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07 Feb 2019

The main financial ratios of BRD Groupe Société Générale as at 31 December 2018 at consolidated level, according to the International Financial Reporting Standards (IFRS):


“In 2018, BRD Group achieved strong financial results, reflecting robust commercial dynamics and very solid operational performance. Growth was driven by higher retail loans and savings, increasing corporate financing and larger number of transactions. However, going forward, if the fiscal measures introduced through the Ordinance 114/2018 were to be confirmed, the consequences for the Romanian economy would be clearly negative”, said François Bloch, CEO of BRD Groupe Société Générale.


Robust commercial performance

The Romanian lending market remained robust in 2018 (+7.4%* at December 2018 end in nominal terms), pushed by household demand, while volume growth on corporate segment accelerated at end of year. This evolution mirrored the macroeconomic picture in Romania, as economic growth (+ 4.2%** at Q3-2018) was driven by private consumption, whereas investment remained modest. The propensity to save was still significant, with deposits up by +8.5%* compared to December 2017 end.

In this context, BRD’s business momentum continued to be very positive. Individual customers’ equipment rate (the average number of products per active customers) increased to 4.23 from 4.16 at 2017 end. The number of internet and mobile banking subscribers advanced by +15% versus 2017 end, with the adoption of mobile banking rising fast (number of MyBRD Mobile subscribers rose by +36%). Moreover, with the launch of ContAll, an account aggregator feature allowing MyBRD Mobile users to have a comprehensive and quick overview of all the bank accounts they hold at both BRD and other banks, BRD positioned its client offer at the forefront of banking innovation. Customers can now consult, in a single place, complete information regarding their current account balance, transaction history, loans, credit cards, term deposits and saving accounts.

Net loans, including leasing receivables, increased by +4.0%* compared to 2017 end, pushed by both retail and corporate portfolios. Retail loans were up by +3.7%*, thanks to sustained demand for housing loans (+4.6%*) and unsecured consumer loans (+7.0%*).
The activity on the corporate segment was dynamic, with increases on bank loans, factoring and leasing. Corporate financing, including leasing, increased by +4.6%* YoY. Factoring turnover was up by +9.3% versus 2017 end, driven by both export and domestic operations. Leasing production increased by +21.8% versus 2017, with the demand coming especially from SMEs.
In 2018, BRD actively contributed to the sustainable development of the SME sector in Romania by co-financing more than 140 investment projects with EU grant component, through loans amounting to EUR 54 million, of which around half to the agricultural sector under the National Programme for Rural Development (PNDR). BRD also continued to support Romanian farmers by granting 3,200 APIA bridge loans, totaling over EUR 35 million.

Deposits from customers were up by +2.2%* YoY, driven by the retail segment (+7.1%*) particularly due to higher inflows in sight deposits (+21%*) in a context of rising wages. The ratio of net loans to deposits was 67.2% at 2018 end, +1.1 percentage points compared to 2017 end. 

Strong full year financial results 

BRD Group 2018 net banking income reached RON 3,117 million, up by +11.9% YoY, on broad based revenue growth. Net interest income increased by +15.7% YoY, reflecting volume growth in both customer loans and deposits, and the favorable interest rate environment. Net fees and commissions advanced by +4.5% YoY, mostly on dynamic trends on card activity and depository and custody services, as well as transaction volume growth.

Operating expenses totaled RON 1,489 million, increasing only marginally on a yearly basis (+1.1% YoY), with reduced cumulated contributions to Bank Deposit Guarantee and the Resolution Funds almost compensating higher staff expenses (+3.9% YoY, related to salary and other benefits adjustments, in a tight labor market) and increasing IT costs, driven by transformation related investments. 

BRD Group consequently registered a very strong operating performance, with gross operating result increasing by +24.0% YoY compared to 2017. Cost/Income ratio was further improved to 47.8% (-5.1 pts) compared to 52.9% in 2017.

The risk profile of the loan book continued to be upgraded : NPL ratio kept trending downwards, to 4.6% at 2018 end vs. 6.8% at 2017 end, reflecting write-off operations and sales of non-performing loans as well as the good control of risk at loan origination. Coverage ratio remained at adequate level, at 74.2% at Dec 2018 end, unchanged compared to 2017 end (non-performing loans, according to EBA definition). Net cost of risk registered RON 230 million write-backs in 2018 vs. RON 360 million in 2017, with the one off items’ contribution decreasing from RON 272 million in 2017 (insurance indemnities and gain on sale of NPL portfolio) to RON 95 million in 2018.

In this context, BRD Group net profit reached RON 1,565 million in 2018, higher by +10.6% YoY (+23.6% excluding non-recurring items) on further business growth, improved operating performance and net cost of risk write-backs. Return on equity reached 20.8% in 2018 (19.9%, excluding non-recurring items related to risks costs).

BRD’s capital position remained at a comfortable level in 2018. The total capital ratio was 19.6% as of December 2018 end (at individual level, under Basel 3 regulations, excluding net result for the current year), versus 19.8% at 2017 end (including financial result for the year, net of dividends).

Considering the results of the year as well as the expected capital adequacy trajectory, the Board of Directors has decided to propose the same level of gross dividend per share as for 2017 financial year (RON 1.64/share), subject to a favourable vote by the Annual General Meeting of Shareholders on April 18th, 2019.


Acting for the future of the Romanian society

In 2018, BRD continued to invest in key domains for the development of a modern, competitive but also engaged society: education and technology, culture and journalism, and sport.

BRD is actively involved in education, by launching a new platform, called Scoala9, where modern ideas about the present and future of the Education are gathered, documented and debated. Since its launch, more than 200 000 individuals, teachers, parents, students interacted with Scoala9, through different channels.  

BRD also plays an important role in preparing the new generation of IT specialists and entrepreneurs to the challenges of tomorrow’s digital society, through innovative projects in this area - BRD First Tech Challenge, the Robotics Laboratory and Innovation Labs, which attracted more than 50,000 students and 500 teachers from high schools and universities. 

In the field of culture, BRD founded Fundatia9, in order to support leaders and projects of the new generation of artists and educators. Fundatia9 is developing 2 key projects: Scena9, the cultural magazine for the new generation and Rezidenta BRD Scena9, a center for contemporary culture. In sports, BRD continued its major partnerships with Handball and Tennis Federations.

In addition, BRD encouraged its employees to engage in social causes, through “ZiuaV”, an internal platform of solidarity. In 2018, BRD developed 37 volunteering actions all over the country in which 1 400 employees (more than 18% of BRD employees) involved in actions like blood donation, building affordable housing for low income families, preparing hot meals for most disadvantaged in the community: elderly, children, homeless people.



The introduction of a tax on financial assets, in reality a tax on loans, would have clearly negative consequences for the Romanian economy 

With the publishing on 29th of December 2018 of Emergency Government Ordinance 114/2018, a new tax specifically targeting the banking sector was introduced. 
As such, starting 2019, banks would be subject to a tax on financial assets if ROBOR is above a 2% reference level, the quantum of the annual tax increasing incrementally in dependence of ROBOR intervals. Considering the current ROBOR levels, in case the application guidelines would define the taxation rate as a quarterly one, banks would be subject to a 1.2% annual tax on their financial assets.
In other words, this means that banks would have to pay a 1.2% tax on all the loans they grant. 

First, we believe it necessary to remind that ROBOR indices are the references for the money market. They are based on interbank rates formed as a result of supply and demand, as in any other market. The factors determining the level of liquidity and consequently ROBOR indices are diverse, among them the most important are the fiscal policy, the public budget execution and the public debt management, the evolution of the macroeconomic environment and in particular of inflation, and the monetary policy. All these factors are clearly beyond banks’ control.

As a universal bank, BRD plays a key role in financing all the actors of the Romanian economy:

In addition, BRD is a major contributor to the national budget.
The amount of taxes and social charges paid by BRD over the last 10 years totals RON 4.4 billions, representing 73% of the bank pre-tax profit.

Over the last decade, BRD registered on average a profit representing 1.2% of its assets. The introduction of a tax on financial assets, which would come on top of BRD’s already significant contribution to the public budget, would consequently significantly hamper BRD’s capacity to generate profit through the cycle.
For the banking system as a whole, which registered an average return on assets of 0.4% over the last decade, the situation would even be worse.
Without generating profit, banks cannot generate capital.
Without generating capital, banks cannot grant new loans.

In conclusion, the introduction of such a tax on financial assets, in reality a tax on loans, would undoubtedly drastically restrict the banking sector’s capacity to continue playing its fundamental role -actively financing the projects and activities of all the actors of the economy- and would have clearly negative consequences for the entire Romanian economy.

* we note however that the application guidelines of the ordinance are not yet published

BRD preliminary financial results for the year ended December 31, 2018 are available to the public and investors on the website of the bank: beginning with 09h00. Copies of the documents can also be obtained upon request, free of charge, at the head office of BRD-Groupe Société Générale, located at 1-7, Ion Mihalache Bd., 1st district, Bucharest.

(*)  Variations at constant foreign exchange rate
(**) Seasonally adjusted

BRD - Groupe Société Générale operates a network of 723 units. BRD has a leading position on the card market with approx. 2.4m cards and a network acceptance of approx. 28,000 POS and near 1,600 ATMs. Total assets of the Bank at December 2018 end amounted to RON 54.1bn.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 147,000 employees in 67 countries and 31 million customers worldwide in its three key activities:
French retail banking 
International Retail Banking, Insurance and Financial Services to Corporates
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