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BRD GROUP RESULTS FOR 9M 2022: STRONG LENDING ACTIVITY, SUPPORTING THE ROMANIAN ECONOMY

04 Nov 2022

Main commercial trends and financial indicators of BRD Groupe Société Générale at September 30, 2022 at consolidated level, according to the International Financial Reporting Standards (IFRS):

- Intense lending activity across the board

new housing loan production continued to show a double-digit advance (+21% YoY), while consumer lending reflects the market slow down
corporate lending remarkable performance (+30.9% YoY) built on both an excellent activity on SME segment (+49.5% YoY) and an accelerated growth of loans to large companies (+22.4% YoY)
governmental programs also supported the lending dynamic, with RON 1.4 billion approved loans in H1 2022 (IMM Invest program ended in June 2022)
leasing activity kept high, posting a +12% YoY increase of portfolio

Leading to +11.5% YoY increase in the stock of loans as at end of September 2022

- Delivery of high value added new products, important milestones on the digital roadmap

100% online credit card issuance flow now accessible on BRD website and via You BRD
instant payments available for individuals, 24/7, in You BRD

- Solid performance across all revenue categories

continued upward trend of NII (+12.2% YoY), building on both positive volume effect and higher interest rates, while significantly increasing the remuneration for collected deposits, to the benefit of our clients
operating expenses posted a tempered growth in an inflation marked context, thanks to rigorous spending discipline (+5% YoY, excluding resolution and deposit guarantee funds contribution)
credit risk indicators remained at sound levels (NPL ratio 2.6%, NPL coverage ratio 78%, as of September 2022 end)
RON 1,016 million net profit (+10.3% YoY); ROE close to 17% in 9M 2022

“Over the first nine months of 2022, BRD showed a robust performance across the board, despite the challenging macroeconomic context.

Lending momentum was maintained at high levels. Financing of housing loans for individuals further advanced, with a 21% growth of new production. Market share on new consumer loans was resilient in a slowing down market after a record 2021. Corporate financing had a remarkable performance (+31% YoY) sustained by both its pillars, with an outstanding growth of lending of both SMEs and large companies. BRD was actively involved in the governmental programs supporting the economy, with approved loans of RON 1.4 billion for H1 2022 (IMM Invest program was no longer operational after June). The support will continue within the new IMM Invest Plus program that started in October 2022.

Constantly guided by the desire to improve our customers’ experience, we stepped up our digital offer, enabling access to full online credit card issuance and instant payments.

BRD initiated Climate Change Summit, the first summit in Romania dedicated to climate change, a CEE forum uniting climate leaders and experts to discuss solutions for a sustainable future and provide the momentum to be part of the transformation. The summit registered an audience of almost 1 million people across all channels.

Building on a broad based dynamic commercial activity, BRD delivered over the first nine months a solid financial performance. NBI was higher on overall dynamic volumes and rising market rates, while also embedding the significantly increased remuneration of our customers’ deposits. Despite the important inflationary pressure, operating expenses’ increase was tempered through rigorous spending discipline. Cost of risk was well contained, confirming soundness of the portfolio. As a result, BRD delivered a high ROE close to 17%.

BRD reaffirms its commitment to be a trustworthy long term partner for its customers and the Romanian economy, especially needed within an environment marked by uncertainties“, said François Bloch, CEO of BRD Groupe Société Générale.

Strong commercial momentum across the board

BRD Group net loans outstanding, including leasing receivables, increased by +11.5% YoY at September 2022 end. On retail, the growth of +3.2% YoY was underpinned by both individuals and small business segments. Housing loans remained the main driver, with a consistent increase of +21% YoY in 9 months new production, while consumer lending was resilient as reflected by the quasi stable market share in a slowing down market. Corporate financing posted a noteworthy performance (+30.9% YoY) built on both an impressive activity on SME segment (+49.5% YoY, with RON 1.4 billion approved loans within IMM Invest program that was operational until June 2022 end) and a solid growth of loans granted to large companies (+22.4% YoY). Leasing activity also printed high, +12.2% YoY.

Deposits to customers reached RON 55.2 billion at September 2022 end, higher by 2.5% on an annual basis, in a tight liquidity market. Retail deposits’ advance benefitted mainly from increasing inflows in individuals’ foreign currency sight accounts and RON term deposits in a rising rates context. Large corporate deposits increased by 6% YoY, with a solid advance of RON deposits.

BRD was an active participant (40% average market share) in the distribution of the three issues of Fidelis government bonds for retail investors held in 9M 2022, an amount of RON 1.8 bn equivalent being subscribed through bank’s network.

BRD marked important steps forward on the road to a fully digitalized customer journey, with the 100% online credit card issuance flow, accessible on BRD website and via the online banking app, You BRD, and the instant payments solution offered to individuals customers in You BRD. The digital adoption further augmented, as revealed by the significantly higher number of users of the mobile application, You BRD, which is approaching 1 million as of September 30, 2022.

Consolidation of revenues upward trend

Reflecting the broad based dynamic commercial momentum, BRD Group’s net banking income amounted to RON 2,541 million, up by +9.8% YoY. The +12.2% YoY increase of net interest income stemmed from solid volume growth and higher interest rates. The evolution includes the effect of increased interest expense on resources, as both retail and non-retail customers benefitted from higher remuneration of their deposits. Net fees and commissions registered an advance of +1.9% YoY in 9M 2022, on the back of intensified activity with cards and growing penetration of insurance products, partially counterbalanced by lower revenues from e-banking services given the migration of retail clients to the new free of charge mobile application, You BRD. Other revenues posted also a solid growth (+13.4% YoY) due to consistent increase in both trading and sales activities on all products.

Operating expenses totalled RON 1,276 million in 9M 2022 (vs RON 1,198 million in 9M 2021), increasing by +5.0% YoY, excluding the contributions paid to Deposit Guarantee and Resolution Funds (RON 69.2 million vs RON 49.4 million in 2021). The discipline on spending remained rigorous. Under the pressure of inflation and a persistently tight labor market, staff costs inched up by +5.2% YoY, as a result of wage increase and other benefits adjustments (especially meal tickets), partially balanced by the declining trend in the number of employees given the network footprint optimisation. Other costs advance reached +4.9% YoY mainly related to several external services and IT&C.

Overall, BRD Group registered a growth of gross operating income of +13.4% YoY. As a result, cost to income ratio was improved by 2.2 ppt, to 47.5% in 9M-2022, from 49.6% in the same period of the last year (excluding the cumulated contributions to Deposit Guarantee and Resolution Funds).

As regards the credit risk indicators, their levels reflect a very good quality of the loan portfolio. NPL ratio remained at the historically low level of 2.6% (vs. 3.2% at September 2021 end) and coverage ratio increased further to 78% (vs. 75% as of September 2021 end). 9M 2022 net cost of risk registered RON 37 million net provision expense (vs. RON 42 million net income in 9M 2021) driven by charges on performing portfolio in response to macroeconomic trends, while non-performing portfolio remained a driver of steady recoveries throughout the year.

Given all the above, BRD Group net profit reached RON 1,016 million (vs. RON 920 million in 9M 2021), up by +10.3% YoY, leading to a ROE of near 17% compared to 13% in the corresponding period of last year.

BRD total capital ratio stood at 22% as of September 2022 end.

_{BRD financial results for nine months ended September 30, 2022 are available to the public and investors on the website of the bank: www.brd.ro beginning 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.,1st district, Bucharest.

Note: If not stated otherwise, all variations are vs. 9M 2021 (for income statement related items) or September 2021 end (for balance sheet related items) NPL, coverage ratio and capital ratio, at bank level

BRD - Groupe Société Générale operates a network of 470 units. Total assets of the bank reached RON 69bn at September 2022 end.

BRD is part of the Société Générale Group, one of the largest European financial services groups. The group has 117,000 employees in 66 countries and 25 million customers worldwide in its three key activities:

• French retail banking

• International Retail Banking, Insurance and Financial Services to Corporates

• Global banking and Investor Solutions}

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BRD GROUP RESULTS FOR 9M 2022: STRONG LENDING ACTIVITY, SUPPORTING THE ROMANIAN ECONOMY