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BRD GROUP RESULTS FOR 2019: SOLID DEVELOPMENT OF ACTIVITY AND MAINTAINED HIGH PROFITABILITY
06 Feb 2020
The main commercial trends and financial indicators of BRD Groupe Société Générale at December 31, 2019 at consolidated level, according to the International Financial Reporting Standards (IFRS):
- Expanding volumes across all customer segments: further retail loan growth (+3.5%* YoY), increasing lease financing and loans to large corporate (net loans including leasing up by +4.6%* YoY), remarkable achievement on alternative savings market (BRD AM’s assets under management up by +74% vs December 2018 end), growing use of digital channels (MyBRD Mobile & MyBRD Net unique active users, up by +19% vs December 2018 end)
- Sustained yearly revenue growth, with net banking income up by +5.0% YoY
- Operating expenses increase mainly related to higher staff costs and regulatory expenses (cumulated contributions to Deposits Guarantee and Resolution Funds and tax on financial assets), while other costs categories were contained at +2.5% YoY
- Strong operating performance as reflected by the increase in gross operating income, up by +4.8% YoY, excluding Deposit Guarantee and Resolution Funds’ contribution and tax on financial assets, on dynamic commercial activity; cost-to-income ratio at 46.8%, stable vs 2018, (excluding the impact of above mentioned expenses) supported by revenues growth while continuing the transformation
- NPL ratio well below market average (3.1% at Dec 2019 end vs 4.3% banking system)
- Cost of risk write-backs of RON 204 million driven by strong recovery performance from previously written off exposures, exceptional insurance indemnities payout (recognized in Q3 2019) and good control of risk at loan origination
- Net profit of RON 1,499 million, ROE above 18% for the 3rd year in a row
“2019 was an excellent year for BRD, of course in terms of financial performance, but also in our constant dedication to serve our customers, finance the economy and support local communities.
We delivered high profitability thanks to rising revenues, strong risk profile and robust commercial performance on both retail and corporate segments, while continuing the implementation of our business transformation plan. BRD Asset Management had a spectacular performance as reflected by the +74% growth in assets under management compared to the previous year, reflecting BRD’s strategy to capture the full potential of the savings’ market, and propose to our clients an alternative to standard deposits. In parallel, we actively financed SMEs through our leasing offer.
In line with our business transformation program, we accelerated investments in digital innovation in order to optimize customer experience. For instance, for corporate clients, we launched a new mobile application for cash management and simplified access to factoring and trade finance solutions. For retail clients, the continuous enhancement of our internet and mobile banking solutions led to double-digit increases in the penetration rate and transaction volumes on digital channels.
We also increasingly supported local communities. We broadened our commitment to the society by initiating volunteering projects for our employees. In addition, we now contribute to the fight against deforestation, through the creation of Fondul BRD pentru Paduri.
In 2019 we further consolidated our strong foundation, confirmed BRD’s ability to adapt to a changing environment, while continuing to finance the Romanian economy in a balanced and responsible way”, said François Bloch, CEO of BRD Groupe Société Générale.
Dynamic commercial performance
BRD Group’s net loans, including leasing receivables increased by +4.6%* compared to 2018, thanks to both retail and corporate segments. Consumer lending and housing loans were the main contributors to retail loan growth, which reached +3.5%* YoY. Corporate loan growth (+7.4%* compared to 2018) was underpinned by large corporate lending (+8.2%*) and leasing financing. Leasing production expanded by +39% versus full year 2018 pushed by demand from both SMEs and small businesses for commercial vehicles and passenger cars, and equipments for agriculture and industry.
Retail savings (including BRD AM funds) advanced by +5.7%* on both large retail deposit base increase of +4.0%* YoY (partly linked to the continued growth in wages on the domestic market) and asset management activity remarkable growth. The ratio of net loans to deposits was 68.4% at end 2019, +2.7 ppts versus 2018.
BRD offers to its customers a wide range of solutions for investing and saving through diversified open-end funds managed by its specialized subsidiary BRD Asset Management. BRD registered a very strong performance on this market during 2019. Growth in assets under management accelerated to +74% YoY in 2019 on high net inflows in BRD Simfonia and Eurofond (RON-denominated and EUR-denominated, respectively), which invest mainly in fixed income and money market instruments. As a result, BRD AM’s market share further increased by +6.5 ppts to 19.3%** at the end of the reporting period, becoming the 3rd largest asset manager in Romania. BRD Asset Management’s expertize was recognized by the specialized press, the company winning 2 prizes during last year: “Best diversified fund in Romania” for BRD Diverso and “Best Asset Management Company”.
The use of digital channels has further intensified as reflected by the increasing number of internet and mobile banking unique active users to near 600k at 2019 end, up by +46% over the last two years. In the same time, the volume of transactions via electronic channels was fastly growing, up by +24% compared to 2018. Digital penetration accelerated also on the SMEs and large corporate segments, with more than 97% of the transactions performed via e-channels, capturing more than 1 million payments per month.
With a constant focus on innovation and improvement of customers’ experience, BRD launched multiple digital solutions for its clients: a new mobile application for corporates which offers real time access to accounts in full safety and mobility conditions, a fully integrated end-to-end digital solution for factoring, and a trade finance digital platform dedicated to manage guarantees, letters of credit and collections in a fast and secure way.
Strong full year financial results
BRD Group 2019 net banking income reached RON 3,270 million, up by +5.0% YoY, reflecting strong commercial dynamic across all customer segments. Net interest income reached RON 2,150 million, increasing by +8.1% YoY, favorably influenced by continued expanding volumes, structure shifts and supportive interest rate environment. Despite the stronger pricing pressure on daily and transactional banking services, net fees and commissions income advanced by +1.1% YoY compared to 2018, benefitting from intensive card activity, risings volumes of customers’ transactions, as well as increasing revenues from asset management.
Operating expenses totaled RON 1,678 million in 2019 (vs. RON 1,490 million in 2018), with their evolution mainly reflecting increasing labor market tightness, rising regulatory costs and investments related to business model transformation. Staff costs were up by +7.6% YoY compared to 2018, due to salary and other benefits adjustments operated by the bank in the context of extremely tense labor market where average salary is growing at a double digit pace. Regulatory costs, referring to the cumulated contribution to Bank Deposit Guarantee and the Resolution Funds (RON 72 million in 2019 vs. RON 35 million in 2018) and tax on financial assets (RON 75 million, recognized in expenses in the last quarter of the year) accounted for near 10% of full year operating expenses. Other costs categories were kept under control (+2.5% YoY), mirroring the effects of the ongoing transformation plan embarked to answer the future challenges, on one side, and contained sundry costs, on the other.
BRD Group registered a very strong operating performance, with gross operating result increasing by +4.8% YoY (excluding regulatory costs). Operating efficiency remained robust with cost/income at 46.8% (excluding regulatory costs), stable compared to 2018.
BRD risk profile proved even stronger in 2019 as reflected by the significant decrease in NPL ratio (non-performing loans, according to EBA definition, NPL ratio at Bank level) from 4.6% at December 2018 end to 3.1% at December 2019 end, due to further write-offs, sale of defaulted exposures and good control of risk at origination. In addition, the coverage of non performing loans remained solid, at 74.0% at December 2019 (vs. 74.2% at December 2018 end) reflecting a prudent provisioning policy. Cost of risk registered RON 204 million net release in 2019 compared to RON 230 million in 2018 due to strong recovery performance, exceptional insurance indemnities payout (RON 161m booked in Q3-19, finalizing several insurance claim files) and good quality loan production.
In this context, BRD Group net profit reached RON 1,499 million in 2019 (vs. RON 1,563 million in 2018) driven by strong revenues’ growth and solid risk profile. Return on equity was 18.9% in 2019 (vs. 20.8% in 2018).
The capital position of BRD remained strong with total capital ratio standing at 20.1% as of December 2019 end (individual level, under Basel 3 regulations, with own funds excluding net result for the current year) compared to 21.1% at December 2018 end (including financial result for the year, net of approved dividends).
Considering the results of the year as well as the expected capital trajectory, the Board of Directors has decided to propose the same gross dividend per share as for 2018 financial year (RON 1.64/share), subject to a favorable vote by the Annual General Meeting of Shareholders on April 23rd, 2020.
Acting for the Romanian society
In 2019, BRD continued its investments in important areas to the Romanian society, such as education and technology, culture and sports.
Our education platform Școala9.ro created together with a team of journalists from DOR is the space where one can see what happens on the ground, where public policies, laws and projects translate into reality. Scoala9 has dedicated content for teachers, parents, students and deals with various topics, from modern teaching methods to school-related fears, from how young people view environmental education to vocational education. Over 500,000 people read articles and interacted last year with Scoala9 through various channels.
In 2019, BRD continued to be supportive of technology through the Mindcraft platform, supporting teams, competitions and robotics laboratories, research, innovative entrepreneurship and the IT&C community in Romania. BRD First Tech Challenge, the robotics competition dedicated to high school students, is already a phenomenon, the third edition attracting over 5,000 young people, 500 teachers from 77 participating cities.
In the field of culture, Fundatia9, the foundation established by BRD to support the new generation of creators, launched a new program: the Lucian Pintilie Cinema Fund, which aims to restore the creative heritage of the Romanian director and to grant scholarships to filmmakers at the beginning of their careers. Through this fund, “The Oak” movie was restored, and will be relaunched this year in cinemas, in 4K digital format. In addition to the Foundation's programs, the partnerships for classical music, contemporary art, performing arts continue. In 2019, BRD was one of the main sponsors of the France-Romania Season, which brought to Romania more than 200 projects and 400 cultural events.
In sports, BRD continued to support important partnerships for the promotion of Romanian handball, tennis and parasports.
BRD employees are encouraged to get involved in various causes and receive a day off each year for volunteering. "ZiuaV", the platform where volunteering opportunities can be found, supported 50 volunteering actions throughout the country, in which over 2,000 employees (more than 25% of the BRD staff) were involved: blood donation, actions in hospitals, restoration of school yards, charity marathons, preparing Christmas presents for children, preparing hot meals for underprivileged members of the community: the elderly, children, homeless people.
BRD preliminary financial results for the year ended December 31, 2019 are available to the public and investors on the website of the bank: www.brd.ro 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.
(*) Average amounts
(**) Market share on open-end mutual funds market
Note: If not stated otherwise, all variations are vs. 2018 (for income statement related items) or December 2018 end (for balance sheet related items).
NPL ratio for banking system as of November 2019 end
BRD - Groupe Société Générale operates a network of 648 units. BRD has a leading position on the card market with approx. 2.4m cards and a network acceptance of approx. 29,000 POS and almost 1,500 ATMs. Total assets of the Bank at December 2019 end amounted to RON 55.9bn.
BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 149,000 employees in 67 countries and 31 million customers worldwide in its three complementary core businesses:
• French Retail Banking
• International Retail Banking, Insurance and Financial Services to Corporates
• Global Banking and Investor solutions.
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