The BRD Group ended 2023 with an increase in both the loan portfolio and the most important profitability indicators. Following the solid results, the Board of Directors proposed for approval at the AGM the distribution of a gross dividend per share of 1.4070 lei, according to a report prepared by the Analysis Department of TradeVille
BRD – Groupe Societe Generale SA is one of the largest financial-banking groups in Romania. The main activity of the BRD group is related to offering banking products and services to commercial customers and individuals, through the BRD bank. At the same time, other activities are carried out within the group, such as asset management, the provision of leasing services and other financial services. BRD is the third largest bank in Romania, by assets, with a market share of 10.2%. Among the main competitors of the BRD group are Banca Transilvania, BCR, UniCredit Bank, Raiffeisen Bank, ING Bank.
Since 1998, BRD’s parent company is the French bank Societe Generale, one of the largest banks in Europe. On December 31, 2022, it controlled 60.17% of BRD’s share capital. Other shareholders include some private pension funds from Romania, such as NN Pensii, AZT Viitorul Tău and Metropolitan Life, but also institutional investors such as SIF Oltenia or Transilvania Investments Alliance.
Starting on September 26, 2023, Francois Bloch decided to resign from the mandate of general director of BRD, the position to be taken over by Mrs. Maria Rousseva, for a four-year mandate, subject to the approval of the BNR.
• The profitability of the banking sector in Romania is increasing
According to the latest data published by the BNR, the profitability of the banking sector in the country is increasing, while the solvency of the system is two percentage points (ppt) above the EU average, at 22.3%. At the same time, the rate of non-performing loans (NPL) is at a historic low (2.3%), while the degree of coverage with provisions (65.3%) places Romania in a low risk category at the level of the European Union.
Liquidity improved significantly in 2023, the liquidity requirement coverage indicator (LCR) being 281% at the end of the year, compared to 209% at the end of 2022. Therefore, the regulated limits that provide for a level of LCR of 100% and those of the European average, which at the end of September 2023 marked a value of 167.3%.
It is important to mention that the banks with majority local shareholders strengthened their position on the market until the end of 2023, thus representing more than 34% of the level of banking assets in Romania at an aggregate level.
The consolidation of banking profitability is also reflected by the indicators regarding the efficiency of the use of capital and assets, ROE and ROA respectively, recording values of 20.4% and 1.8% at the end of 2023, well above those recorded at the end of 2022 (16.4 % ROE, 1.5% ROA).
• BRD’s operating profit – higher by 23.3% in 2023, compared to 2022
The BRD Group ended the 2023 fiscal year registering a 13% increase compared to the end of 2022 in the loan portfolio, thanks to the strong contribution of both the retail and corporate segments. At the same time, the quality of assets improved during the past year, the NPL rate decreased to 1.9%, compared to 2.6%, the level recorded at the end of 2022, and the coverage rate of non-performing loans remained at a solid level (75, 9%, compared to 76.5% in 2022).
Both in the retail segment (individuals) and in the corporate segment, the BRD group remains on track to meet the sustainable financing objectives set for 2025. In the retail segment, a record volume of new loans granted in the amount of 7, 7 billion lei, while in the corporate division, the solid performance (+23% compared to 2022) was due to SME customers (+18%) and large companies (+26%), notes TradeVille
On the P&L side, the group’s annual operating income increased by 10.8% over 2022, as interest income maintained a solid 15% growth rate, while on the fee side, the company remained at a constant level.
BRD ended the year with an operating profit increasing by 23.3% compared to 2022, while the cost/income ratio improved due to the favorable effect of revenues, to 49.4% in 2023, compared to 50.4% in end of 2022. Net profit also increased by 24%, and return on equity (ROE) demonstrated the strength of the group, increasing to 21%, by 5.4 ppt.
BRD plays an important role in financing the green transition by integrating ESG principles into its lending operations and by defining clear strategic objectives in this direction. It is estimated that the goal of one billion euros of sustainable financing by the end of 2025, defined in the Horizons 2025 plan, will be reached earlier. In 2023, the value of new transactions that supported, among others, an important photovoltaic project or co-financed energy efficiency projects, amounted to 2.3 billion lei, which brings the cumulative sustainable financing to approximately 800 million euros at the end the year 2023.
• BRD shares, on a positive course
In the last year, BRD registered a positive dynamic on the local stock exchange, being correlated with the evolution of the BET index of which it is a part. The yield generated by the investment in the BRD share, in the last 12 months, was 25.3%, while the BET index marked an advance of 27.4%, relatively similar.
Compared to the main competitors on the Romanian banking market, the evolution was a mixed one, being below Banca Transilvania, whose shares rose by 39.7%, but above those of Patria Bank and Erste Group, the owner of the local bank BCR, whose shares increased by 1.2%, respectively 13.6%.
Based on the annual financial results, as well as the solid level of the capital position, the Board of Directors of BRD decided to propose a gross dividend of 1.4070 lei/share from the net profit of the bank for the year 2023. Therefore, the distribution rate of dividends is 60%, while the dividend yield, based on the closing price on February 7, 2024, is 7.75%. The approval vote at the AGM will take place on April 25, 2024.
• Opportunities and Risks of investing in the BRD share
timely
– Growth and recurring dividends: Being majority owned by an international brand such as Societe Generale, the company has the expertise and resources of the French bank to meet and even exceed its long-term goals. Also, BRD offers constant annual dividends, with a yield of over 5%.
– Belonging to BET: Along with Banca Transilvania, BRD is part of the BET index, with a weight of 7.76%, being the fifth largest company. Liquidity and the high degree of transparency can be additional reasons why investors can opt for the acquisition of the BRD share in the context where the capital market is becoming the main instrument that both investors and companies opt for in an increasingly high inflationary environment.
risks
– Interest rates and the appetite for credit: In the context in which purchasing power decreases and interest rates remain at a high level, both private and corporate customers will try to distribute more and more of their capital towards the repayment of loans. At the same time, the cost of financing being high, the growth rate of the credit balance could slow down, which will influence both the level of assets held by banks and profitability.
– Fiscal measures: The new turnover tax for banks in Romania will put pressure on both future financial results and interest rate increases. Thus, the banks will transfer the fiscal impact on turnover into interest, thus increasing even more the pressure on lending and the possibility of consumers refinancing or accessing new financing.
Sources mentioned by TradeVille in this report are: brd.com, company report, economica.net, BNR, BVB.
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Investing in financial instruments involves specific risks; past performance is not a reliable indicator of future results. Acquisition costs and currency fluctuations can influence the return on investment. The quotations displayed are those at the end of the previous trading day.List of potential conflicts of interest, researches from the last 12 months. There is no financial instrument without risk.
2024-02-11 22:00:00
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