In Q1 2023, BRD recorded an NII growth of 20.6% YoY, an NFCI decline of 4.3%, a net banking income increase of 15.5%, and a net income of RON 342m, a 30% increase YoY.
Starting off with the net interest income, it amounted to RON 670.5m, an increase of 20.6% YoY, supported by a higher volume of newly issued loans, but also higher interest rates. Net fee and commission income on the other hand declined, decreasing by 4.3% YoY and amounted to RON 172.3m. This was due to lower fees from card activity as a result of increasing penetration of packages, as well as the base effect that was present in Q1 2022 linked to increased cash withdrawals after the start of the war in Ukraine. Other revenues also increased, growing by 26% YoY due to favorable trading activity.
Combined, this led to a net banking income of RON 935.3m, an increase of 15.5% YoY. On the other hand, operating expenses increased by 10.4% YoY to RON 508m, and this came as a result of the double-digit inflation that is currently present in Romania. However, BRD notes that this increase in OPEX is below the inflation rate, due to their cost management. Breaking the OPEX down further, staff expenses increased by 9.1% YoY to RON 224m, coming from the price effect of higher wages and other benefit increases, in a tight and competitive labor market. Other expenses also increased, growing by 11.6% YOY to RON 255m, mainly due to higher contribution to Deposit Guarantee and Resolution Funds (RON 75.8m in Q1 2023 vs. RON 69.2m in Q1 2022), as well as higher expenses with external service providers and finally, an increase in IT&C related costs.
In terms of cost of risk, BRD notes that it was limited to RON 9m (vs. RON 32m in Q1 2022), due to stable portfolio evolution and good recovery performance. Furthermore, the NPL ratio stood at 2.6%, a decrease of 0.1 p.p. YoY. Because of these developments, BRD recorded a net income of RON 342m, an increase of 30% YoY.
BRD Group key financials (Q1 2023 vs. Q1 2022, RONm)
Source: BRD Group, InterCapital Research
Moving on to the balance sheet, BRD Group’s total assets amounted to RON 72.8bn, a decrease of 1.4% YTD. This came as a result of lower reverse repo contracts, which declined by 33.8% to RON 3.61bn, as well as lower derivatives and other financial instruments held for trading, which decreased by 41.4%. On the other hand, loans and advances to customers increased to RON 37.2bn, an increase of 2.5%, on the back of higher corporate loan performance.
On the flip side, total liabilities also decreased to RON 65.2bn, a decrease of 2.5% YTD, mainly driven by a decrease in deposits from customers, which declined by 1.9% YTD to RON 55.6bn. This decrease can be mainly seen in the demand deposits, which decreased by 6.8% to RON 38.1bn, while terms deposits on the other hand increased, by 10.8% to RON 17.4bn. In terms of equity, it amounted to RON 7.61bn, an increase of 9.3% YTD. This came as a result of higher retained earnings (+5.2% YTD), as well as a decrease of other reserves to RON 1.75bn, or 14.9%. Given that the other reserves have a negative impact on equity, their decrease subsequently increased the overall equity amount.