BCR net profit plummets 85 percent y/y to EUR 16.7 mln in 2011 on bad loans, slow economy

Net profit of BCR Group, majority-owned by Austrian Erste Group, dropped 84.8 percent y/y to EUR 16.7 million in 2011, due to weak economic recovery and increased bad loans in the corporate segment.

BCR’s operating profit decreased by 14.6 percent to EUR 676.4 million, while expenses increased by 1.4 percent y/y to EUR 399.7 million, due to investments in personnel and banking infrastructure. Net operating income  lost 8.7 percent y/y to EUR 974.3 million

Net fee income rose by 24.9 percent y/y to EUR 136.8 million, while the net trading result surged 35.8 percent y/y to EUR 99.6 million, driven by foreign exchange trading.

Net interest income lost 16.5 percent y/y to EUR 737.8 million. Income from fees and commissions gained 1.5 percent to EUR 208.3 million, while expenses were reduced by 25.2 percent to EUR 71.5 million.

“2011 was a difficult year as the economic recovery was slowing in the second half, beyond expectations. This is affecting the business and income of our customers and therefore had a negative impact on their transactions with BCR,” said Dominic Bruynseels, BCR CEO.

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The lender’s assets increased by 4.3 percent y/y to EUR 17.7 billion, benefiting from an increased appetite for savings from Romanian customers. Thus, BCR remains Romania’s largest bank with 20 percent market share.

Loans to customers increased by 2.2 percent y/y to EUR 12.3 billion, making BCR the leading lender in Romania with 22 percent market share. Customer deposits rose by 4.9 percent y/y to EUR 9.1 billion, in line with the market trend.

Non-performing loans (NPL) represented 20.6 percent on the total loan portfolio, driven by cash strapped SMEs and large corporate that defaulted or re-defaulted after debt rescheduling. Provisioning gained 7.9 percent y/y to EUR 508 million.  However, the lender says this will improve once the economic growth accelerates.

NPL in retail remained stable due to conservative lending practices. Despite and increase of bad loans, the lender’s NPL coverage ratio stood at 119 percent, including collateral and provisions.

The cost-income ratio of BCR stood at 41 percent at end-December 2011 against 36.9 percent at end-December 2010, impacted by limited income generation.

The lender’s Tier 1+2 capital ratio stood at 12.7 percent on Romanian accounting standards (RAS) against the 10 percent limit imposed by the National Bank of Romania. BCR Group had a 17.1 percent solvency ratio on IFRS standards.

Erste Group has increased its stake in BCR to 89.12 percent by acquiring a 24 percent stake in BCR from 4 SIFs. The transaction is ongoing and is worth EUR 398 million, involving a cash component and a share swap.

In the last quarter of 2011, BCR’s capital was increased by EUR 108 million, Erste contributing by around EUR 100 million to this transaction.

Ovidiu Posirca