Romanian BCR wipes 86% of profit while mother bank Erste posts EUR 973 mln loss

Romanian lender BCR Group saw its net profit down by 86.3 percent year-to-date to EUR 16.1 million at the end of September this year, mainly on lower net operating income and high provisioning in corporate lending, the bank has announced. The same day, its mother bank Erste group announced a loss of EUR 973 million, which was also triggered by the write-down of goodwill in Romania.

“The recovery has been slower than expected. This is reflected in our customers’ business and income and therefore affects their transactions with BCR,” said Dominic Bruynseels, BCR CEO. “Erste Group maintains and even increases its commitment towards BCR and Romania. We continue working closely with our customers looking to help them and doing our best to support and accelerate Romania's recovery,” he added. The net charge with risk provisions for loans and advances totalled EUR 382 million year-to-date, eflecting delayed economic recovery. The non performing loans portfolio remain manageable, weighting 20.8 percent of the total loan portfolio at end September, according to the bank. The corporate segment is the main contributor to new NPL volumes as SMEs are still facing high liquidity constraints and some large corporate re-defaulted. Gradual recovery is expected once economic growth accelerates, BCR has said. “BCR continues to focus on active and prudent risk management which mainly means rescheduling and restructuring loans for customers in difficulty, improved collection and improving approval and monitoring processes,” it went on. Erste Group, the main shareholder in Romanian has announced it would increase its commitment towards BCR and Romania. An increase of BCR’s capital of up to EUR 144 million was recently announced and is in progress. Thus BCR will enhance its capability to finance Romania’s real economy once the recovery resume. At the same time Erste Group is preparing to increase its ownership in BCR by acquiring SIFs participation – the process is also ongoing. BCR’s parent bank is also ready to further support BCR with funding and capital whenever needed, reads its statement. This announcement comes soon after Romanian president Traian Basescu has expressed public concerns about the capitalization of Romanian subsidiaries and the need for foreign banks to maintain exposure on Romania for at least two years. Meanwhile, BCR’s total assets had a modest increase of 1.1 percent, to EUR 17 billion, benefiting from the growth of resources attracted from customers. BCR maintains its leading position in the market with 20 percent market share. Erste Bank announced on Friday it posted a net loss of EUR 973 million during the first nine months of this year, mainly due to the write-down of goodwill in Hungary and Romania, additional risk provisions in Hungary, and expenses resulting from the change in the fair value of the CDS portfolio. Erste made a net profit of EUR 633.8 million during the same period of last year. The loss of expected as the set of measures had been announced at the beginning of the month. "Following our pre-announcement for the third quarter on 10 October concerns were raised in relation to our CDS exposure. We have reacted to this and reduced our portfolio from EUR 5.2 billion at the end of September to EUR 0.3 billion yesterday with no additional negative P&L effect", said Andreas Treichl, CEO of Erste Group Bank AG, at the results presentation for the first nine months of 2011. "Our view is confirmed by the performance of Česká spořitelna, Slovenská sporiteľňa, Erste Bank Oesterreich and Erste Bank Croatia, all of which are doing well: operating and net profit are up year on year, risk costs are down over the same period. In Romania GDP growth is still slow, as is our business performance, but the domestic economy should be supported by a better EU funds absorption rate going into 2012. In Hungary we have started a strategic review with the aim to reposition our bank towards extending local currency loans funded by local currency deposits", Treichl concluded.