In Q1 BRD recorded an increase in net banking income of 8.3% and a decrease in net income of 27.3%.

As BRD published their Q1 2019 report, we are bringing you key takes from it. According to the report, the company observed an increase in net interest income of 10.3% YoY, amounting to RON 514m. This could be attributed to higher volumes and positive structure shifts, as well as a favorable interest rate environment (ROBOR 3M at 3.10% in Q1 2019 vs. 2.03% in Q1 2018).

Net fee and commission income remained flat at RON 184m, despite expanding volumes due to increasing price pressure on transactional banking services.

When observing net banking income, it amounted to RON 784m, representing an increase of 8.3%, which could be attributed to a healthy commercial momentum of both retail and corporate segment.

BRD Performance (Q1 2019 vs Q1 2018) (RON m)

Moving further down the P&L, operating expenses observed an increase of 14.9%, amounting to RON 442m. The increase could mostly be attributed to a rise in contribution to Deposit Guarantee and Resolution Funds which doubled to RON 72m. As a result, CIR amounted to 56.4%, which represents an increase by 3.2 p.p. Excluding the Deposit Guarantee and Resolution Funds cumulated contributions, the cost/income ratio improved by 1.2. p.p YoY.

In Q1, the company observed a net income of RON 301m, which represents a decrease of 27.3% YoY. The lower net income was influenced by lower cost of risk write-backs and higher regulatory costs.

Net Income (Q1 2019 vs Q1 2018) (RON m)

When observing the company’s balance sheet, assets remained flat at RON 56.03bn. Of that, net loans and advances to customers account for 53.2%. On the other hand, liabilities amounted to RON 48bn. Of that deposits to customers account for 92%. When observing loans and deposits, net loans to customers observed an increase of 4.4%, amounting to RON 29.1bn. Deposits to customers remained flat at RON 44.4bn. Consequently, this led to an increase in L/D ratio by 3 p.p. amounting to 65.5%, which is still relatively low.

Turning our attention to the asset quality, NPL ratio was at 4% in March 2019, which represents a decrease by 2.4% YoY. Meanwhile, the coverage ratio remained relatively flat at 75.1%.

Net cost of risk was once again positive and amounted to RON 26m of write-backs, compared to RON 153m in Q1 2018. Lower cost of risk write-backs are a consequence of fading effects of exceptional items and lower recoveries from defaulted portfolios.