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BRD GROUP RESULTS FOR H1 2021

03 Aug 2021

STRONG COMMERCIAL ACTIVITY AND EXCELLENT FINANCIAL PERFORMANCE

The main commercial trends and financial indicators of BRD Groupe Société Générale at June 30, 2021 at consolidated level, according to the International Financial Reporting Standards (IFRS):

- A broad based growth

strong loan production for individuals, +58% YoY and +19% vs H1 2019
outstanding performance on corporate financing activity (+23.5% YoY and +30% vs June 2019 end), driven by both SMEs (+37% YoY) and large corporate clients (+21% YoY)
active involvement in IMM Invest Program with RON 700 million approved loans in just 2 months from its relaunch
growing adoption of digital channels, with the number of customers actively using remote banking up by +19% YoY
BRD Asset Management reaching the 1st place on the market by number of investors

- Net banking income higher by 1.7%, at RON 1,538 million in H1 2021, on strong loan production and rising transactional volumes, compensating the effect of the lower market interest rates

- OPEX evolution related to a large extent to intensified IT investments supporting the acceleration of the digital roadmap, while staff costs are under strong discipline

- Robust loan portfolio quality: low level of NPL ratio, at 3.3% as of June 2021 end; above market average NPL coverage ratio, at 74% as of June 2021 end

- Substantial increase of half-year net profit, +51% vs H1 2020, at RON 626 million (vs. RON 415 million in H1 2020) pulled by solid commercial activity and net release in cost of risk.

“The Romanian economy performed again above expectations, GDP already returning in Q1 2021 to pre-Covid levels. The pandemic is subdued, vaccination is progressing and authorities are gradually lifting restrictions, despite some worries related to the fourth pandemic wave.
In the first half of the year, within this context of better business conditions and sentiment, though still marked by uncertainty, our activity accelerated. The individuals’ loan production spiked, registering a double digit growth compared to 2019 levels.
We continued to accompany Romanian companies, as partner bank, including in all governmental programs launched to support SMEs facing difficulties caused by the COVID-19 pandemic. As such, corporate lending saw a sharp growth both on SMEs and large companies segments. Moreover, after granting in Q1 the largest green loan so far in Romania, we reconfirmed our commitment towards positive impact financing, structuring and committing for a large stake in a EUR 120 million ESG club loan.
On deposits, our focus on offering diversified saving solutions drove our subsidiary, BRD Asset Management, to first place on the market in terms of number of investors with over 100k clients.
In parallel, digital adoption continued to rise, with a +19% yearly increase in the number of customers actively using remote channels. With the constant objective to improve our customers’ experience, we are in pilot phase for two core strategic initiatives, remote onboarding and online lending.
Building on the dynamic commercial activity, BRD obtained in the first half of the year a solid financial performance. NBI increased, despite the continued downward trend of market rates. Costs were strictly controlled, while our strategic investments were preserved. The joint effects of economic rebound and consistent recoveries on non-performing portfolio translated in net reversal in the cost of risk.
BRD remains a solid and reliable partner for its customers and a committed actor of the Romanian economy”, said François Bloch, CEO of BRD Groupe Société Générale.

Solid commercial activity all across the board

Loans’ outstanding (including leasing) marked a strong performance, being up by almost +9% YoY, on a broad based growth, sustained by both a remarkable loan production for individuals and a very dynamic activity on corporate segment. Loan production for individuals spiked by +58% YoY, on both housing (+52% YoY) and consumer (+61% YoY) loans, registering also double digit growth compared to 2019 levels. Corporate lending printed at +24% YoY, with SMEs important growth of +37% YoY sustained by government backed lending programs, with RON 700 million approved loans within IMM Invest Program in just 2 months from its relaunch. The outstanding performance on large companies segment of +21% YoY comes to consolidate BRD’s position of leading partner for large corporations. BRD continued to deliver on its commitment to support sustainability transitions and structured a EUR 120 million ESG club loan.

Deposits from customers saw a further consolidation on both retail and corporate segments, with an overall advance of +12% YoY. The growth was mainly driven by corporate segment (+20% YoY), both SME and large corporate clients, each with double digit growth. The strong savings’ propensity triggered by the prolonged pandemic tempered, but it still drove deposits’ inflows from individuals up by +5.4% YoY. Small business segment was also a contributor to deposits’ expansion, with a consistent +18% YoY growth. In addition, a dynamic performance is seen in asset management activity, BRD Asset Management reaching first place on the market by number of investors. Assets under management reached RON 4.94 billion at June 2021 end, increasing by 33% YoY, above the pre-crisis level.

Digital roadmap is accelerating, with BRD expanding even more on YOU BRD functionalities to enhance customer experience. Additionally, the mobile version of the e-trading platform, Anyma Online Trading, is now available. Online lending and remote onboarding, two core milestones of the digital roadmap, are in pilot phase. The increased focus on the acceleration of digitalization is visible in the +19% growth in number of customers actively using remote channels at end of June 2021 and the fast growing number of transactions via electronic channels, +36% YoY in H1 2021. Digital penetration on corporate clients’ segment is at a very high level, with 99% of large corporate and 96% of SMEs transactions performed via digital channels.

Further improved financial performance

The dynamic commercial momentum registered in the first half of the year translated into a good set of financial results, with BRD Group net banking income reaching RON 1,538 million, higher by 1.7% year on year. The net interest income was rather resilient (RON 1,013 million in H1 2021, -2.7% year on year) given the significantly lower market interest rates (average ROBOR 3M at 1.60% in H1 2021 versus 2.72% in H1 2020), supported by the positive effect of rising volumes.

The pressure on net interest income was compensated by the performance of net fees and commissions and other revenues. Net fees and commissions marked a strong growth of 13.6% compared to H1 2020, building on increasing clients’ transactional volumes and a dynamic activity on capital market. The other banking revenues increased (+6.4% compared to H1 2020), on higher trading result and reevaluation gain.

Operating expenses totaled RON 825 million in H1 2021 compared to RON 800 million in H1 2020, an evolution which reflects increased non staff expenses, mainly IT&C and higher cumulated contribution to Deposit Guarantee and Resolution Funds. IT expenses were up by 20% YoY, on intensified investments supporting the acceleration of Bank’s digital transformation. On the opposite side, staff expenses were reduced by -1.1% YoY in H1 2021, as a result of productivity gains.

Given the above, Cost-to-Income ratio remained under control compared to the same period of last year, reaching 49.7% in H1 2021 versus 49.1% in H1 2020, excluding cumulated contributions to Deposit Guarantee and Resolution Funds and sanitary crisis management costs.

The loan portfolio quality remained robust with credit risk indicators at comfortable levels. At June 2021 end, the NPL ratio (Bank level, non-performing loans, according to EBA definition) was 3.3% decreasing slightly from June 2020 end level of 3.5%, despite the 2021 regulatory changes (i.e. new default definition) and moratoria exits, further reinforcing the Bank’s strong asset base and efficient collection activity. The coverage of non-performing loans holds solid at 74% at June 2021 end (NPL coverage at 75% at June 2020 end). The overall portfolio quality was reflected in risk costs as well, with a net reversal of RON 39 million in H1 2021 versus a net charge of RON 225 million in H1 2020 at the onset of the Covid-19 pandemic. The net cost of risk release reflects the joint effects of economic rebound and consistent recoveries on non-performing portfolio.

In this improved overall context, BRD Group net profit amounted to RON 626 million in H1 2021 versus RON 415 million in H1 2020, increasing by 50.9% YoY given a dynamic commercial activity and net release in cost of risk. Return on equity printed at 12.6% in H1 2021, +2.8 ppts higher compared to H1 2020 .

The level of solvency ratio remained elevated, reaching 29.6% at June 2021 end (BRD standalone), compared to 27% at June 2020. This evolution is mainly the result of higher own funds following the incorporation of 2020 profit and increased reserves from revaluation of debt instruments accounted at fair value through other comprehensive income. Total risk exposure amount increased, driven by the dynamic lending.

BRD financial results for six months ended June 30, 2021 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.

_{(*) On open-end mutual funds market

Note: If not stated otherwise, all variations are vs. H1 2020 (for income statement related items) or June 2020 end (for balance sheet related items)

NPL and NPL coverage ratio, at Bank level}

_{BRD - Groupe Société Générale operates a network of 541 units. BRD has a leading position on the card market with approx. 2.33 million cards and a network acceptance of over 30,000 POS and almost 1,400 ATMs. Total assets of the Bank at June 2021 end amounted to RON 64.8 bn.}

_{BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 133,000 employees in 61 countries and more than 30 million customers worldwide, including individuals, businesses and institutional investors, 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 H1 2021

STRONG COMMERCIAL ACTIVITY AND EXCELLENT FINANCIAL PERFORMANCE