AFTER NINE MONTHS The total provisions of BCR exceed the total level of 2011

The Romanian Commercial Bank (BCR) saw a net loss of 762.5 million lei (172.1 million Euros) at the end of Q3 2012, whereas over the same period of last year it had net profit 67.6 million lei (16.1 million Euros), according to a press release by the bank.

This result came on the back of high provisions, which were higher after nine months than what they were at the end of 2011. Thus the net expenses with risk provisions for loans and advance payments, reached 2.63 billion lei (594.7 million Euros) in the first nine months of the year , up 64% YOY and 25% compared to the end of 2011 when they amounted to 2.1 billion lei (508 million Euros).

The representatives of the bank said that the results reflect the impact which the low performance of the Romanian economy had on companies and on the real estate market.

The evolution of provisions led to an increase in the rate of coverage of non-performing loans to 57.2%, at the end of September, compared to 50.6% at the end of 2011. The rate of coverage of non-performing loans, including collateral guarantees, stayed at 109.9%, on September 30th, despite a reevaluation of the collaterals.

At the end of September, the ratio of non-performing loans stood at 25.8% of the total loan portfolio.

Tomas Spurny, CEO of the Romanian Commercial Bank (BCR), said that the third quarter was the first to show an improvement in the performance of the bank, which shows the commitment of the management to bring the BCR group back to profitability, the press release of the bank states.

His statements - the first since taking over the management of the bank in April - are made as the bosses in Vienna asked the new board of BCR to implement a process for the transformation of the bank, which would lead to its profitability in 2013.

Tomas Spurny said: "The BCR group delivers its first quarter during which time its operating performance improved. This achievement presents and emphasizes our commitment to make the BCR group profitable again over the coming years. Aside from improving our cost basis, the BCR Group will focus on the systematic monitoring of our commercial capabilities, our operating excellence and the quality of our assets. These dedicated measures will present durable results".

After the first nine months of 2012, the BCR Group posted an operational profit of 1.82 billion lei (411.6 million Euros), down 3.5% YOY.

"This evolution came as a result of cost cuts and the improved trading results, as well as an increase in the net commission revenue, which largely covered the reduction of the net interest revenue", according to the press release.

During the reviewed period, operating revenue fell 4.5% over the similar period, to 3 billion lei (679 million Euros). The main reason behind this drop is the low demand for consumer loans, the continuous formation of non-performing loans and the pressure on profit margins stemming from competition, which affected the net interest revenue (2.13 billion lei, down 10.2% YOY).

The net commission revenue increased 7.1%, all the way to 476.4 million lei (107.5 million Euros).

The net trading result increased 21.6%, (adding 393 million lei - 88.7 million Euros) to the bank's revenues after the first nine months, mostly due to the gains from currency trading.

Operating expenses fell 6.1% during the reviewed period, to 1.18 billion lei (267.4 million Euros), compared to the similar period of 2011.

At the end of September, the Tier 1 and 2 capital ratio was 13.23%, according to the International Financial Reporting Standards with prudential filters, compared to the minimum of 10% required by the NBR. The solvency ratio (BCR Group, IFRS) stood at 17.59%.

The cost/revenue ratio for the BCR Group, has improved, reaching 39.4% at the end of September, compared to 40%, at the end of Q3 2011.

• The loss of BCR in Q3 was 138% greater than in Q3 2011

In Q3 2011, BCR reported a net loss of 214 million lei, down 11% compared to the previous quarter, but 138% higher compared to Q3 2011.

The bank's profitability was affected by the increase of the provisions. The net expenses with loans and advances, in the third quarter, reached 875 million lei, a 5.9% increase over Q2, thanks to the portfolio of retail loans, whereas the rate of growth of non-performing corporate and real estate loans slowed down.

The operating profit posted by BCR in Q3, of 618 million lei, increased 3.8% over the previous quarter, but fell 3.13% over the similar period of 2011.

"The growth outlook for Q3 2012 looks weak, considering that the Eurozone, Romania's main partner has reentered recession", according to the press release of the bank.

The representatives of BCR expect the economy to slow down 0.7% this year, from 2.5% in the previous year.

As for the consumers' purchasing behavior, the officials of the bank said that it would remain very cautious because the customers are still affected by the difficult economic context, which is marked by uncertainty.

The BCR group has maintained its market share of approximately 20%, based on its total assets, despite a 0.5% decline in the value of its assets, to 76.37 billion lei (16.82 billion Euros) compared to the beginning of the year.

In Q3 2012, the aggregated volume of loans granted to customers (before provisions, IFRS), increased 3.1% over the beginning of the year, to 55.03 billion lei (12.12 billion Euros).

Retail lending has advanced, especially due to the increase on the mortgage segment (the market share had an annual growth of 1.8%, to 25.4%). The market share of BCR when it comes to lending (in general) was above 21% at the end of September, and 30% for real estate loans denominated in Euros (up 1.1% in the beginning of the year).

BCR has a market share of 19.2% on the segment of deposits denominated in lei and foreign currencies.