Romanian largest bank’s losses bring down Austrian group Erste’s results

The largest Romanian bank BCR, which is part of Austrian Erste Group, ended last year with losses of EUR 627 million, as its operating profit declined and the costs for non-performing loans (NPLs) more than doubled compared to 2013. BCR’s losses also impacted Erste Group’s financial results. The Austrian group ended the year with EUR 1.44 billion in losses. “Our net profit was impacted last year by two factors: the risk situation in Romania and the FX loans in Hungary. In both countries we have solved those issues,” explained Andreas Treichl, CEO of Erste Group. BCR’s risk provisions went up to almost EUR 1 billion (RON 4.4 bln) in 2014, driven by ample efforts to reduce NPLs, including portfolio sales and write-offs. In 2014, BCR sold non-performing loans amounting to EUR 450 million (RON 2.0 bln), thus achieving its target to reduce overall NPL volume by 24% yoy. The NPL ratio decreased to 25.7% (from 29.2% at end-2013). “BCR reduced total NPL volume by a quarter, delivering on its commitment to accelerate resolution of troubled loans legacy. We fully assume the impact on short-term profitability, as we see the reduction of non-performing loans being critical to restore lending growth and financial performance,” said Adriana Jankovicova, Chief Financial Officer of BCR. She added: “BCR benefits from exceptionally strong capitalization, allowing it to comfortably absorb balance sheet restructuring and further support good growth across all business lines.” BCR had an operating profit of some EUR 427 million, 19% lower than in 2013. The decline was due to a 14% decrease of its loan book (from EUR 8.54 bln to EUR 7.31 bln), as well as lower interest rates. In 2014, BCR granted new loans totalling EUR 1.66 billion, on the back of solid growth in retail and stabilization of corporate book. On top of that, the bank invested EUR 1.03 billion in government bonds. “On the back of the strategic shift to lending in RON, BCR tripled new housing loans and grew significantly new cash loans volumes in 2014. We hold a fifth of the new lending market share and we will further consolidate that position, as BCR successfully completed a branch network improvement project, aimed to reinforce client service quality,” said Dana Demetrian, Retail & Private Banking Vice President of BCR. Deposits from customers grew by 6.6% to almost EUR 9 billion. Customer deposits remain BCR’s main funding source. The shareholder’s equity went down by a third, to EUR 13.85 billion. Erste Group holds 93.6% of BCR’s shares while Romanian investment fund SIF Oltenia owns 6.3%. Andrei Chirileasa, andrei@romania-insider.com