During 2023, BRD Group recorded a net interest income growth of 15% YoY, NFCI decrease of 1%, net banking income increase of 11%, and a net income to majority of RON 1.66bn, an increase of 24% YoY.
Starting off with the net interest income, it amounted to RON 2.72bn, growing by 15% YoY. This was supported by the continued growth in loans issued to customers, which grew by 12% YoY to RON 40.8bn, but also by higher interest rates on loans. However, BRD does not provide details on its net interest margins so it is hard to quantify how much did the interest rates change. At the same time, according to various statistics, including the Romanian National Bank, Word Bank, OECD, and IMF, the average interest rate on loans in Romania ranged between 7-9%. While we empathize this does not refer to all loans, it did grow by several percentage points in the last couple of years. Lastly, unlike the Eurozone, Romanian Central Bank sets its own key interest rates due to the fact that it still uses its own currency (lei), and these range from 6-8%.
Coming back to BRD, for loans, the Group states that exceptional performance was noted in corporate financing, which grew by 23% YoY, and this included noteworthy growth in both SMEs (+18% YoY) and large corporate customers (+26% YoY). Furthermore, consumer loans recorded 20% YoY growth.
Moving on to net fee and commission income, it remained relatively unchanged, decreasing by 0.5% YoY to RON 750.2m, and BRD noted that this came due to counterbalancing effects. This would refer to lower revenue from card activity given the higher penetration of current account packages, in line with market trends, and contraction of fees on cash transactions mainly due to the base effect, which was offset by increased revenues from lending, insurance, and capital market activities.
Together, this led to an 11% YoY increase in net banking income, to RON 3.83bn. In terms of operating expenses, in total they amounted to RON 1.89bn, growing by 9% YoY. BRD notes that despite the inflation falling to the mid-single digit level by the end of 2023, the average for the year was still double-digit, leading to increased pressure on op. expenses. Furthermore, they note that through strong spending discipline, they were able to keep the growth at this level. Inside OPEX, the largest increase was recorded by other op. expenses, which grew by 12% YoY to RON 615.7m, and personnel expenses, which increased by 7% YoY to RON 962.9m. For other op. expenses, the increase came mainly due to higher costs of external services and increased IT&C related expenses. Meanwhile, personnel expenses grew due to the adjustments of salaries and other benefits within the collective labor agreement, in an inflationary context and highly competitive market for talents. The cost of risk amounted to RON 57.4m (2022: RON -95.1m), due to the fact that BRD recorded persistent recoveries on defaulted exposures and limited NPL formation. In fact, the NPL ratio fell to 1.9% by the end of the year, vs. 2.6% at the end of 2022. Taking all of this together, BRD recorded a net income to majority of RON 1.66bn, growing by 24% YoY.
BRD Group key financials (2023 preliminary vs. 2022, RONm)
Source: BRD, InterCapital Research
Moving on to the balance sheet, total assets grew by 14% YoY to RON 83.8bn, supported by higher financial assets at amortised cost (+18% YoY), and higher Cash and due from Central Banks (deposits held at the Central Banks), at 54% YoY. For the cash at the Central Banks, this is in line with the trend in other banks, as currently the interest rates are so high. Inside the financial assets at amortised cost, loans and advances to customers were the main drivers, increasing by 12% YoY to the aforementioned RON 40.8bn, while treasury bills at amortised cost also grew significantly, by 90% YoY to RON 5.18bn.
On the other hand, total liabilities grew by 12% YoY to RON 74.9bn. Inside this category, the largest increase was recorded by deposits from customers, which grew by 10% YoY to RON 62.4bn, helped by the higher interest rates offered on deposits. This was supported by both retail deposits (+9.9% YoY) and corporate deposits (+10.6% YoY), particularly of SME customers (+15.1% YoY).
