H1 2017 commercial and financial highlights
Banca Comerciala Romana (BCR) in H1 2017 achieved a strong net profit of RON 305 million (EUR 67.4 million), supported by operating performance and continued improvement of portfolio quality. Compared to the same period last year, net profit declined mainly due to base effect from significant gain following the sale of certain participations coupled with risk provision releases generated by recoveries from non-performing loans booked in the first half of 2016.
The operating result stood at RON 729.8 million (EUR 160.9 million), 3.6% higher than the previous year, at RON 704.7 (EUR 156.8), mainly due to lower operating expenses.
In bank retail business, BCR granted new loans totalling RON 2.6 billion with solid sales of both unsecured and secured loans. Secured loans have been consistently backed by the Prima Casă Program on the basis of the new funds allocated.
In bank corporate business, new volumes added on the balance sheet totalled RON 1.5 billion. Co-financing of EU funded projects was also solid with BCR holding over 30% market share and a portfolio of over RON 7.74 billion co-financed. The corporate book growth is further supported by a solid pipeline of better quality new business, particularly in overdraft, working capital and production and supply chain financing.
Net interest income was down by 6%, to RON 878.73 million (EUR 193.71 million), from RON 934.7 million (EUR 208 million) in H1 2016, on the back of continued NPL portfolio resolution and a low interest rate environment.
Net fee income decreased by 4.3%, to RON 338.88 million (EUR 74.7 million), from RON 354.1 million (EUR 78.8 million) in H1 2016, on the back of lower transaction banking fees.
Net trading result increased by 21.3%, to RON 189.60 million (EUR 41.80 million), from RON 156.3 million (EUR 34.8 million) in H1 2016 on the back of positive effect from revaluation of FX participations.
The operating income decreased by 2.3% to RON 1,439.53 million (EUR 317.33 million) from RON 1,473.0 million (EUR 327.7 million) in H1 2016, mainly driven by reduced net interest income and lower commission income partly compensated by higher trading result.
General administrative expenses in H1 2017 dropped by 7.6% to RON 709.65 million (EUR 156.43 million) from RON 768.4 million (EUR 170.9 million) in H1 2016 mainly impacted by methodology adjustments for booking contribution to the bank deposit insurance fund.
Risk costs and Asset Quality
In terms of net charge of impairments on financial assets not measured at fair value through profit and loss BCR recorded a provision of RON 61.6 million (EUR 13.6 million) in H1 2017, versus a net risk provisions release of RON 69.3 million (EUR 15.4 million) in H1 2016, while continuing efforts to improve the quality of the portfolio.
NPL ratio2 at 11%, as of 30 June 2017, significantly decreased from 14% as of 30 June 2016 and 23.1% as of 30 June 2015, due to reduction of the NPL book, driven by recoveries, sales of NPL portfolios and write-offs. NPL provision coverage ratio improved to 92.1%, while, collateral included, it comfortably stood at 125.3%.
Capital position and funding
Solvency ratio under local standards (BCR standalone) as of May 2016 stood at 23.2%, well above the regulatory requirements of the National Bank of Romania. Also, IFRS Tier 1+2 capital ratio of 22.1% (BCR Group), as of March 2017, 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.
BCR will continue to maintain high solvency ratio, proving its ability and commitment to support sustainable quality of lending growth in both Retail and Corporate franchises, further reinforcing core revenue generating capacity.
Loans and receivable to customers increased by 0.5% to RON 32,437 million at 30 June 30 2017, from RON 32,291 million at 31 December 2016, as a result of increased lending volumes on the retail segment.
Deposits from customers decreased by 2.1% to RON 47,208.1 million (EUR 10,370.2 million) at 30 June 2017, versus RON 48,235.2 million (EUR 10,626.8 million) at 31 December 2016, due to a decrease in corporate deposits. Customer deposits remain BCR’s main funding source, while the bank benefits from diversified funding sources, including parent company.
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.