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Return to profit and further improvement in risk profile

11 Feb 2015

The main financial ratios of BRD-Groupe Société Générale as at December 31, 2014 at stand alone level, according to the International Financial Reporting Standards (IFRS):

Return to profit (RON 43.2m) as a result of declining net cost of risk (-43% compared to 2013) and sound cost discipline
Decrease in NPL ratio (to 20.3% versus 24.9% in 2013) due to write-off operations and sales of impaired receivables
Improved level of NPLs coverage with provisions (71% at 2014 end vs. 69% at 2013 end)
Comfortable capital adequacy ratio: 17.0% (Basel III) against 14.2% in 2013 (Basel II)
Significant growth of household deposits: +8.0%* vs. December 2013
Increased operational efficiency: 2.9% decrease in operating expenses compared to 2013, C/I remaining at a comfortable level

In 2014, the Romanian banking sector continued to face weak credit demand in spite of the low level of interest rates. The market saw a decrease in the volume of gross loans (-3.1%*) over the last 12 months, also triggered by write-off operations, while deposits advanced (+7.9%*), mostly on the companies’ side (+10.7%*).

BRD’s outstanding net loans to individuals amounted to RON 16.2bn, +0.3%* yoy, pushed by the continuous expansion of the housing loans portfolio. The bank delivered also a solid performance in terms of consumer loan production (+85% yoy). As regards corporate loans, the low demand and fierce competition triggered an 11.6%* decline of the net volume to RON 10.2bn.

The bank continued to consolidate its large deposits base, which stabilized at RON 36.0bn, by favoring the attraction of deposits from individuals, which are the most stable. Savings from individuals rose by 8.0% in 2014, outperforming market growth. With net loans to deposits ratio reaching 73.4% at end 2014 (-3.4 pts against 2013 end), BRD re-affirmed its solid financial position and reinforced its degree of financial autonomy. Consequently, the bank has the capacity to significantly develop its loan portfolio as soon as demand recovers.

Net banking income declined by 8.4% compared to 2013, primarily affected by the net interest margin contraction. This evolution mainly stemmed from lower volumes of loans for companies. Sustained by higher revenues from investment banking activities as well as custody & depository services, the net fees and commissions remained resilient in spite of overall weaker lending activity. Other banking income decreased due to non-recurring revenues registered in 2013 (higher gains from FX swaps portfolio valuation).

BRD continued to implement cost optimization measures which led to an overall reduction in operating expenses of 2.9% compared to 2013. The cost/income ratio stood at 50.2%.

The bank managed to reduce its non-performing loans (NPLs) ratio (from 24.9% at 2013 end to 20.3% at 2014 end) notably thanks to the implementation of an active write off and sale policy, while improving the coverage of NPLs with provisions (from 69% at 2013 end to 71% at 2014 end). Net cost of risk declined by 43% against 2013 with favourable evolutions on both the corporate and individuals segments.

With its consistently solid capital buffer, BRD has a sound capital adequacy ratio of 17.0% (under Basel III regulations) versus 14.2% in 2013 (Basel II), well above the regulatory requirement.

“2014 marked a turning point for BRD, when the bank returned to profit while managing to further improve its risk profile and operational efficiency. In 2015, BRD will continue to draw on the strength of its universal banking model and capacity to provide innovative solutions and tailor-made advices to a broad customer base. More than ever, BRD has also the ambition to be positioned at the forefront among the economic actors that will create the premises for a revival in investment activity”, 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 starting 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., 1^st 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 no. 1 bank in the Romanian syndicated loans market. BRD - Groupe Société Générale has 2.2 million customers and operates a network of 860 units. With around 2.2 million valid cards and an acceptance network of over 25,000 POS and 1,500 ATMs, BRD is no. 1 on the Romanian banking cards market. With factoring operations of EUR 918M in 2013, BRD is the leader of the Romanian factoring market. The total assets of the bank as at end 2014 amounted to RON 45.18 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 32 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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Return to profit and further improvement in risk profile