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BRD group results for the first 9 months of 2015: strong financial performance

03 Nov 2015

The main financial ratios of BRD-Groupe Société Générale are as at September 30, 2015 at consolidated level, unless otherwise stated, according to the International Financial Reporting Standards (IFRS):

Net profit of RON 380 million in the first 9 months of 2015, compared to RON 38 million in the corresponding period of 2014, thanks to further decline of risk cost and contained costs
Sequential increase in revenues since Q1-2015, although year-on-year evolution was still affected by low interest rates (net banking income higher by approximately 2% quarter-to-quarter in Q3-2015 and Q2-2015 but contracting by 5.4% in the first 9 months 2015 compared to the similar period of 2014)
Net cost of risk at -53% year-on-year and NPL ratio on a declining trend (18.5% at September 30, 2015 from 21.1% at September 30, 2014 for the Bank), mainly due to write-off operations
Coverage ratio of non-performing loans with IFRS provisions posted at 76.0% for the Bank as at September 30, 2015 (71.5% as at September 30, 2014)
Capital adequacy ratio above regulatory requirements: 17.2% at September 30, 2015, almost unchanged year-on-year (Bank only)
Further improvement of individuals’ demand for new loans (loan production up by 17% against January – September 2014): continued growth of housing loan production and rising interest for consumer loans

As of September 30, 2015, the modest growth of gross loans in the Romanian banking system (+0.9%* versus September 30, 2014) shows the loan market is slowly recovering. Individuals’ outstanding loans increased steadily thanks to housing credit. RON-denominated consumer loans gained momentum, however this evolution did not offset the drop of the FX component on an annual basis. Gross loans to companies increased slightly against December 31, 2014 (+1.8%*) as the effect of write-off and sales operations started to dissipate. Both individuals and corporate customers continue to show important propensity to save: total deposits were up by 7.2%* against September 30, 2014.

The outstanding net loans of BRD Group as of September 30, 2015 increased slightly year-to-date (+1.3%* against December 31, 2014) sustained by the retail segment and also by the portfolio of large corporate clients, which confirmed the trend observed earlier this year. The 3.5%* year-to-date expansion of the retail portfolio was underpinned by housing loans. Individuals’ loan production during January – September 2015 reached RON 3.7bn, up by 17% against the corresponding period of last year, partially as a result of the Prima Casa program which enjoys buoyant growth (Prima Casa loan production accounted for 27% of total loan production).

BRD’s leading position on the large corporate segment and the supportive macroeconomic picture resulted in an increase of outstanding loans to large corporate clients, a highly competitive segment (+3.3%* versus September 30, 2014).

BRD Group deposit base further widened, by 7.1%* against December 31, 2014 and by 13.1%* compared to September 30, 2014, thanks to deposits in current accounts (+39.5%* year-on-year). The large deposit base constitutes a solid foundation for financing the economy once credit activity resumes more vibrant growth. The ratio of net loans to deposits thus reached 70.1% (-4.4 pts versus December 31, 2014 and -11.4 pts versus September 30, 2014), showing high financial autonomy.

A turning point in the revenues’ evolution was reached, as the Group registered sequential growth of net banking income in the last two quarters of the reporting period (by circa 2% during each quarter). Nonetheless, net banking income decreased by 5.4% compared to the first 9 months 2014 to RON 1,860 million, as the net interest margin was still adversely impacted by the low interest rates on the market, and as net fees and commissions income was impacted by the suppression or reduction of some commissions for individuals and a high base effect (one-off revenues from corporate finance services booked in July 2014).

Operating costs were reduced by 0.6% to RON 954 million compared to the corresponding period of last year. Real-estate, communication and consultancy costs decreased due to rigorous cost control. The cost/income ratio stood at 51.3%.

BRD reduced the non-performing loans (NPLs) ratio from 21.1% as of September 30, 2014 to 18.5% as of September 30, 2015 (at Bank level), mainly as a result of write-off transactions. The coverage of non-performing loans with IFRS provisions increased from 71.5% at September 30, 2014 to 76.0% at September 30, 2015. The lower level of net cost of risk (- 53.1% at Group level, against the corresponding period of last year) was the main determinant of the material improvement in profitability. Net profit rose significantly to RON 380m during the 9 months ended September 30, 2015, bringing the annualized ROE at 8.6%.

BRD’s capital adequacy ratio of 17.2% at individual level (under Basel III regulations) at September 30, 2015 is well above the regulatory requirement and compares to 17.1% at September 30, 2014.

“BRD Group’s results for the first 9 months of 2015 were marked by a pick-up in credit activity, on individuals and large corporate segments, sharp downward adjustment of risk costs and proactive cost management. The gradual recovery of demand for loans provides encouraging signs for a further sequential improvement of revenues”, said Philippe Lhotte, BRD CEO.

BRD Group financial results for the 9 months ended September 30, 2015 are available to the public and investors on the website of the bank: www.brd.ro from 09h00 onwards. 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 is the second bank in Romania considering the total assets’ volume. BRD - Groupe Société Générale has 2.2 million active customers and operates a network of 842 units. BRD has a leading position on the card market with 2.2m cards and a network acceptance over 26,000 POS, and 1,500 ATMs. With factoring operations of EUR 960m in 2014, BRD is the leader of the factoring market. Total assets of the Bank at September 2015 end amounted to RON 47.6 bn.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 148,000 employees in 76 countries and 30 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 the first 9 months of 2015: strong financial performance