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BRD GROUP RESULTS FOR H1 2019: DYNAMIC COMMERCIAL AND FINANCIAL PERFORMANCE

01 Aug 2019

The main commercial trends and financial indicators of BRD Groupe Société Générale at June 30, 2019 at consolidated level, according to the International Financial Reporting Standards (IFRS):

Continued business growth: retail loans outstanding up by +3.0%* YoY, leasing production up by +33% YoY, strong performance of BRD Asset Management (assets under management +23% YoY), higher number of remote banking subscribers (+18% YoY)
Steady rise in revenues, with net banking income up by +8.7% YoY
Operating expenses integrating the impact of higher regulatory (contributions to Deposit Guarantee and Resolution Funds) and staff costs
Solid operating performance: gross operating income reached RON 805 million (+12.9% YoY excl. Deposit Guarantee and Resolution Funds’ contribution); C/I ratio improved by 2 pts, at 45.5% in H1 2019 vs. 47.5% in H1 2018, excl. the impact of above mentioned regulatory expenses
Net cost of risk write-backs of RON 144 million (vs. RON 154 million in H1 2018) benefiting from strong recovery performance on defaulted portfolio and favorable economic environment
Net profit of RON 787million (vs. RON 757 million in H1 2018)

“The results obtained in the first semester mean for us, first and foremost, further trust from our clients, for whom we want to be better not only from one semester to another, but every day, together with the team of extraordinary people of this bank. Also, the financial performance reconfirms that, in full transformation process, we continue to have a solid basis, so that we can fully achieve the objectives of digitalization, simplification and efficiency for our clients. We are moving towards a business model with multiple digital channels, which will be implemented gradually, while maintaining our brick-and-mortar presence. ContALL - the first aggregator of bank accounts in Romania and a first step towards Open Banking - and Instant Top Up are just a few examples of our digitalization approach”, said François Bloch, CEO of BRD Groupe Société Générale.

The Romanian loan market registered a robust increase (+6.1%* YoY at June 2019 end) on both individuals’ and companies’ segments. After enjoying sound growth last year thanks to the favorable macroeconomic environment, households’ loan appetite moderated in the first part of 2019.

BRD Group’s net loans, including leasing receivables, were up by +2.3%* compared to June 2018 end, driven by retail and large corporate segments. Both consumer and housing loans contributed to retail loan growth (+3.0%*). On the corporate side, large corporate lending (+2.3%*) and leasing outstanding (+10.4%*) were the main growth drivers. Leasing production was up by +33% versus the first half of 2018 thanks to demand from both small businesses and SMEs.

Deposits from customers increased by +1.9%* on an annual basis. Retail savings’ annual growth (+3.2%* YoY) was driven by larger inflows in individuals’ sight deposits (+23%* YoY) boosted by higher disposable income. The ratio of net loans to deposits was 67.5% at June 2019 end, quasi stable compared to June 2018 end.

Through the funds managed by its specialized subsidiary BRD Asset Management, BRD offers to its customers a wide range of solutions for investing and saving. On this market, a remarkable performance was registered in the first half of 2019. BRD AM’s assets under management increased by +23% YoY at June 2019 end on significant net inflows in BRD Simfonia and Eurofond (RON-denominated and EUR-denominated, respectively), which invest mainly in fixed income and money market instruments.

Digital transformation has remained one of BRD’s key priorities. The sustained investments in digitalization have resulted in an increasing number of internet and mobile banking subscribers (+18% versus June 2018 end). The adoption of mobile banking is rising fast as reflected by the +43% increase in MyBRD Mobile subscribers.The volume of transactions through MyBRD Mobile and MyBRD Net solutions increased by +24% compared to the first half of 2018. The intensity of commercial relationships also improved, with individual customers’ equipment rate (the average number of products per active customers) rising to 4.25 from 4.22 at June 2018 end.

With a constant focus on innovation, MyBRD Mobile application was voted the ”Banking Product of the Year 2019” at the tenth edition of the ”Voted Product of the Year” gala in Romania, which took place in May 2019**.

BRD Group net banking income amounted to RON 1,609 million in H1 2019, up by +8.7% compared to the same period of the last year. Net interest income advanced by +11.4% year on year, combining higher volumes and positive structure shifts, in a favourable interest rate environment. In a context of increasing pricing pressure on some transactional banking services, fees and commissions revenues increased by +2.0% compared to H1 2018, helped by intensified card activity.
Operating expenses reached RON 804 million in H1 2019, higher by +8.9% compared to H1 2018 given the increase in regulatory costs (double cumulated contribution to the Deposit Guarantee and Resolution Funds, RON 72 million vs RON 35 million in 2018) and staff costs (+6.7% YoY, related to salary and other benefits’ adjustments, in a tight labor market context). Excluding Deposit Guarantee and Resolution Funds’ cumulated contribution, the increase in operating expenses was contained at +4.0% on a yearly basis, while cost/income ratio improved by 2 pts over last year, reaching 45.5% (cost/income ratio at 50.0% in H1 2019 incl. the impact of above mentioned regulatory expenses, stable compared to H1 2018).

Consequently, BRD Group registered a solid operational performance with gross operating income reaching RON 805 million vs. RON 742 million in H1 2018, up by +8.5% (+12.9% excluding the contribution to Deposit Guarantee and Resolution Funds).
Risk indicators continued their improving trend with an NPL ratio (non-performing loans, according to EBA definition) at 3.8% at June 2019 end vs. 6.3% at June 2018 end and a high level of coverage of non-performing exposures (coverage ratio at 75.7% at June 2019 end vs. 73.0% at June 2018). Net cost of risk write-backs reached RON 144 million in H1 2019 vs. RON 154 million in H1 2018 reflecting strong recovery performance, the good quality of the loan origination and a favorable economic environment.

In this context, BRD Group net profit reached RON 787 million in H1 2019 vs. RON 757 million in H1 2018 driven by robust revenues’ generation and cost of risk write backs. Return on equity reached 20.9% in H1 2019 (vs. 21.6% in H1 2018).

BRD maintained a comfortable capital position, with total capital ratio reaching 20.0% at June 2019 end (vs. 18.8% as of June 2018 end, figures at individual level, under Basel 3 regulations).

BRD financial results for six months ended June 30, 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.

(*) Variations at constant foreign exchange rate
(**) Based on a market study conducted by EXACT Business Solutions
Note: If not stated otherwise, all variations are vs. H1 2018 (for income statement related items) or June 2018 end (for balance sheet related items)
BRD - Groupe Société Générale operates a network of 699 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 almost 1,600 ATMs. Total assets of the Bank at June 2019 end amounted to RON 55.0bn.

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 and Financial Services
• Global Banking and Investor solutions.
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BRD GROUP RESULTS FOR H1 2019: DYNAMIC COMMERCIAL AND FINANCIAL PERFORMANCE