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BRD: Solid activity in a still difficult economic environment, net result affected by the cost of risk

12 Feb 2013

The main financial ratios of BRD-Groupe Societe Generale as at December 31, 2012 at stand alone level, according to the International Financial Reporting Standards:

Throughout 2012, the bank performed in a still difficult economic environment, characterised by a low level of confidence that affected consumption, a feeble external demand that held back exports and a weak performance of agriculture, with a below average harvest.

The economic difficulties mirrored in the activity of the banking sector, with gross loans volume contracting by 0.1% (*) . Gross loans to individuals shrank by 1.5% (*) , due to the 6.2% (*) decline in consumer loans volumes. At the same time, companies limited their investments, bringing a negative impact in the demand for credit.

The 2012 credit activity of the bank was mainly supported by housing loans and the financing of large corporate customers. Loans to individuals grew by 2.4% (*) at end 2012, driven by the robust production of housing loans in the framework of "Prima Casa" program. Corporate loans went up 2.5% (*) compared to 2011, triggered by a more intense financing activity of the large corporate customers. On corporate clients' segment, RON-denominated loans have been favored with a 6.0% (*) increase in outstanding amounts compared to 2011. As a result the market shares of the bank on loans increased by respectively 0.6 points on individual customers and 0.2 points on corporate customers.

2012 was also characterized by a dynamic growth of the customers' deposits (+4.1% (*) ), with a reorientation on longer tenors.

During 2012 the bank managed to diversify its funding sources and materially improved its L/D ratio from 103.6% to 98.7% at the end of 2012 (-4.9 pts).

The net banking income is down by 6.1% compared to 2011, mainly influenced by the decline of the net interest margin, which was impacted by adverse interest rates and structure effects.

In this context, BRD focused on enhancing its operational efficiency and reduced its operational expenses by 2.4%. The cost/income ratio remained in 2012 well below 50%, at 46.5%.

The net cost of risk increased by 61.6% versus 2011, to 1.938 billion RON, due to the deteriorated macroeconomic environment and the implementation, starting with the second quarter of 2012, of a more precautionary methodology of collateral valuation.

The level of the cost of risk affected the net result, which came out at -332 RON million.

''Our 2012 financial performance was affected by the deterioration of the cost of risk, in a difficult environment. But the solidity of our business model is not called into question and we have clear strategic orientations for 2013 and beyond. We will focus on further reinforcing our risk procedures and policies as well as enhancing our operational efficiency, while continuing to make the necessary investments to ensure our future commercial development, so as to be able to restore an adequate level of profitability'', said Philippe Lhotte, BRD Chairman and CEO.

BRD-Groupe Societe Generale had, as at end 2012, more than 2.3 million clients . At the same date, BRD had more than 2.2 million valid cards and operated a network of over 1,500 ATMsand approximately 21,000 POSs . The total assets of the bank as at end 2012 amounted to RON 47.924 billion.

The preliminary financial statements as well as the press conference presentation are available to the public and investors on the website of the bank: www.brd.ro. Copies of the documents can also be obtained upon request, free of charge, at the head office of BRD-Groupe Societe Generale, located at 1-7 Ion Mihalache Bd., 1 st district, Bucharest.

(*) Variations at constant foreign exchange rate.

BRD-Groupe Societe Generale is the second bank in Romania in terms of total assets. BRD is part of the Societe Generale Group, one of the largest European financial services groups. The group has 160,000 employees and 33 million clients throughout the world, in three core businesses:

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