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Strong financial structure, accounting results influenced by the consolidation of non-performing loans coverage

11 Feb 2014

The main financial ratios of BRD-Groupe Société Générale as at December 31, 2013 at stand alone level, according to the International Financial Reporting Standards (IFRS):

- Consolidation of NPLs coverage with provisions, leading to a net result of – 385 million RON

- Comfortable capital adequacy ratio: 14.3%, up 0.3 pt against 2012

- Significant growth of deposits: + 12.7%* vs December 2012

- Increased operational efficiency: - 5.6% in operating expenses compared to 2012 year end, C/I maintained at a low level

In 2013, the Romanian banking sector continued to go through a consolidation phase. The system witnessed an overall decrease in loans’ volume (-4.2%*) over the last 12 months, pushed down by the corporate segment evolution, while deposits grew dynamically (+7.4%* yoy), especially on the corporate customers’ side (+10.1%*yoy).

BRD outstanding gross loans to individuals reached 17.2 RON billion, up 1%* yoy (vs -2%* for the market). Thanks to our leadership position on “Prima Casa”, housing loans’ volume rose by 20.4%*, largely outperforming the market (+8.9%*), thus leading to a 1.7 points market share increase. As far as corporate loans are concerned, the low demand triggered a 12.5%* decline of gross volume to 16.3 RON billion.

Deposits registered a significant increase (+12.8%*, versus +7.4%* for the market). With net loans to deposits ratio consequently improving to 76.8% at end 2013 (- 22 pts against 2012), BRD further strengthened its balance sheet structure and reinforced its degree of financial autonomy.

Net banking income was down 6.9% compared to 2012, mostly affected by net interest margin decline. This evolution was triggered mainly by the contraction of net loans’ volumes on the corporate segment. The net fees and commissions decreased by 4.7%, mostly due to the overall lower lending activity.

The bank managed during 2013 to maintain a tight cost control which led to a 5.6% reduction in operational expenses, enabling it to maintain its cost/income ratio at a low level (47.1%, below market average).

In a context of decreasing loan collateral values and growing share of exposures under insolvency regime, the bank consolidated its level of NPLs coverage with provisions (from 51.9% at 2012 to 68.9% at 2013), an effort translating into a high cost of risk on SMEs portfolio.

With a solid capital base, the bank keeps a comfortable capital adequacy ratio of 14.3% (+0.3 pt yoy), well beyond the regulatory requirement.

“2013 was for BRD a year of transition, largely devoted to the enhancement of its organization and risk management and to the reinforcement of its core competitive advantages - powerful network, strong capacity of innovation, high operational efficiency. In substance, 2013 was a useful year, of which BRD is coming out stronger. BRD is looking to 2014 with serenity, ready to accompany Romanian economy growth. Guided by a long term vision, BRD continued to invest in order to maintain or strengthen its leadership on several business lines which are now offering us real development prospects”, said Philippe Lhotte, BRD Chairman and CEO.

The preliminary financial statements 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 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 and the first one in terms of major corporate clients and syndicated facilities at mid 2013. BRD - Groupe Société Générale has 2.3 million customers and operates a network of 883 units. With 2.3 million valid cards and a network acceptance over 21,600 POS and 1,500 ATMs, BRD is no. 1 on the Romanian card market. With factoring operations exceeding EUR 1 billion in 2012, BRD is the leader of the factoring market. Total assets of the bank as at end 2013 amounted to RON 47.08 billion.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 154,000 employees in 76 countries and 32 million customers worldwide in its three key activities:

Retail banking in France
International retail banking, financial services and insurance
Corporate & Investment banking, private banking, asset management and investor services

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Strong financial structure, accounting results influenced by the consolidation of non-performing loans coverage