From huge losses to a sustained performance: Romania’s largest bank returns on profit in 2015

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Banca Comerciala Romana (BCR) ended 2015 with net profit of RON 918.9 million (EUR 206.8 million), supported by good operating performance and risk provision release due to higher recoveries on the basis of improved workout capabilities and macroeconomic environment, a press release informs.

Thus, Romania’s largest bank returned on profit last year, recovering from huge loss of RON 2.8 billion in 2014.

“In the last year BCR, channelled over 8 billion RON new funding into the economy and adjusted the instalment rates of over 30.000 customers. That, we believe, is the right thing to do as a bank”, Sergiu Manea, CEO of BCR said.

The operating result stood at RON 1,561.5 million (EUR 351.3 million), 18.4 percent lower than the previous year at RON 1,914.4 (EUR 430.8), driven by lower operating income, impacted by reduced unwinding contribution, low interest rate environment and higher costs related to running IT projects.

“There are significant unexpected challenges for the local financial sector, not least a heated debate as of how the banking sector should serve the economy. We are determined to seek, together with all the stakeholders the right way to promote a solid development agenda and sustainable access to financial service, anchored in stability, economic growth, as well as adequate protection for social-case debtors”, added Sergiu Manea.

In bank retail business, strong performance in volume generation by the franchise resulted in new loans in local currency totalling RON 5.0 bn, with sales of secured loans increasing by 11,5 percent annually, driven by Prima Casa new production up by 29 percent yoy, while new volumes of cash loans increased by 7 percent yoy.

In bank corporate business, new volumes added on the balance sheet totalled RON 3.6 billion, supported by 3.6 percent growth in SME business. New approved loans are substantially picking up, supported by a solid pipeline of better quality new business, particularly in overdraft, working capital and supply chain financing.

Net interest income was down by 13.0 percent, to RON 1,992.6 million (EUR 448.3 million), from RON 2,289.4 million (EUR 515.1 million) in 2014, on the back of accelerated NPL portfolio resolution, efforts to price competitively in the market and a low interest rate environment.

The operating income decreased by 9.3 percent to RON 3,074.9 million (EUR 691.9 million) from RON 3,389.3 million (EUR 762.4 million) in 2014, mainly driven by reduced net interest income along with lower trading result. As such, cost-income ratio advanced to 49.2 percent in 2015, versus 43.5 percent in 2014.

BCR recorded a provision release of RON 72.9 million (EUR 16.4 million) in 2015, versus a negative charge of RON -4,440.0 million (EUR -999.0 million) in 2014, driven by higher recoveries on the basis of improved workout capabilities and macroeconomic environment. NPL ratio at 20.2 percent, as of 31 December 2015, significantly decreased versus 25.7 percent as of 31 December 2014, despite overall reduction of the loan book, determined by recoveries, sales of selected NPL portfolios and write-offs. NPL coverage ratio stood at 77.4 percent.

Deposits from customers were up, by 6.8 percent to RON 42,626.0 million (EUR 9,422.2 million) at 31 December 2015, versus RON 39,922.6 million (EUR 8,905.7 million) at 31 December 2014, driven by positive development of retail and SME deposits. Customer deposits remain BCR’s main funding source, while the bank benefits from diversified funding sources, including parent company.

Romania’s largest bank 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.

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