📊 Dividend Scorecard: 🏦 Banca Transilvania (TLV)

Perfect 15/15 Business Score + 7% Forward Yield + OTP Bank Integration: Full Analysis Inside

💡 Check out my Dividend Scoring Framework to understand how I rate dividend stocks on the Romanian market.

TL;DR

Banca Transilvania (TLV) kicks off the Dividend Scorecard series with an impressive 46/50 in my dividend analysis. The bank nails it on all business metrics (perfect 15/15), pays out only 23% of its profits as dividends (meaning there's plenty of room to grow them), and offers a solid 7% expected yield.

Add in the upcoming merger with OTP Bank and a projected 70% jump in profits, and you'll understand why I chose TLV as the first company to analyse in this series.

The Company

Founded in 1993 in Cluj-Napoca, Banca Transilvania has grown into Romania's largest bank and second-largest listed company.

TLV focuses on three main areas:

• Retail banking (personal accounts, mortgages, consumer loans)

• SME banking (the bank's traditional strength)

• Corporate banking (large company services)

Right now, TLV is getting even bigger - it's in the process of buying OTP Bank Romania for €347.5M. The deal should be completed by February 28, 2025, making TLV's market position even stronger.

📊 The Scorecard

Let's put TLV through my Dividend scoring framework. If you haven't checked it yet, I use 10 criteria across three categories to rate dividend stocks on the Romanian market. A perfect score would be 50 points - and TLV comes pretty close.

Let's see:

Business Fundamentals: 💪 Perfect Score (15/15)

1. Market Capitalization (5/5)

At 25B RON, TLV is Romania's second-largest listed company, well above our 1B RON threshold for top marks. For reference, our framework only asks for 1B RON for top marks - TLV is in a league of its own here.

2. Business Understanding (5/5)

Of course I understand their business - I'm a client. TLV makes money from lending, service fees, and investing excess cash, with a solid grip on both business and retail banking.

3. Financial Health (5/5)

Strong capital position and conservative lending practices make TLV one of the safest banks in Romania.

Dividend Quality: 💰 Almost Perfect (22/25)

4. Dividend Status (5/5)

TLV has a long track record of dividend payments dating back many years, qualifying it for the highest rating in this category.

5. Payment History (4/5)

Consistent payments since 2015, showing growing commitment to dividends. While there were some gaps before 2015, the recent track record is solid.

6. Yield Range (4/5)

Current yield of 4.04% with projected 7% in 2025. Not the highest on BVB, but sustainable and well-covered by earnings.

7. Payout Ratio (5/5)

At 23%, TLV's payout ratio is very conservative. Plenty of room to maintain or grow dividends even if profits take a hit.

8. Dividend Growth (4/5)

Expected jump from 1.25 RON to 1.86 RON per share shows strong growth potential, backed by rising profits.

Risk Management: 🛡️ Strong Control (9/10)

9. Payment Consistency (4/5)

Regular payments since 2015. Yes, there were gaps before that, but what matters is the solid track record in recent years.

10. Trading Liquidity (5/5)

TLV is Romania's most traded stock with around 8-9M RON in daily value, ~300-350K shares traded daily, and 19.44% weight in BET index. This means you can buy or sell comfortably without affecting the price.​​​​​​​​​​​​​​​​

Final Score: 46/50 Points 🏆

🟢 ★★★★★ Top Tier

The Position Size

Going by my framework, TLV earned a Top Tier rating, which suggests a position size up to 10% of your dividend portfolio.

The Risks

TLV looks good but it’s not imune to risks:

1. OTP Bank Integration

This merger has a tight deadline of February 28, 2025, and anyone who's followed bank mergers knows they're incredibly complex. We're talking about integrating different computer systems, bringing teams together, and aligning all sorts of processes. Any delays or hiccups in this process could cause problems.

2. Economic Climate

We're in a tricky economic environment right now. If interest rates keep rising, fewer people might want to take out loans. An economic slowdown could mean more people struggling to pay back their existing loans. Plus, banks are competing hard for deposits, which could squeeze how much money they make on each loan.

3. Market Leadership Challenges

Being the biggest bank in Romania means everyone's gunning for your spot. The digital banks are getting aggressive, especially in attracting younger customers, and they're not afraid to compete on price. TLV needs to stay on its toes to keep its leading position.

My Exposure

I own TLV both directly and indirectly through EVER (Evergent Investments):

• Direct TLV position: 2.8%

• Indirect TLV exposure through EVER: ~5.3% (38% of my EVER position)

My total TLV exposure is 8.1%. Given TLV's top-tier score (51/55), I could increase this up to 10%.

A note on indirect ownership: EVER trades at a 56% discount to its Net Asset Value (NAV 3.3413 RON vs. stock price 1.475 RON at the time of the writing). Since TLV makes up 38% of EVER's portfolio, buying EVER means getting TLV at a discount. That's exactly why I bought EVER - I get their dividend yield (which comes from dividends of companies they hold, including TLV) while effectively buying TLV below market price.

I'm satisfied with my mix of direct TLV shares and EVER exposure, but you'll need to decide what works best for your portfolio.

Next Analysis: 🚚 Aquila (AQ)

Moving from banking to distribution and logistics. As Romania's market leader in FMCG distribution, Aquila works with global brands like Coca-Cola, Unilever, and Ferrero. With 72,000 retail points covering 90% of Romania's market and the country's largest transport fleet (1,648 vehicles), they're a key player in getting products to shelves.

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Lady Magee

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Disclaimer: This analysis isn't financial advice. I own TLV shares and EVER (which holds TLV). Always do your own research and consider talking to a financial advisor before investing.

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