Romanian lender BRD sees 63% higher profit in 2016, offers 6.2% dividend yield

BRD-Groupe Société Générale, the second-biggest bank in Romania, recorded a 63% increase in its consolidated net profit, in 2016, to RON 763 million (EUR 170 million), on higher revenues, strict cost control, and lower risk costs. “2016 was marked by a solid performance of BRD Group, with net income substantially higher than in 2015, benefiting from a strong commercial momentum on retail segment, a better operating performance and a significantly improved risk profile,” said Francois Bloch, BRD’s new CEO. “Looking ahead, we are confident of our universal bank business model which will further enable us to satisfy the most various needs of our customers and grow healthily on all segments while creating value for our shareholders,” he added. The group’s net banking income went up by 7%, to RON 2.78 billion (EUR 618 million) driven by improvement in net interest income (+4.6% versus 2015), higher net fees and commissions income (+3.1% versus 2015), and the disposal of its stake in Visa Europe. Operating expenses quasi stable, at RON 1.39 billion (EUR 308 million). The risk costs went down by 26.5% compared to 2015, to RON 484 million (EUR 108 million), as the group’s non-performing loan ratio went down from 13.3%, in December 2015, to 10.5%, in December 2016. BRD also increased its commercial activity in 2016, especially on the retail segment, where it gained 37,000 clients and increased its loan production by 11.2% compared to 2015. The bank had 2.15 million individual clients at the end of 2016. BRD group’s net loans outstanding amount reached RON 28.5 billion (EUR 6.33 billion), in December 2016, higher by 3.2% compared to December 2015 due to the positive performance registered on individuals and large corporate segments. On the retail segment, net loans outstanding increased by 5.3%, driven by a further advance of unsecured consumer loans and housing loans. Unsecured consumer loan production, was up by 20.3% year on year, to RON 4.0 billion. Lending to large corporate remained on an ascending trend, up by 6.6% versus December 31, 2015, the group’s data shows. Outstanding customer deposits increased by 2.3% versus December 31, 2015 with an important rise on retail deposits, up 9.9% versus December 31, 2015, despite the low level of interest rates. Non-retail deposits contracted year on year, in a context of very comfortable liquidity situation. The ratio of net loans to deposits was 67.6%. Considering the results of the year as well as the comfortable capital adequacy level, BRD’s Board of Directors has decided to propose a dividend corresponding to a payout ratio of 70% of the bank’s individual 2016 net income (RON 728 million), subject to a favorable vote by the Annual General Meeting of Shareholders on April 20, 2017. The total dividends will thus amount to RON 510 million (EUR 113 million) and the gross dividend per share will be some RON 0.7315, resulting in a 6.2% yield based on the current share price of RON 11.68 (as of February 9).