THE BUSINESS MODEL BORE FRUIT Banca Transilvania, a fabulous profit on a market in freefall

Banca Transilvania yesterday announced a 40% increase in its profits for the year 2012, to 320.43 million lei, a performance which brokers consider surprising.

The result is out of tune with the banking sector, as most of the Romanian lenders on the Romanian market posting losses.

According to analysts, the difference comes from the business model of Banca Transilvania, as the bank is focused on smaller businesses, since its financing sources were more expensive, in the absence of a foreign parent bank as a shareholder.

• Horia Ciorcilă: "We will propose the capitalization of profit"

The president of Banca Transilvania, Horia Ciorcilă, expressed his satisfaction with last year's results, especially since they were obtained in spite of a deep volatility and of the multiple uncertainties of the local and European economic environment.

He said: "The increase in the number of active customers, correlated with historical highs of in the number of operations and of better performance of some of our lines of business have led to the strong consolidation of our market position. We will suggest to our shareholders the capitalization of the profit, in order to be able to help the future growth of the bank and to continue its support of the Romanian economy".

Brokers consider that the evolution of the bank was the result of its strategy and of reinforcement of its position on the banking market.

• Adrian Simionescu, "Vienna Investment Trust": "The business model which is unique in the country has ensured the bank's success"

The business model which is unique in the country has ensured the bank's success last year, said Adrian Simionescu, head of "Vienna Investment Trust".

He said: "It is not the growth in itself that is satisfactory, but the fact that it was achieved in a difficult economic period. Most of the banks have posted losses, with 2012 representing a historic high when it comes to the total losses. What is praiseworthy in the case of Banca Transilvania does not concern the activities conducted by the bank in 2012, but also the reorientation of the strategy, ever since back in 2009, when the financing sources fell dramatically and the bank had to find alternative expansion methods".

According to Adrian Simionescu, no other bank followed this business model, of focusing on attracting new, well-off customers, in order to offset any potential non-performing loans.

He went on to say: "The 40% growth of the bank is more than satisfactory for Vienna Investment Trust, as well as for our investors".

Mr. Simionescu considers that the strategy in itself is far more important, and he said that he expects similar results to happen in the coming years as well.

• Alin Brendea, "Prime Transaction": "One of the few banking businesses which managed to successfully keep a balance between cost cutting and a growth-inducing policy"

The results of Banca Transilvania can be viewed as positive, both in the context of the results in the banking sector, as well as through the angle of the fact that 2012 was a difficult year for the Romanian economy, considers Alin Brendea, general manager of "Prime Transaction".

The growth seen last year came in the context of the strengthening of its position on the banking market, he went on to say.

Alin Brendea said: "It is one of the few banking businesses which managed to successfully keep a balance between cost cutting and a growth-inducing policy over the last few years, which is now showing its results".

In his opinion, Banca Transilvania has the necessary strengths to show positive results this year as well: "The bank has announced that it has significant amounts of cash which could provide the foundation for new financing which would directly affect the turnover and the profitability".

• Mihai Mureşian, "Intercapital Invest" : "The bank's results are surprising"

The growth of Banca Transilvania in 2012 is surprising, considering that most banks had substantial losses, considers Mihai Mureşian, trading director at "Intercapital Invest".

He said: "Banca Transilvania has shown, lately, that it is above the market average, in fact it is the leader of the pack, and has succeeded each time to show positive results. I don't know how it did that, but it certainly shows that BT is a strong and profitable bank".

Mihai Mureşian considers that the banking system is going through an unfavorable period, and the macroeconomic activity in the country will be extremely important this year, but there are chances that Banca Transilvania will maintain its profitability in 2012.

• Magda Sirghe, "Tradeville": "The results are slightly below the expectations of analysts polled by Reuters"

Magda Sirghe, financial analyst at "Tradeville", said that Banca Transilvania, the third largest bank in terms of assets, has seen financial results slightly below the expectations of analysts polled by Reuters, with a 10% increase in operating revenues and a 40% increase in the net profit.

The quoted analyst said: "All the categories of revenues, interest (+5%), commissions (+15%) and financial operations (+12%) have contributed to an increase in operating revenues. We are seeing the reduction of the margin on interest and the profit from financial operations, which generally fluctuates. The increase in operating revenues for expansion and development at the same rate with that of the operating revenues, as well as the increase of the net expenses with loan-loss provisions, should have reduced the annual growth rate of the net profit, but the bank benefited from fiscal facilities in switching from the RAS to the IFRS reporting standard".

In the opinion of Mrs. Sirghe, 2013 will be a difficult year, with an uncertain economic environment. "The profitability may fall compared to last year, on the back of the reduction of interest revenues and the increase of expenses, but the bank still enjoys the support of the institutional investors (EBRD)".

Concerning its profit, Banca Transilvania says in the report it published yesterday that it has benefited from fiscal facilities in 2012, as a result of the application of the prudential filters imposed by the Order of the NBR no. 29 of December 28th, 2011.

The operating revenues of Banca Transilvania reached 1,536.55 million lei, up 10% compared to December 31st, 2011. The upward trend was caused by the 12% increase in the revenues from financial operations, 15% in terms of the net revenue commissions, and 5% of net interest revenues, according to the report of the bank.

At the end of last year, the operating expenses of BT amounted to 816.36 million lei, compared to 743.48 million lei, seen in 2011. The 10% increase was also caused by the organic increase in the activity of the bank, as well as by the evolution of the Euro/leu exchange rate, the officials of BT say.

Net expenses with provisions for assets, other debts and lending commitments amounted to 379.43 million lei, compared to 380.80 million lei, what their value was in the previous year. The net expenses with provisions for the lending activity amounted to 368.14 million lei, compared to 324.50 million lei, at the end of 2011, as the bank has constantly kept on top of the quality of its loan portfolio, the quoted report says.

The officials of the bank also say: "The loan portfolio of Banca Transilvania is a stable one, mostly denominated in lei, and the balance is 17,151 million lei. 64.20% of the bank's loans are issued to companies, and 35.80%, to individuals. Non-performing loans, which are more than 90 days overdue, represents 11.31% of the total loan portfolio of the bank. The balance of the provisions for the lending activity is 2,111 million lei, on December 31st, 2012, compared to 1,659 million lei, at the end of 2011, with BT ensuring an adequate rate of provision coverage for non-performing loans, of 108.05%".

The deposits attracted from customers increased 14% compared to the end of 2012, amounting to 23.061 million lei. BT has encouraged saving in 2012 as well, through transparent and simple products, by offering customers real-positive interest rates, according to the report of BT.

On December 31st, 2012 the bank had 1.67 million active customers, compared to 1.55 million active customers in the previous year. The number of customer operations has also increased, 11.3%, compared to the similar period of 2011, reaching 221.93 million operations.