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BRD Group Results For Q1 - 2018: Net Profit Of RON 414 Million

04 May 2018

The main financial ratios of BRD Groupe Société Générale as at March 31, 2018 at consolidated level, according to the International Financial Reporting Standards (IFRS):

Net profit of RON 414 million, up by +26% YoY on healthy revenue generation, quasi stable operating expenses and positive cost of risk
Strong and broad-based net banking income growth (+11.4%), particularly on robust net interest income increase (+14.2%) due to positive volume and interest rate effects, and on the advance of net fees and commissions (+5.2%)
Flat operating expenses, leading to gross operating income increase of +27.5%
Good commercial momentum: higher number of active customers (+37k), +5.0%* rise in net loans, +6.0%* rise in deposits, higher number of transactions
Positive net cost of risk, driven by significant recoveries on non-retail portfolio and recognition of insurance indemnities
Further improved credit risk profile: NPL ratio of 6.2% at March 2018 end, versus 10.3% at March 2017 end; NPL coverage ratio maintained at high level (75.4%)

Solid commercial momentum

The first quarter of 2018 was characterized by further growth on the Romanian loan market (+3.5%* YoY), especially on strong demand from private individuals. The economic environment was also marked by rising interest rates in a context of increasing inflationary pressures. Savings also rose (+10.6%*), sustained by both individuals and companies.

In this context, BRD displayed, once again, a strong business performance. The number of active customers increased by +37,000 YoY, of which individuals +33,000 and small business customers +4,000. Individual customers’ equipment rate (the average number of products per active customers) further increased to 4.18 from 4.09 at March 2017 end. The stock of internet and mobile banking contracts for individual customers reached around 1.44 million, +19% YoY. The number of MyBRD Mobile subscribers rose by +43%.

Net loans amounted to RON 30.4 billion, +5.0%* compared to March 2017 end, thanks to more intense credit activity on individuals and large corporate client segments. Individuals’ net loan outstanding expanded by +7.8%* YoY pushed by strong loan production, which rose by +9.0% YoY, to RON 1.4 billion. In this context, BRD maintained its leadership position on credits to households, with a market share of 16.9% at March 2018 end. The non-retail segment was resilient, with robust performance on large corporate clients (+5.9%* YoY).

Deposits increased by +6.0%* YoY, pushed up by both retail and non-retail savings. The rise in retail deposits (+7.4%*) stemmed mainly from increased inflows in individuals’ current accounts (+29%*). The increase in non-retail savings (+3.6%*) was due to increases on both SMEs and corporate clients. The ratio of net loans to deposits was 68.6% at March 2018 end (-0.6 pts versus March 2017 end).

Consistent revenue generation and positive cost of risk

BRD Group delivered healthy revenue growth, generated by a robust advance of loan and deposit volumes, coupled with a more favorable interest rate environment, and an increase in the number of customers’ transactions. Net banking income amounted to RON 724 million (+11.4% YoY) increasing across all the main lines. Net interest income increased at double-digit rate (+14.2%), driven by positive volume effect and the rising trend in interest rates. Net fees and commissions income (+5.2%) benefited from an increasing number of transactions and higher revenues from custody and depository services. Other net banking income increased by +10.8%, on higher trading result.

Operating expenses reached RON 385 million, quasi stable versus Q1-2017 (+0.2%). Staff costs were higher by +11.3%, as a result of compensation package adjustments, in line with market conditions, in a tight labor market context. Other operating expenses (excluding Bank Deposit Guarantee Fund and Resolution Fund contributions) were up by +12.0%, reflecting notably higher investments in change-the-bank and regulatory projects. The cumulated contribution to the Bank Deposit Guarantee Fund and Resolution Fund decreased by -50.5% compared to Q1-2017.

Operational performance was very robust, with gross operating result up +27.5% YoY. Group Cost/Income ratio reached 53.2%, -5.9 pts lower compared to Q1-2017.

Asset quality further improved, as the NPL ratio was reduced to 6.2% at March 2018 end versus 10.3% at March 2017 end, while the coverage ratio remained solid at 75.4%, compared to 77.4% at March 2017 end (all ratios according to EBA methodology). Net release of provisions amounting to RON 153 million was recognized in Q1-2018, +23.4% versus Q1-2017, driven by recoveries on non retail defaulted portfolio and nearly RON 65m recognition of insurance indemnities.

In this context, BRD Group marked a strong start to the year: net profit amounted to RON 414 million in Q1-2018, +25.6% YoY, leading to return on equity of 22.0% compared to 19.3% in Q1-2017.

BRD maintained a comfortable capital adequacy ratio of 19.3%** as of March 2018 end (at individual level, under Basel 3 regulations), versus 19.9%** at March 2017 end.

“The first quarter of 2018 was very dynamic as shown by the continuous increase in loans, deposits and transaction volumes which, together with the favorable interest rate context, translated into a double-digit increase in net banking income. Looking forward, we will continue to improve customer experience and satisfaction by further investing in digitalization and through ongoing developments of our business model”, said Francois Bloch, CEO of BRD Groupe Société Générale.

BRD financial results for the three months ended March 31, 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
(**) Net of dividends approved in the annual shareholders’ meeting

BRD - Groupe Société Générale has 2.32 million active customers and operates a network of 753 units. BRD has a leading position on the card market with approx. 2.4m cards and a network acceptance of approx. 28,200 POS and more than 1,500 ATMs. Total assets of the Bank at March 2018 end amounted to RON 54.5bn.

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 Q1 - 2018: Net Profit Of RON 414 Million