Romania’s largest bank BCR went into the red, posting EUR 61.9 million losses for the first half of 2014, compared to a net profit of EUR 127 million in the same period of 2013, due to larger provisions for non-performing loans (NPL). The bank accelerated its portfolio cleanup in the first half and in July it sold a EUR 227 million batch of NPLs.

The bank had an operating result of EUR 245.6 million in the first six months, some 7 percent lower compared to the same period of 2013, as net interest income and net trading result declined and net income from commissions increased. The positive operating result was canceled by impairments related to non-performing loans, which totaled EUR 294 million, about 30 percent more than in the same period of 2013, the bank reported

These results reflect the bank’s intention to accelerate the resolution of the NPL stock. “We enter the second half of 2014 with strong intention to clean our balance sheet and enhance future capacity to deliver strong performance from healthy and solid core of the bank. That healthy core, the current commercial performance, shows continuing signs of improvement, as BCR delivers respectable new lending market share along reinforcement of the overall deposit base,” said Tomas Spurny, BCR’s CEO.

BCR manages a non-performing loans portfolio of around RON 12.9 billion (EUR 2.93 billion), which it decided to resolve in accelerated manner. The bank has a target to reduce overall NPL stock by 25 percent until year-end. Consequent risk costs are anticipated to off-set the operational result of the bank in 2014, but the capital position of the bank will absorb the above mentioned balance sheet cleaning measures and remains strong to support good growth across all business lines, according to BCR’s representatives.

“In that respect, BCR has signed, in July 2014, a sale transaction of RON 1 billion (EUR 227 mln) for a non-performing corporate loans package (secured, all of which in legal procedures - insolvency, enforcement), to a consortium of foreign investors and available funding lines,” the bank announced.

BCR’s assets already declined by 5.1 percent in the first half of 2014, to EUR 14.6 billion, at the end of June, as the bank removed non-performing loans from its balance sheet. The bank also reduced its cash positions, as Romania’s National Bank reduced the mandatory minimum reserves ratios for local banks. BCR’s deposits from other banks also reduced by almost 10 percent (some EUR 400 million) which could reflect the repayment of credit lines from parent group Erste.

Austrian group Erste holds almost 94 percent of BCR’s shares with Romanian investment fund SIF Oltenia still owning a minority stake of 6 percent.

Andrei Chirileasa, andrei@romania-insider.com