BCR financial results for H1 2014: RON 1 billion operating result, accelerated balance sheet clean-up

Autor: Bancherul.ro
2014-07-31 13:43

Banca Comerciala Romana (BCR) said in a statement it achieved in H1 2014 an operating result of RON 1,096.6 million (EUR 245.6 million), underpinned by solid commercial performance of the healthy business, encompassing strong market share in new lending, along reinforcement of deposit base.

On the back of historical high solvency (16.4%) and strong capitalization (RON 7.3 billion), the bank has undertaken to accelerate resolution of NPL legacy, despite short term profitability impacted by consequent sustained provisioning.

Net result for H1 2014 is negative at RON -276.6 million (EUR 61.9 million).

Tomas Spurny, CEO of BCR has stated: “We enter the second half of 2014 with strong intention to clean our balance sheet and enhance future capacity to deliver strong performance from healthy and solid core of the Bank.

That healthy core, the current commercial performance, shows continuing signs of improvement, as BCR delivers respectable new lending market share along reinforcement of the overall deposit base. Aside from accelerated resolution of NPL legacy, we plan to further improve our competitive capacity in both Retail and Corporate franchises of the Bank.”

Healthy lending portfolio overview

In retail business, campaigns consolidated the performing loans balance at around RON 16.8 billion, with Q2 2014 being the first quarter in the last three years for which new lending offset volumes of loans reimbursed or maturing. At RON 8.8 billion the housing loans portfolio grew satisfactorily versus RON 8.6 billion at end of year 2013.

Overall local currency loans portfolio encouragingly grew to RON 6.1 billion as compared to RON 5.5 billion at year end 2013. Average retail interest rate at end of H1 was 25 bp lower than year end 2013.

In corporate business, performing loan portfolio stabilized at around RON 12.0 billion, with June 2014 1st month in the year when overall loan balance ticked up versus previous month. The uptick was mainly generated by increased new lending to SME and large corporate clients in sectors such as energy, agriculture, constructions, pharmacy & healthcare, industry, IT&C with exposures to real estate and public sector entities
continuously decreasing.

Average corporate interest rate at end of H1 was 15 bp lower than year end 2013.

Resolution of NPL stock

BCR manages a non-performing loans portfolio of around RON 12.9 billion, which it decided to resolve in accelerated manner, thus expecting significant improvement of its balance sheet quality (a NPL reduction of about 25%, compared to year-end 2013) and financial performance in the near term. BCR has a target to achieve 25% overall NPL balance reduction until year-end.

Consequent risk costs are anticipated to off-set the operational result of the bank in 2014. The capital position of the bank will easily absorb the above mentioned balance sheet cleaning measures and remains strong to support good growth across all business lines.

In that respect, BCR has signed, in July 2014, a sale transaction of RON 1 billion for a non-performing corporate loans package (secured, all of which in legal procedures - insolvency, enforcement), to a consortium of foreign investors and available funding lines.

Capital position and financial highlights

Solvency ratio under local standards (BCR standalone, IFRS with prudential filters) as of 31 May 2014 stood at 16.4%, well above the regulatory requirements of the National Bank of Romania (min 10%).

Also, IFRS Tier 1+2 capital ratio of 24.8% (BCR Group), as of December 2013, is clearly showing BCR’s strong capital adequacy and continuing support of Erste Group.

In this respect, BCR enjoys one of the strongest capital and funding positions amongst Romanian banks. Balance sheet cleaning will thus have very limited impact on solvency ratios the bank; capital base stays strong and will support good growth across all business lines.

Amounts owed to customers just slightly decreased by -1.3% to RON 37,014.6 million (EUR 8,445.0 million) as of 30 June 2014, versus RON 37,500.0 million (EUR 8,387.4 million) as of end December 2013.

Customer deposits remain BCR’s main funding source, while the bank enjoys strong support from its parent bank, at the same time benefiting from diversified funding sources and agreements with other International Financial Institutions.

The volume of aggregate loans to customers (before provisions, IFRS) decreased by -5.7% to RON 35,601.5
million (EUR 8,122.6 million) from RON 37,758.6 million (EUR 8,445.2 million) at year-end 2013, especially on the back of portfolio clean-up, with new lending in specific segments covering reimbursements and natural repayments.

BCR plans to keep focus on RON lending, so as to reverse the currency mix of the loan book in favour of local currency on medium to long term and fully use the strong self-funding capacity in RON.

BCR maintained its market leading position, despite decline in total assets by 5.1% to RON 63,346.0 million (EUR 14,452.6 million), versus RON 66,728.8 million (EUR 14,924.8 million) at 31 December 2013.

Net interest income, was down 13.9%, to RON 1,228.8 million (EUR 275.1 million), from RON 1,426.3 million (EUR 324.7 million) in H1 2013, on the back of a lower interest rate environment, efforts to price competitively in the market and accelerated NPL portfolio resolution.

Net fee income was up 10.6%, to RON 360.6 million (EUR 80.7 million), from RON 326.1 million (EUR 74.2 million) in H1 2013, on continuous and successful focus on transaction banking, shift to non-cash operations and customer preference for alternative investment solutions and insurance products.

Net trading result decreased by 8.2%, to RON 203.6 million (EUR 45.6 million), from RON 221.8 million (EUR 50.5 million) in H1 2013 on the back of lower FX transactions.

The operating income decreased by 9.5% to RON 1,804.3 million (EUR 404.0 million) from RON 1,994.6 million (EUR 454.1 million) in H1 2013.

General administrative expenses in H1 2014 reached RON 707.6 million (EUR 158.5 million), down by 13.2% in comparison to RON 814.8 million (EUR 185.5 million) in H1 2013 reflecting full benefits of restructuring and strict cost management.

As such, cost-income ratio improved to 39.2% in H1 2014, versus 40.8% in H1 2013.

The net charge of impairments on financial assets not measured at fair value through profit and loss increased by 29.5% to RON 1,306.6 million (EUR 292.6 million) in H1 2014, versus RON 1,008.6 million (EUR 229.6 million) in H1 2013, reflecting accelerated efforts to resolve NPL legacy.

NPL coverage ratio, now at 64.5%, stood significantly above 61.6% as of June 2013, on the back of sustained provisioning in the view of the balance sheet clean-up. NPL ratio remained stable at 29.3% of the total loan portfolio at 30 June 2014, despite overall decrease of the loan book caused by natural repayments, write-offs and sales of selected NPL portfolios.

The net result in H1 2014 was negative at RON -276.6 million (EUR -61.9million), mainly due to elevated provisioning generated by accelerated balance sheet clean-up, with the view to improved near term performance and considering the fact that diminishing the ratio of non-performing loans is critical to restoring credit extension, economic growth and creation of jobs in the economy.

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