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BRD GROUP RESULTS FOR 2020: SOLID BUSINESS MODEL, RESILIENT FINANCIAL PERFORMANCE

10 Feb 2021

The main commercial trends and financial indicators of BRD Groupe Société Générale at December 31, 2020 at consolidated level, according to the International Financial Reporting Standards (IFRS):

- Quick adaptation to address the crisis and continuously stand by our customers

Adequate sanitary measures and adapted organization
Facilitated access to financing

- Important progresses on our client centric roadmap

Accelerated digital deliveries for both retail and corporate customers
Enhanced value proposition for individuals

- Dynamic lending activity to SME

Sustained SME loan portfolio growth, +22% YoY
Active participation in IMM Invest Program, with RON 930 million approved loans
+18%* YoY leasing portfolio advance

- Loans to individuals in rebound in H2

Consumer loans’ production +37% in H2 vs H1 2020

- Significant cost reduction and resilient operating performance

- Elevated capital adequacy and quality of assets

- Net profit of RON 963 million, embedding RON 353 million provision charge reflecting the worsened macroeconomic outlook (compared to a net release in 2019)

- Double digit ROE, 11% in 2020

“2020 was marked by the unfolding of an unprecedented sanitary crisis, that abruptly translated into a severe economic crisis. Though economic rebound is expected, its amplitude and timing highly depend on the evolutions on the sanitary front and the execution of the relaunch programs. Banks are key actors for the economic resilience and recovery.
In this challenging context, BRD acted quickly and efficiently to fully and continuously support its clients, while adapting its organization to ensure business continuity and swiftly implementing actions to mitigate the negative financial impacts. This is reflected in the perception of customers and recognized by the market, BRD being awarded the Bank of the Year in Romania by "The Banker".
In the same time, BRD maintained a strong focus on its client centric roadmap, showing accelerated digital deliveries and improved value proposition to customers. In particular, the release of “You BRD” sets the ground for our future omnichannel platform.
Relying on its solid business model, BRD delivered a resilient financial performance. The planned savings were fully delivered, without compromising on the strategic priority of digital transformation.
needs. BRD was involved in solidarity actions fighting the pandemic, but also reaffirmed its active support to important areas, such as education and culture. ” said François Bloch, CEO of BRD Groupe Société Générale.

Quick adaptation to address the crisis and continuously stand by our clients

BRD acted dynamically and adapted quickly to the exceptional circumstances caused by the pandemic. The first priority was to ensure the protection of our clients and staff, and adequate sanitary measures were swiftly and strictly implemented in all business outlets. At the same time, business continuity was ensured, with employees switching over to a largely remote working arrangement in a very short time. In addition, customers were offered continuous support, by either benefitting from payment holidays under moratorium, or facilitated access to financing, especially through IMM INVEST program. Around 40 thousand customers benefitted from deferral in loan repayment, while financing granted though IMM IMVEST reached approximately RON 930 million, for near 1,900 clients.

Important progresses on our client centric roadmap

Digital deliveries accelerated with the launch of our new mobile application, You BRD, integrating modern concepts allowing the continuous enrichment of the functionalities to provide better and simpler customer service. In addition, BRD continued to launch new features such as Apple Pay, answering customers increasing appetite for innovation. The value proposition to individual customers was also enhanced with the introduction of improved daily banking packages and new service model designed for each segment.

Corporate clients’ digital experience was further enhanced by launching multiple innovative digital solutions: a new mobile application for corporates which offers real time access to accounts in full safety 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 SME financing activity and accelerated digital channels’ adoption

BRD Group net loans, including leasing receivables, registered a growth of +0.5%* compared to 2019, reflecting the activity rebound in H2 after the significant impact of the lockdown.

Core retail loans’ increase (+0.8%* YoY) was mainly driven by housing loans (+2.4%* YoY), while consumer loans production showed a strong rebound after the drop during the lockdown, printing at +37% in H2 vs H1 2020.

Corporate lending (+1.9%* compared to 2019) was fueled by strong SME financing with average and end of year outstanding amounts growing by respectively +7.9% and +22%. This growth built on the active participation in IMM Invest Program, with RON 930 million approved loans, and solid leasing portfolio advance of +18%* YoY. Financing to large corporate clients decreased by -2.3%* YoY driven by companies’ reduced investment appetite in the pandemic context.

Deposits from customers saw a further consolidation on both retail and corporate segments. Retail deposits exhibited an accelerated growth pace (+7.0%* YoY), driven by larger inflows in individuals’ savings (+6.3%* YoY), while corporate deposits increased by +4.7%* YoY. The ratio of net loans to deposits stood at 61% at December 2020 end, down by 7 percentage points versus December 2019 end. BRD registered a rebound in asset management activity during H2 2020, after the impact of the crisis unfolding in Q1. Assets under management reached RON 4.25 bn at December 2020 end, driving market share to 19.2%**. Moreover, BRD very actively participated in the Romanian government bond issuances for individuals, Fidelis program, with an average market share reaching 40%.

In the 2020 context, BRD further promoted the embracement of digital channels, reflected by sustained increase of digital adoption for both retail and corporate clients. The number of active users of remote channels inched up by +23% YoY at end of December, while 99% of large corporate and 96% of SMEs transactions were performed via digital channels.

Resilient financial performance

The full year net banking income of BRD Group reached RON 3,088 million, 5.6% lower compared to 2019, reflecting the resilience of business model and revenues in the current crisis context. Net interest income decreased moderately, by 2.9% YoY, to RON 2,087 million, being mainly influenced by the declining interest rates (average ROBOR 3M at 2.39% in 2020 vs 3.13% in 2019) and the drop of loan production during restrictions. The contraction of net fees and commissions income was mainly linked to reduced fees on daily banking transactions following the SEPA regulation enforcement and the overall lower volumes.

In spite of the exceptional sanitary costs and the recognition of a provision for restructuring in Q4, operating expenses were significantly reduced (RON 1,588 million vs RON 1,678 million in 2019). This evolution reflects both a base effect (2019 costs were inflated by the tax on financial assets) and the execution of a saving plan combining tactical and structural measures. Excluding non recurring items, both staff expenses and non staff expenses were reduced. In parallel, investments in digital transformation were accelerated.

Given all the above, the cost/income ratio remained stable, at 51.4%, despite the crisis impact on revenues. BRD Group gross operating income amounted to RON 1,500 million in 2020 vs. RON 1,592 million in 2019.

The quality of the loan book remained solid in 2020, as reflected by the low NPL ratio (Bank level, non-performing loans, according to EBA definition), reaching 3% at 2020 end, stable compared to 2019 end. The Bank benefits from a consistent level of coverage with provisions of non-performing exposures, of 75.8% at 2020 end compared to 74% at 2019 end, well above market average. Net cost of risk registered RON 353 million provision charge in 2020 compared to RON 204 million provision release in 2019, reflecting the prudent treatment of exposures under moratorium and the deteriorated economic environment.

BRD Group net profit consequently reached RON 963 million in 2020 vs. RON 1,499 million in 2019.

Solvency ratio stood at 30.3% at December 2020 end (individual level, with own funds excluding net result for the current year), compared to 24.9% at December 2019 end, with most of the increase explained by the temporary capital relief on sovereign debt exposures issued in EUR (introduced through EU regulation in response to COVID-19 pandemic) and by higher reserves from revaluation of debt instruments accounted at fair value through other comprehensive income.

Taking into consideration the regulator’s recommendation to limit dividend distribution to 20 bps of CET1, the Board of Directors has decided to propose a gross dividend per share of 0.0749 RON, subject to a favorable vote by the Annual General Meeting of Shareholders on 22nd of April, 2021.

Responsible together // Acting for the future of the Romanian society

In 2020, BRD was involved in solidarity actions fighting the pandemic, but also continued its investments in important areas to the Romanian society, such as education, technology, culture and sports. The total amount invested in 2020 in projects for the society was of approx. RON 10 million.

For the medical system, BRD’s donation reached 70 hospitals in 43 cities, providing for the acquisition of 53,000 medical protective equipment, Covid-19 testers and ventilators.

In the cultural area, BRD and Fundatia9 created Artists Rooms, a micro-grant program for the independent cultural sector financing 50 artists and 38 projects. Fundatia9’s programs were followed by over 1 million people.

The education platform Scoala9.ro creates relevant content for education in Romania. More than 700,000 people read and interacted with Scoala9.ro last year. Starting December 2020, BRD sponsors the National Program for closing the literacy gaps in Romania, implemented by the Association for Values in Education (AVE), with deep intervention and impact at the level of 16,800 pre-school and primary school children.

BRD continued to be supportive of technology through the Mindcraft platform initiatives : BRD First Tech Challenge Romania, robotic labs in Politehnica University of Bucharest, Innovation Labs accelerator for young entrepreneurs and start-up teams, partnership with the Romanian Institute for Data Science. Together, these projects have a significant impact on over 50,000 beneficiaries.

BRD has been a long-lasting supporter of Romanian sports, with focus during the last years on women’s handball, with an impact on over 7,800 licensed handball players. Also, the bank is more and more involved in sport related projects for disabled persons. The bank’s connection with sports is also illustrated by the partnership with Cristina Neagu, BRD’s ambassador in a series of CSR projects.

In 2020, BRD Forest Fund was involved in the protection of a valuable forest in the Sibiu area, together with WWF Romania Foundation, and financed the start of a reforestation project in Neamț County.

In their turn, BRD employees are encouraged to get involved in various causes. "ZiuaV" is the platform where 2,550 employees registered to access volunteering opportunities. Last year, the platform supported 22 volunteering actions across the country.

BRD preliminary financial results for the year ended December 31, 2020 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.

_{(*) On average outstanding

(**) Market share on open-end mutual funds market

Note: If not stated otherwise, all variations are vs. 2019 (for income statement related items) or December 2019 end (for balance sheet related items).

NPL ratio, Coverage ratio, at Bank level}

_{BRD - Groupe Société Générale operates a network of 584 units. BRD has a leading position on the card market with approx. 2.36 million cards and a network acceptance of approx. 30,000 POS and 1,400 ATMs. Total assets of the bank at December 2020 end amounted to RON 61.6bn.}

_{BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 138,000 employees in 62 countries and 29 million customers worldwide in its three key activities:}

_{French retail banking}
_{International Retail Banking, Insurance and Financial Services to Corporates}
_{Global banking and Investor Solutions.}

_{www.brd.ro; facebook}

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BRD GROUP RESULTS FOR 2020: SOLID BUSINESS MODEL, RESILIENT FINANCIAL PERFORMANCE