Romania's BCR Group six-month net profit shrinks to a third on lower income and high provisioning

BCR Group in Romania posted a profit of EUR 298.9 million in the first half of the year, down from EUR 391 million in the first half of 2010, as a result of market conditions: reduced interest rates, continuing low eligible loan demand and the impact of the new law on credit contracts for consumers (former OUG 50), the bank has announced. Its profit in the second quarter of this year was of EUR 154.4 million, 5.5 percent up on the first quarter. The group's consolidated net profit after taxes and minority interest stood at EUR 37.8 million in the first half of this year, which was one third of the H1 2010 results, mainly due to the lower net operating income and still high provisioning. The net profit managed to grow in the second quarter of the year by 7.8 percent on the previous quarter. Its non-performing loans reached 17.9 percent of the total loans portfolio. Risk provisions for loans and advances reached EUR 117.4 million, up by 6.8 percent compared to the first quarter of the year, but decreased by 5.75 percent on the second quarter of 2010, proving a slowdown in non-performing loans formation, according to BCR. The risk costs went down by almost 3 percent compared to the first six months of 2010, developing in line with expectations as the Romanian companies and individuals are still confronted with adverse market conditions. “Corporate segment was the main contributor to new non-performing loans volumes in the first half of 2011 as SMEs remained most pressured given still high liquidity constraints. Gradual recovery is expected once economic growth resume,” BCR wrote in its most recent financial release. “The new loans granted in the last two years have a very low rate of default,” it went on. The implementation in 2011 of the law on credit contracts for consumers (former OUG 50/2010) also reshaped business flows and cut banks’ fee income for both new and existing loans compared to H1 2010, according to BCR. The bank reduced its operating expenses by 5.6 percent quarter-on-quarter to EUR 101.2 million in the second quarter of the year, the lowest number in the last four quarters. Its expenses were however higher overall in the first half of the year as BCR continued the investments business development, especially in internet and cards channels and in IT infrastructure as well as in modernizing its branch network premises - all of these result in a higher running costs and depreciation charge. The bank’s total assets went up by 3.5 percent to EUR 17 billion as at June 30th, 2011 , the highest result ever in the bank. editor@romania-insider.com (photo source: BCR)