PHILIPPE LHOTTE: "180 million Euros, the costs of the frauds committed at BRD in 2012"

• BRD had the first losing year in the last decade

The costs of the frauds which were uncovered last year at BRD amount to 180 million Euros, said Philippe Lhotte, the President and CEO of the bank. Provisions for the bulk of the amount - 109 million Euros were set up in 2011, and the rest in 2012, of which 25 million Euros in the last quarter, he said. These costs represent a marginal part of the cost of risk, which has increased over 60 percent, compared to 2011, according to Philippe Lhotte. The banker went on to say: "Last year's frauds are among the unpleasant memories, especially since the bank was unfairly placed in the spotlight. BRD was the victim of these frauds, which were uncovered by the internal audit department and by an inspection team which came in from Societe Generale. We have cooperated with the DIICOT, we have filed complaints in these cases, but I am quite disappointed by the exposure in the media, because we are the ones who suffered a loss".

Last year, BRD was at the center of two investigations conducted by the Department for the Investigation of Organized Crime and Terrorism Actions (DIICOT). In the first investigation, which was started in November, approximately 100 people were investigated, for a fraud of 22 million Euros. Among those who were heard was Claudiu Cercel, the deputy general manager of BRD, who coordinated the financial markets department. The second investigation began in December and concerns a fraud of 85 million Euros. According to the DIICOT, the main defendants in this case are Adrian Martiş, executive director of BRD Unirea, and Andrei Nanu, sales manager of BRD Dorobanţi.

Losses of over 300 million lei

Last year, BRD recorded losses of 322 million lei, due to the 61.6% increase in provisions, to 1.938 billion lei, the bank announced.

The increase in the cost of risk was caused by the deterioration of the macroeconomic environment and by the implementation, starting with the third quarter of 2012, of a new, more cautious methodology for evaluating collaterals, according to the bank.

"Our financial performance was affected last year by the increase in the cost of risk, given a difficult economic environment", said Philippe Lhotte. He went on to say: "The solidity of our business model is not in doubt, and we have clear strategic plans for 2013 and the coming years. We will focus on consolidating our risk procedures and policies and improving our operating efficiency, while at the same time continuing to make the investments needed for our future development, so we can generate an adequate level of profitability".

The net banking revenue fell 6.1%, last year, compared to 2011, to 2.912 billion lei, amid the decline in the net interest margin, caused by the unfavorable evolution of the interest rates and by the structural effects, the press release by BRD states.

The bank has cut its operating expenses by 2.4%, compared to 2011, to 1.353 billion lei. The cost/revenue ratio was 46.5%, last year.

The volume of loans has increased 2.5%, and that of deposits has climbed 4.1%, in 2012, compared to 2011. The lending operation was supported by the financing of real estate, as well as by the lending to major corporate clients. The loans granted to individuals increased 2.4% at the end of last year, under the influence of the production of real estate loans thanks to the "First Home" program. Corporate loans increased 2.5% compared to 2011, an evolution caused by the more intense borrowing activity of major corporate clients. Companies favored borrowing in lei, with their balance seeing a 6.0% increase compared to last year. This evolution led to an increase in the market shares of the bank by 0.6%, for retail, and 0.2% for the corporate markets.

The rate of non-performing loans was 21.3% last year, for the entire loan portfolio. On the retail segment, the weight was 7.8%, whereas on the corporate segment it stood at 33.6%. The degree of coverage of the non-performing loans was 51%.

BRD had assets of almost 47.93 billion lei at the end of 2012. The number of the bank's clients at the end of 2012 exceeded 2.3 million, and that of valid cards, 2.2 million. On that same date, the bank was operating over 1,500 ATMs and 21,000 POSs.

• 22 branches shut down in 2012

Last year, BRD closed down 22 branches, reducing the size of its network to 915, announced Philippe Lhotte. Staff expenses fell 5% in 2012, to 636 million lei.

In January, the bank also shuttered 17 more branches and opened 4 others. The number of employees will continue to fall this year as well, the head of BRD said, but he said that the pace will slow down. "We continue to reevaluate our branches, to come up with solutions to streamline costs", Philippe Lhotte said, who went on to say that "probably", certain agencies should not have been opened in the period before the onset of the financial crisis.

The economic environment remained difficult in 2012 as well, as it was characterized by a low level of confidence, which affected consumption, weak foreign demand which prevented the growth of exports and a weak performance of the agricultural sector, with a below average harvest, according to the representatives of BRD. The economic difficulties have caused the gross volume of loans to fall by 0.1%. Retail loans fell 1.5%, due to the 6.2% decline of the volume of consumer loans. "At the same time, companies have held back on investments, which had a negative impact on the demand for loans", BRD states.