and BRD SocGen.

“With lower dividends from bank holdings, the dividend contributions of the other holdings are not a consistent source of revenues or cash. The low dividends collected by SIFs from holdings other than banks have been the main worry in terms of qualitative movements within SIFs’ portfolios during the last few years”, Erste said in a market report.

The best positions are held by SIF 4 Muntenia (more than €6 million) and SIF 5 Oltenia (more than €7 million), while the lowest cash inflow from dividends is expected by SIF 2 (less than €2 million). SIF 1 and SIF 3 expect to collect less than €3 million and €4million, respectively.

“The main challenge is the transfer of future cash inflows to equity market opportunities. Three SIFs announced ambitious investment plans for this year (SIF 1 Banat Crisana 52 million lei, SIF2 Moldova 140 million lei, SIF 3 Transilvania 60 million lei).

“The investment plans announced by SIFs suggest that, in spite of cash restrictions, the funds will not adopt a very defensive investment policy in 2010, which in our view would be a positive surprise”

Analysts note that in spite of the current asset management challenges, SIFs’ portfolios should not deteriorate in 2010, as their cash reserves are still comfortable relative to operational expenses.

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