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BRD GROUP RESULTS FOR Q1 2020: BRD solid business performance allows full support of the Romanian economy

06 May 2020

The main commercial trends and financial indicators of BRD Groupe Société Générale at March 31, 2020 at consolidated level, according to the International Financial Reporting Standards (IFRS):

• Entering the crisis with a very strong profile

• Strong balance sheet, with a capital adequacy ratio of 22.6% after decision to entirely retain the 2019 net profit, and a very comfortable liquidity situation
• Solid risk profile, with NPL ratio of 3.3% at March 2020 end, and high level of coverage with provisions (73.3%)

• In capacity and fully committed to support the real economy
• Robust broad-based business dynamics: net loans advanced by +2.4% YoY on a strong corporate financing activity (+4.3% YoY), with a solid advance on leasing (overall leasing portfolio up by +27.6% YoY); sustained collection of deposits (+5.9% YoY), and growing use of digital channels (MyBRD Mobile & MyBRD Net unique active users up by +19% YoY)
• Resilient operating performance, with a stable gross operating income
• Net profit of RON 241 million (vs. RON 301 million in Q1 2019), influenced by cost of risk charge after the recognition of a specific COVID-19 crisis provision overlay

“In the first three months of the year, BRD delivered a dynamic commercial performance. Robust business activity was registered on all segments, with continued lending growth, supported by strong corporate financing activity, sustained collection of deposits and growing use of digital channels. Though in the economic context generated by the COVID-19 pandemic the profitability was scaled back by the negative cost of risk, the operational performance remained resilient.

The crisis we are facing is unprecedented, with complex economic challenges and difficult to quantify recession perspectives. But offset policies are in place. Public authorities delivered support in terms of liquidity, credit guarantees, and household income assistance measures.

The Romanian banking system is healthy, and will be a key actor of the economic recovery.

BRD, in particular, is entering the crisis with a very solid profile. It can build on strong liquidity and capital positions. These are fundamentals allowing our bank to stand by its clients in difficult times, and to remain fully committed in playing its more than ever essential role of financing the economy in a responsible way”, said François Bloch, CEO of BRD Groupe Société Générale.

Dynamic commercial activity and resilient operating performance

BRD Group net loans, including leasing receivables, increased by +2.4% compared to March 2019 end. Retail loan growth (+1.6% YoY) was fueled by demand for both consumer (+1.9% YoY) and housing loans (+2.9% YoY, out of which, RON +10.2%), while BRD Finance’ net loans were up by +8.1% YoY. Corporate financing portfolio increased by +4.3% versus March 2019 end, driven by both SMEs (+7.6% YoY) and large corporates (+2.9% YoY). Leasing portfolio advanced by +27.6% YoY, on financing of commercial vehicles, and of equipment for agriculture and industry.

Deposits from customers, founded on a solid retail base, saw a strong collection. Retail deposits’ annual growth (+4.2% YoY) was driven by larger inflows in individuals’ savings, with current accounts up by +30% YoY. Corporate deposits advanced (+ 9.3% YoY) on a high increase of SMEs resources (+25.5% YoY). The ratio of net loans to deposits was 66.7% at March 2020 end, down by 2.3 percentage points versus March 2019 end.

BRD continued to foster digitalization development, aiming to offer customers a complete experience based on a comprehensive multichannel set-up. The use of digital channels has further intensified as reflected by the increasing number of internet and mobile banking unique active users to 624k at March 2020 end (up by +19% YoY), and the fast growing volume of transactions via electronic channels (+38% YoY) in Q1 2020. Digital penetration on corporate clients’ segment registered a very high level, with more than 95% of the transactions performed via digital channels. Corporate clients’ digital experience was further enhanced by the full launch of new digital solutions: BRD@ffice Mobile, the mobile version of the online banking application and M-Token, a safe and convenient authentication method for mobile.

BRD Group net banking income reached RON 767 million in Q1 2020, lower by -2.2% compared to Q1 2019, quarterly dynamic incorporating first effects of the current challenging environment. Net interest income registered a still strong advance, increasing by +6.6% YoY, underpinned by expanding loan volume and favorable structure shifts. The decrease in net fees and commissions of -4.0% YoY, is mainly explained by the price alignment of EUR denominated payments to domestic ones, following the recently enforced SEPA regulation, and by ceasing of the Western Union activity starting August 2019. Other banking income was impacted by the volatile March context driven by pandemic, which brought a decrease of trading and revaluation results.

Operating expenses totaled RON 425 million in Q1 2020, lower by -3.8% YoY, benefitting from reduced regulatory costs (Deposit Guarantee and Resolution Fund cumulated contribution, RON 43 million, recognized in full in Q1 2020, compared to RON 72 million in 2019) and good control of sundry expenses. Staff costs increased by +4.4% YoY, mirroring 2019 salary adjustments in response to the tense labor market. Other costs categories (+1.8% YoY), remained under strict control, mainly driven by ongoing investments in business transformation. Cost/income ratio reached 55.5% vs. 56.4% in Q1 2019. The operating performance was resilient, reflected by the stable gross operating income.

The quality of the loan book remained solid throughout the period as shown by the further decrease in NPL ratio to 3.3% (according to EBA definition) at March 2020 end, compared to 4.0% at March 2019 end. BRD built a high coverage with provisions of non-performing loans, standing at 73.3% at March 2020 end. Net cost of risk turned negative, to RON 60 million (vs. RON 26 million release in Q1 2019) influenced mainly by the recognition of a provision overlay related to COVID-19 economic context.

Embedding all the above, BRD Group net profit reached RON 241 million in Q1 2020 vs. RON 301 million in Q1 2019.

Beyond a resilient profitability, BRD can build on its strong capital and liquidity positions. With the incorporation of the entire 2019 profit, BRD further reinforced its already elevated capital adequacy, allowing the highest capacity to support the economy in the crisis context. The solvency ratio reached 22.6% as of March 2020 end vs. 19.7% as of March 2019 end, up by 3 pts YoY. The liquidity profile is also very comfortable, with the LCR standing at 287% at end of March 2020.

Rapid and responsible answer to the crisis

BRD reacted quickly in order to address the current crisis, offering support to its clients and employees, while ensuring the operational continuity.

Prevention and security measures were applied in all of the business outlets, as safety of customers and employees has been the priority of last weeks, with special care for those in the front line. A flexible working schedule was put in place, teams were split and half of BRD’s employees quickly switched to telework.

Fast tracked Customer Interaction Center capabilities answered the current lockdown context, with the implementation of additional 9 contact center locations in 4 different towns, with less than 1 week average time to set-up a new location. Number of answered client requests increased by +133% between 16th March - 16th April 2020 versus the same period last year, with even up to 14,500 requests answered per day. The business interaction massively migrated towards e-channels, with a +75% increase in number of digital interactions. Additionally, to encourage the use of remote channels, free access to MyBRD Mobile & MyBRD Net is provided to all clients since early March.

In order to support the customers experiencing temporary distress due to COVID-19 crisis, BRD implemented an immediate response through its own standstill offer, applied starting mid March until GEO 37/2020 was issued, deferring customer loan installments for up to 3 months. Starting with 31st of March, BRD provides debt moratorium according to the Government Emergency Ordinance conditions. Fully committed to stand by its clients, BRD granted repayment flexibility to over 44ths. borrowers overall, up to 30th of April. In addition, BRD is strongly involved in financially supporting the SME sector, notably through the active participation to the large-scale loan facility programme guaranteed by the Romanian state.

In these difficult times, BRD also reinforced its community support actions, donating RON 2 million to the medical sector and the independent cultural ecosystem.

BRD financial results for three months ended March 31, 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. Q1 2019 (for income statement related items) or March 2019 end (for balance sheet related items)
BRD - Groupe Société Générale operates a network of 640 units. BRD has a leading position on the card market with approx. 2.43 million cards and a network acceptance of approx. 30,000 POS and almost 1,500 ATMs. Total assets of the bank at March 2020 end amounted to RON 57.02bn.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 149,000 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 Q1 2020: BRD solid business performance allows full support of the Romanian economy