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BRD GROUP RESULTS FOR 9M-2017: STRONG PROFITABILITY GROWTH FULLY CONFIRMED

03 Nov 2017

The main financial ratios of BRD-Groupe Société Générale as at September 30, 2017 at consolidated level, according to the International Financial Reporting Standards (IFRS):

Net profit of RON 1,066 million in 9M-2017, +76% YoY, fuelled by both dynamic commercial activity and improved risk profile
Net banking income higher by +3.4% after excluding non-recurring items (gain on Visa transaction in 2016 and gains on AFS instruments). Sound increase in net interest income (+6.8%) driven by solid volume growth.
Increased operational performance (gross operating income +3.8%) and improved C/I year on year (51.8% versus 52.0% in 9M-2016) when adjusting for non-recurring income
Strong commercial performance: continuous expansion of the client base (+34k active retail customers), larger stock of internet and mobile banking contracts (+25% YoY), higher volume of new household loans (+12.4% YoY) and strong lending to large corporate clients (+10.9% YoY)
Positive net cost of risk, driven by recoveries on non-retail defaulted portfolios, insurance indemnities recognition and gain on sale of NPL portfolios
Asset quality continues to improve: NPL ratio of 7.8% at Sep-17 end versus 10.8% at Sep-16 end; slight increase in NPL coverage ratio to 75.0% as of Sep-17 end from 74.8% at Sep-16 end

Gross loan growth on the Romanian market is accelerating as corporate credit is gathering pace and households’ demand remains strong. Gross loans increased by +5.7%* YoY at Sep 2017 end, with household loans up by +6.2%* and loans to companies higher by +5.2%* YoY. Housing loans were the main growth driver on the individuals’ segment (+10.7%* YoY). Banking system deposits growth was above +9%* YoY, for both individuals and companies, in spite of low interest rates.

BRD delivered healthy commercial performance, consolidating business growth and stepping up digitalization. The number of active retail customers increased by 34,000 YoY, of which individuals +31,000 and small business customers +3,000. Individual customers’ equipment rate (the average number of products per active customers) further increased to 4.16 from 4.04 at September 2016 end. The stock of internet and mobile banking contracts reached 1.30 million, +25% YoY. In particular, the number of MyBRD Mobile subscribers rose by +55%.

BRD Group net loan outstanding amounted to RON 30.7 billion, +6.6%* higher compared to September 2016, underpinned by sound growth on both retail and non-retail segments. Retail loans outstanding was up +7.1%*, sustained by the strong advance of new consumer loans and housing loans, thanks to well-targeted campaigns and market appetite for new lending. Individuals’ loan production further expanded (by +12.4% versus January-September 2016) to RON 4.8 billion, and BRD consolidated its leadership position on household loans, with a market share of 16.9% at September 2017 end. Non-retail loans marked an annual increase of +5.6%*, driven by credit to large corporate clients (+10.9%* YoY), illustrating BRD’s strong position on the segment.

The deposit base expanded further on an annual basis (+3.6%* versus September 2016), pushed up by retail customers’ savings (+7.6%* YoY). In a context of persistently low interest rates, deposits on current accounts further expanded, by +19%* compared to September 2016 end. The ratio of net loans to deposits was 72.0% (+2.1 pts vs. September 2016 and +4.4 pts up compared to December 2016).

BRD Group’s net banking income amounted to RON 2,061 million, accelerating to +3.4% YoY, excluding non-recurring elements (gains on available for sale assets and VISA Europe transaction in 9M-2016, which totalled RON 127 million, and gains on available-for sale assets of RON 9 million in 9M-2017). The +6.8% increase of net interest income stemmed from solid volume growth. Net fees and commissions income (-2.4% YoY) were sustained by revenue growth on card activity, higher commissions from capital and financial markets services and from electronic banking subscriptions, but were impacted by the lower fees on transactional banking products.

Operating expenses increased by +3.0% YoY, as a result of a moderate increase in staff costs (+2.7%), higher cumulated contributions to Bank Deposit Guarantee Fund and the Resolution Fund (+8.6% YoY) and a rise in IT investments, mostly in relation to change-the-bank initiatives. Excluding non-recurring income, Group Cost/Income ratio reached 51.8% versus 52.0% in 9M-2016.

BRD Group further improved its operational performance, with gross operating income up +3.8% YoY, when adjusting for non-recurring income.

Asset quality continues to improve, as shown by the lower NPL ratio, of 7.8 % at September 2017 end versus 10.8% at September 2016 end, and the solid coverage ratio of 75.0%, compared to 74.8% at September 2016 end (all ratios according to EBA methodology). Net cost of risk registered a RON 271 million net release due to recoveries on non-retail defaulted portfolios, recognition of insurance indemnities, and gain on sale of NPL portfolio.

In this context, BRD Group continued to record very strong profitability, the net profit reaching RON 1,066 million in 9M-2017, +75.8% YoY, leading to a return on equity of 20.5% compared to 12.5% in the corresponding period of last year. Excluding non-recurring income, net profit increased by +66.2% YoY.

BRD maintained a comfortable capital adequacy ratio of 18.5% as of September 2017 end (individual level, under Basel 3 regulations with national discretions), stable versus September 2016 end.

“The first nine months of 2017 were marked by a dynamic commercial activity, leading to an acceleration of core net banking income growth. Combined with non recurring positive cost of risk items, this evolution translated into a very strong increase of the financial performance. BRD’s broad-based credit growth testifies to the Group’s commitment towards financing the economy. Further, we will continue to step up on digitalization and innovation in order to permanently improve our products and services, and enhance customer experience”, François Bloch, CEO BRD-Groupe Société Générale.

BRD financial results for the nine months ended September 30, 2017 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.

(*) Variations at constant foreign exchange rate

BRD - Groupe Société Générale has 2.27 million active customers and operates a network of 783 units. BRD has a leading position on the card market with approx. 2.3m cards and a network acceptance of approx. 28,700 POS and more than 1,500 ATMs. Total assets of the Bank at September 2017 end amounted to RON 51.6bn.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 145,000 employees in 66 countries and 31 million customers worldwide in its three key activities:

Retail banking in France
International Retail Banking, Financial Services and insurance
Corporate and investment banking, private banking, asset management and securities services

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BRD GROUP RESULTS FOR 9M-2017: STRONG PROFITABILITY GROWTH FULLY CONFIRMED