According to the preliminary results for 2022, BRD Group recorded an NII increase of 13.7% YoY, NFCI increase of 1.4%, net banking income growth of 11.7%, and a net income to majority of RON 1.33bn, an increase of 1.4% YoY.
In 2022, BRD Group’s net loans, including leasing receivables, increased by 10.4% YoY. On the retail side, BRD marked a record level of new housing loan production and the second-best year for new loans, with nearly RON 7.5bn in new loans being granted to individuals during the year. Corporate financing increased by 25.8% YoY, built on a strong performance in the SME segment (+43% YoY), and a notable increase in loans granted to large companies (+18.7% YoY). The leasing activity also increased, by 15.1% YoY. The Group notes that they continue to be an active participant in the IMM INVEST program, offering support to over 2,000 eligible SMEs. In fact, the total value of loans approved under this program amounted to RON 2bn, an increase of 69% YoY.
The Group also continues to finance the sustainability transitions. As such, the value of new sustainable finance transactions amounted to EUR 215m in 2022. They also note that this is important progress towards the EUR 1bn strategic objective of sustainable financing by the end of 2025. The deposit base also increased, with corporate deposits growing by 17.2% YoY, driven by extensive collection from large corporate customers. On the other hand, retail deposits increased by 3.1% YoY, in a tight liquidity and competitive context.
Looking at the financials more closely, BRD Group recorded a net banking income of RON 3.46bn, an increase of 11.7% YoY. They note that the macroeconomic environment was marked by strong inflationary pressures, an accelerated upward trend of market interest rates, and increased volatility. Due to the very dynamic commercial activity and the effect of the interest rates, net interest income increased by 13.7% YoY but was tempered by the significantly increased remuneration of customers’ deposits. Net fees and commission income increased by 1.4% YoY and amounted to RON 754.3m. This was driven by an increased volume of transactions and a dynamic health insurance production, counterbalancing the lower revenues from asset management activity and e-banking commissions given the migration of retail customers to free of charge mobile app, YouBRD.
Moving on, operating expenses were under the influence of inflationary pressure, but costs increase was limited by a maintained rigorous spending discipline. In total, OPEX grew by 9.2% YoY and amounted to RON 1.74bn. Staff costs increased by 8.6% YoY and amounted to almost RON 900m. They were influenced by the price effect of wage increases and other benefits adjustments within the collective labour agreement, and exceptional inflation premiums. Other operating expenses also increased, growing by 14.1% YoY to RON 547.6m. This growth was due to higher costs of external services, elevated energy prices, and increased IT&C related expenses.
As a result, the gross profit amounted to RON 1.71bn, an increase of 14.3% YoY. This would also imply a gross profit margin of 49.57%, an increase of 1.13 p.p. YoY. The NPL ratio stood at 2.5% in December 2022, down 0.6 p.p. YoY. Finally, the net profit to majority of the Group amounted to RON 1.33bn, an increase of 1.4% YoY, implying a net profit margin of 38.4%, a decrease of 3.9 p.p. YoY.
BRD Group key financials (Preliminary 2022 results vs. 2021 results, RONm)
Source: BRD Group, InterCapital Research
This would also mean that the return on equity and ROE of the Group amounted to 15.9%, an increase of 2.5 p.p. YoY. The Group’s total capital ratio stood at 20.9% in December 2022. Finally, the BRD Board of Directors decided that no dividend from the 2022 profit shall be proposed for the GSM approval. According to the Group, this is consistent with the strong recommendations of prudence from the National Committee for Macroprudential Oversight and the National Bank of Romania. The high risk of volatility remains, and the quick fix relief on other comprehensive income (OCI) reserve recognition in own funds is no longer applicable starting 1 January 2023. As such, this decision was made in order to ensure enough lending capacity while respecting on a permanent basis, and especially in severely adverse conditions, the regulated ratios.