BRD GROUP RESULTS FOR 9M 2018: STRONG OPERATING PERFORMANCE AND EARNINGS GROWTH

The main financial ratios of BRD Groupe Société Générale as at September 30, 2018 at consolidated level, according to the International Financial Reporting Standards (IFRS):

Net profit of RON 1,142 million, up by +7% YoY (+28% excluding non-recurring items) on strong operating performance and positive cost of risk
Net banking income, up by +11% pushed by healthy net interest income generation, on volume growth and favourable interest rate environment
Significant improvement in operating performance: gross operating income up +19% YoY, C/I ratio at 48.2% in 9M 2018, lowered by 3.4 pts on a yearly basis
Positive business momentum: +1.5%* increase in total net loans, +4.3%* on retail loans, +11% on leasing production, increasing volume of transactions and remote banking subscriptions for individual customers (+16% YoY)
Net cost of risk write-backs of RON 170 million, reflecting the quality of the loan book

Dynamic business performance

The Romanian loan market increased in nominal terms by +5.3%* YoY at September 2018 end, supported by the continuous positive performance on individuals segment (+8.9%* YoY) in a context of increasing disposable income, while the advance on companies segment remained modest (+1.8%* YoY). The increase of deposits, up by +9.4%* YoY at September 2018 end, remained elevated on both segments: individuals and companies.

In this context, BRD’s business momentum continued to be positive. Individual customers’ equipment rate (the average number of products per active customers) increased to 4.25 from 4.16 at September 2017 end. The stock of internet and mobile banking contracts for individual customers reached 1.51 million, +16% YoY, with mobile banking rising at a very fast pace (MyBRD Mobile subscriptions rose by +39% YoY). Online banking applications were further developed, with new enhancements brought to existing functionalities during the first nine months of 2018, mainly for facilitating the invoice payments and online mutual funds’ subscription.

Net loans were up by +1.5%* compared to September 2017 end pushed by retail portfolio positive dynamic. Retail loans maintained the good momentum, increasing by +4.3%* YoY particularly driven by housing loans advance (+8.3%* YoY). In a context of increasing interest rates and prudent risk management, non retail loan volume registered a +1.7%* growth compared to December 2017 end.

Deposits from customers were up by +1.5%* YoY, driven by retail deposits up by +6.7%* YoY, on the back of rising sight deposits as a result of increasing disposable income. The ratio of net loans to deposits was 69.0% at September 2018 end, stable compared to September 2017 end.

Revenues showed strong momentum

In the first nine months of 2018, revenues showed strong momentum and rose by +11.1% YoY to RON 2,289 million, led by both net interest income and non-interest income. Net interest income was up +15.5% YoY supported by higher volumes on retail segment (average outstanding amount of loans up + 6.9% and deposits up +5.2%) and rising RON rates. Non-interest revenues registered a +4.2% YoY growth, benefitting from increasing transactions volumes, dynamic custody activity, and higher trading result.

Operating expenses increased by +3.9% YoY, reflecting rising labor costs and costs relating to the transformation of the bank. The increase in personnel expenses of 9.4% YoY was mainly attributable to adjustments made to compensation packages in the context of tighter labor market. Other expenses, excluding regulatory costs (Bank Deposit Guarantee Fund and Resolution Fund contributions), were up by +5.9% mainly on higher IT expenses driven by strong transformation related investments. Total contribution to the Bank Deposit Guarantee Fund and Resolution Fund was halved on an annual basis.

Operating performance significantly improved on a yearly basis with gross operating income up by 18.9%, reflecting strong earnings generation capacity. Cost/Income ratio improved by -3.4 pts YoY (48.2% vs. 51.6% in 9M 2017).

BRD Group registered a cost of risk write-back of RON 170 million in 9M 2018 illustrating the quality of the loan book. On a yearly basis, cost of risk write-backs decreased by -37.6% due to significantly higher non-recurring elements booked in the first half of 2017 (insurance indemnities and sale of non-performing loans of RON 272 million in 9M 2017 compared to RON 95 million in 9M 2018). The NPL ratio declined to 5.8% at September 2018 end versus 8.1% at September 2017 end, while the coverage ratio remained high at 73.1%, compared to 75.0% at September 2017 end (all ratios according to EBA methodology).

In this context, BRD Group net profit amounted to RON 1,142 million in 9M 2018, higher by +7.1% YoY (+28.2% excluding non-recurring elements) on continued commercial growth, improved operating performance and positive cost of risk. Return on equity reached 20.9% in 9M 2018 (19.7%, excluding non-recurring items).

The capital adequacy ratio of BRD remained at a comfortable level, 19.4% as of September 2018 end (at individual level, under Basel 3 regulations), versus 18.5% at September 2017 end, well positioning the bank for further business growth.

“In the first nine months of 2018, BRD Group delivered very strong results, reflecting the positive business momentum and strong operating performance. Growth was driven by volumes’ increase on both retail loans and deposits, intensified transactional activity while the rising usage of remote banking solutions demonstrated the continuous efforts to further enhance our digital offer.”, said François Bloch, CEO of BRD Groupe Société Générale.

BRD financial results for the nine months ended September 30, 2018 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 operates a network of 745 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 September 2018 end amounted to RON 53.0bn.

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
Global banking and investor solutions
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BRD GROUP RESULTS FOR 9M 2018: STRONG OPERATING PERFORMANCE AND EARNINGS GROWTH