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BRD group results for Q1 - 2017: Net profit of RON 330 million

25 Apr 2017

The main financial ratios of BRD-Groupe Société Générale are as at March 31, 2017 at consolidated level, unless otherwise stated, according to the International Financial Reporting Standards (IFRS):

Very strong increase in net profit to RON 330 million in first quarter of 2017 (4.5x vs. Q1 2016) on positive net cost of risk, backed by improved net interest income and strict monitoring of operating expenses
Net interest income up 5.1% compared to Q1 2016, on volume growth and favourable structure shifts; fees and commissions revenues lower year on year, mainly on regulatory driven decrease of interchange fees and market pressure on transactional banking prices
Strict cost discipline: operating expenses -5.1% versus Q1 2016; C/I lower by 3.4 percentage points at 59.1% compared to Q1 2016; accounting for the adjustment to the FGDB contribution booked in Q2 2016, operating expenses stable on a yearly basis
Healthy commercial momentum: further growth of customer base (+68k active individual clients), increase in individuals’ equipment rate on growing number of remote banking contracts (MyBRD Net and MyBRD Mobile), strong origination on consumer loans (+26.3% year-on-year) and solid position on lending to large corporate (outstanding up 4.9% year-on-year)
Positive net cost of risk, building upon the improved quality of the new production, coupled with significant recoveries on non retail customers and insurance indemnities for previous losses
Improved asset quality with further decline in NPL ratio: 10.3% at March 2017 end from 13.7% at March 2016 driven by write-off operations and sales of impaired loan portfolios as well as continued improvement in coverage ratio: 77.4% at March 2017 end compared to 74.8% at March 2016

The lending activity on the Romanian banking market continues to be supported by loans granted to individuals (which grew by 4.8%* compared to March 2016 end) while lending to corporate is flat on a yearly basis. Deposits increased by 10.1%* vs. March 2016 end, driven by both individuals and corporate customers savings.

The commercial activity displayed a robust performance in the first quarter of 2017, with the number of active individual customers reaching 2.15 million, 68k higher compared to end of March 2016. Customer equipment rate (the average number of products per active customer) increased from 4.01 at March 2016 end to 4.09 at March 2017 end, driven by the growing number of remote banking contracts. The stock of internet and mobile contracts reached 1.20 million contracts as of March 2017 end, +28.9% compared to March 2016. In particular, the interest towards the mobile banking application increased dramatically, as shown by the strong growth in My BRD mobile subscriptions (number of contracts up 61.8% versus March 2016).

As part of its digital offer enhancement, BRD performed a total makeover of its corporate website, with further enhanced customer experience, both for mobile devices and classical web browsers, integrated a real time chat option and new services for locating the nearest branch or ATM directly on the website.
On the mobile platform users are now offered increased flexibility and have access to real time data of their investment funds portfolio, while on MyBRD Net the customers can make all their subscriptions (including their first one) to investment funds fully online.
In addition, BRD further improved the omni-channel customer experience through the upgrade of the ROBO fleet with machines offering new functionalities, while the coverage of utilities providers for bill payments facilitation was increased.

BRD Group’s net loans outstanding amount reached RON 28.7 billion, 3.5%* higher compared to end of March 2016, driven by sustained performance on both individuals and large corporate segments.

Outstanding of loans to large corporate customers is up by 4.9%* compared to March 2016, on strong growth in medium and long-term financing. Leasing portfolio is also on a positive trend, with two-digit increase YoY.

Individuals loan portfolio rose by 5.8%* versus March 2016, driven by favorable dynamics of unsecured consumer loans and housing loans. Loan production for individuals registered a robust increase, reaching RON 1.3 billion in Q1 2017, up by 17% compared to the same period of last year, on strong origination of consumer loans, up by 26.3% compared to Q1 2016, to RON 987 million.

The customer deposits base expanded both on retail and non retail, reaching RON 41.4 billion, up by 6.7%* compared to end of March 2016. In the context of persistently low interest rates environment, collection on current accounts increased compared to the same period of the last year. Retail deposits growth reached 9.5%* versus March 2016 end (o/w current accounts are up by 30%) while for non retail deposits the increase was of 2.3%* versus March 2016 (o/w current accounts are up by 5.1%).

The ratio of net loans to deposits reached 69.2% as of the end of March 2017.

BRD Group net banking income reached RON 650 million in Q1 2017, with a slight increase compared to Q1 2016 (+0.4%), as the growth in net interest income (+5.1% YoY on positive volume effects and favorable structure shifts) exceeded the decrease in non interest income. The regulatory driven decrease in interchange fees, coupled with the increased market pressure on the prices for transactional products drove net fees and commissions lower by 7.3% on a yearly basis.

Operating expenses were 5.1% lower versus Q1 2016, driven by lower Bank Deposit Guarantee and Resolution Fund contributions when compared to the booked amount in the same period of last year. Accounting for the adjustment to Deposit Guarantee Fund booked in Q2 2016 (the amount recognized in the first quarter was adjusted downward in the second quarter of 2016) operating expenses were stable on a yearly basis. Cost/income ratio improved by 3.4 percentage points, to 59.1% in Q1 2017 compared to 62.5% in Q1 2016 (flat when including full Deposit Guarantee booking).

BRD Group registered a continued improvement in asset quality: NPL ratio decreased to 10.3% at March 2017 end (vs. 13.7% at March 2016 end, EBA methodology) mainly due to write-offs and sales of non- performing loans. In parallel, coverage ratio was increased to 77.4% at March 2017 end (74.8% at March 2016 end). Recoveries on non retail defaulted exposure, coupled with the recognition of material insurance indemnities led to a positive net cost of risk of RON 124 million (vs. a provision charge of RON 152 million in Q1 2016), and a net profit of RON 330 million in Q1 2017.

The capital position remained strong as of March 31, 2017 with bank capital adequacy ratio at 19.9% (under Basel 3, with national discretions) versus 19.5% at March 31, 2016.

“BRD Group delivered a robust performance in the first quarter of 2017, with a strong net profit, a good commercial momentum on retail and large corporate segments, strict cost discipline and further improved risk profile. Looking ahead, we will continue to focus our attention and investments on our customer centric model, as well as on our digital offer, and we restate our commitment towards financing the Romanian economy and sustainably creating value for our shareholders”, said Francois Bloch, BRD CEO.

BRD quarterly financial results for the three months ended March 31, 2017 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
Note: NPL ratio and NPL coverage ratio, according to EBA methodology

BRD - Groupe Société Générale has 2.28 million active customers and operates a network of 810 units. BRD has a leading position on the card market with approx. 2.4m cards and a network acceptance of approx. 29,300 POS and more than 1,500 ATMs. Total assets of the Bank at March 2017 end amounted to RON 50.15bn.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 145,000 employees in 66 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 Q1 - 2017: Net profit of RON 330 million