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BRD GROUP RESULTS FOR 9M 2020: SUSTAINED LENDING ACTIVITY IN Q3 AND RESILIENT FINANCIAL PERFORMANCE

05 Nov 2020

The main commercial trends and financial indicators of BRD Groupe Société Générale at September 30, 2020 at consolidated level, according to the International Financial Reporting Standards (IFRS):

- Quick adaptation to address the crisis and support our clients

Adequate sanitary measures
Facilitated access to financing

- Dynamic lending activity

Strong consumer loans’ production rebound (+123% in Q3 vs Q2 2020)
Actively financing SMEs (loan portfolio +7.3% YoY), especially through active participation in IMM Invest (700 MRON approved) and leasing (overall leasing portfolio +17.5% YoY)

- Resilient operating performance and significant cost savings secured

- Building on a very solid base, allowing for continuous support of our customers

Strong balance sheet, with a capital adequacy ratio of 28% and a very comfortable liquidity position
High asset quality with NPL ratio of 3.4% at September 2020 end, and elevated NPL coverage ratio (76.4%)

- Net profit of RON 738 million (vs. RON 1,226 million in 9M 2019), on the impact of net provision charge (compared to a net release in the same period of last year), reflecting the worsened macro-economic environment.

“The unprecedented sanitary crisis in which Romania and the entire world entered in the first quarter of the year continued to spill over in all economic areas, prompting for continuous adaptability.

Looking forward, the economic rebound will rely massively on the execution of the relaunch policies adopted by the authorities and their effects on the pace of progress of production, on the exchange chains and on consumer behavior. Naturally, the Romanian banking system is also a key actor for the economic resilience and recovery.

In particular, BRD acted dynamically and applied all the necessary measures to protect its customers and employees, to ensure business continuity, provide adequate customer support and access to financing. If Q2 was marked by a sharp drop of individuals’ loans production in the lockdown context, the activity rebounded in Q3 with new consumer loans surpassing the pre-crisis levels. BRD has also an active participation in the IMM Invest program, with almost RON 700 million of loans in favor of SMEs and Small Businesses, approved at end of September.

While swiftly answering to the effects of the crisis, BRD focused on materializing the opportunities, fostering digital adoption and accelerating flow automation projects.

Despite the significantly deteriorated economic environment, BRD delivered a financial performance that proves the resilience of our business model and the adequacy of the actions taken in response to the crisis.” said François Bloch, CEO of BRD Groupe Société Générale.

Resilient business model in crisis context

BRD Group net loans, including leasing receivables, registered a slight growth (+0.2% compared to September 2019 end). Core retail loans’ increase (+0.9% YoY), though affected by the spring lockdown, reflects the rebound in consumer loans origination starting mid-May, up to exceeding previous year monthly performance in September 2020. SMEs financing increased (+7.3% YoY) on the active participation in IMM Invest Program, with RON 700 million approved loans, and the strong leasing portfolio advance of +17.5% YoY.

Deposits from customers saw a further consolidation of the already broad base. Retail deposits exhibited an accelerated growth pace (+9.1%), driven by larger inflows in individuals’ savings (+8.3% YoY). Corporate deposits registered double digit increase pushed by a strong growth in SME resources (+23.8% YoY). The ratio of net loans to deposits was 65.0% at September 2020 end, down by 6 percentage points versus September 2019 end.

In the crisis context, BRD focused on fostering digital adoption (one third of our customers actively used remote channels at end of September) and accelerated flow automation projects. BRD continued to launch new features covering in an innovative way the needs of its customers (Apple Pay launched in July). Digital penetration on corporate clients’ segment reached new heights, with 99% of large corporate clients’ and 95% of SMEs transactions performed via digital channels. Corporate clients’ digital experience on the e-banking platforms was further enhanced. In particular, the upgraded version of our cash management platform was massively adopted by large companies.

In the first nine months, BRD Group net banking income reached RON 2,308 million, lower by 5.7% compared to the same period of the last year, with the decrease mainly driven by contraction in net fees and commissions and other revenues category, while net interest income remained rather resilient. Net interest income inched slightly lower, by 2.3% year on year, mostly impacted by lower market rates (average ROBOR 3M at 2.49% in 9 M 2020 vs 3.16% in 9M 2019). The decline in net fees and commissions, of -12% year on year in 9M 2020, was mainly due to lower income from daily banking transactions following the SEPA regulation enforcement and reduced volume of transactions during the lockdown. Other revenues category evolution was influenced by significant revaluation gains in 2019.

Overall, operating expenses over 9 months were contained at the same level as last year. Significant savings were delivered, without compromising on strategic investments. Staff expenses were reduced by -2.2% in Q3 2020 YoY, while non-staff expenses increase was entirely linked to higher IT expenses reflecting the acceleration of our digital roadmap and exceptional costs related to sanitary crisis management. Excluding sanitary and IT costs, non-staff expenses were reduced by -7.5% in Q3 2020 YoY.

Given all the above, the BRD Group cost/income ratio was contained to 50.6% excluding exceptional sanitary costs (vs. 48.5% in the same period of the last year). BRD Group gross operating income amounted to RON 1 120 million in 9M 2020 vs. RON 1 260 million in 9M 2019.

The asset quality indicators of the Bank remained solid, as reflected by the NPL ratio (non-performing loans, according to EBA definition), reaching 3.4% as of September 2020 end (vs. 4.0% as of September 2019 end) and the elevated coverage with provisions of non performing exposure (coverage ratio at 76.4% at September 2020 end vs. 74.1% at September 2019 end). Risk costs registered RON 253 million net provision charge compared to RON 207 million provision release in 9M 2019, mainly influenced by the impact of the deteriorated macro-economic scenarios on the estimated credit losses.
BRD Group net profit reached RON 738 million in 9M 2020 vs. RON 1 226 million in 9M 2019.

BRD remained well positioned to face the challenges of the current crisis, maintaining a robust capital position, at 28% at September 2020 end, (vs. 21% at September 2019 end). Most of the year on year increase stemmed from retention of the full 2019 profit, and the temporary capital relief on sovereign debt exposures issued in EUR, introduced through EU regulation in response to COVID-19 pandemic.

Continuous adaptation to the current crisis

BRD acted dynamically and adapted quickly and successfully its organization, to ensure business continuity under these exceptional circumstances caused by the pandemic. Extended work from home was maintained, and in all our business outlets and offices prevention measures are strictly applied, in order to protect both our employees and our clients.

BRD remains close to its customers, providing them support by answering their requests in a timely manner and with relevant solutions. Either by promoting the usage of the mobile and internet banking applications, by the granted deferral in loan repayment or by providing financing solutions, like IMM INVEST program, to support its customers, BRD proved a reliable partner.

BRD financial results for nine months ended September 30, 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.

_{Note: If not stated otherwise, all variations are vs. 9M 2019 (for income statement related items) or September 2019 end (for balance sheet related items) NPL ratio, coverage ratio, at Bank level}

_{BRD - Groupe Société Générale operates a network of 612 units. BRD has a leading position on the card market with approx. 2.41 million cards and a network acceptance of approx. 30,000 POS and 1,400 ATMs. Total assets of the bank at September 2020 end amounted to RON 59.3bn.}

_{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

Contact media:

Traian Traicu_021 301 61 50_traian.traicu@brd.ro}

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BRD GROUP RESULTS FOR 9M 2020: SUSTAINED LENDING ACTIVITY IN Q3 AND RESILIENT FINANCIAL PERFORMANCE