B R D S T A N D A L O N E, A C C O R D I N G T O I F R S A P R I L 1 8 T H

Transcription

1 BRD Budget 2019 General Shareholders Assembly B R D S T A N D A L O N E, A C C O R D I N G T O I F R S A P R I L 1 8 T H 2019

2 Macroeconomic environment Strong but unsustainable GDP growth GDP growth reached 7% in 2017 and 4.1% in 2018, driven by private consumption which benefitted from pro-cyclical fiscal stimulus, while investment contribution remained modest In a context of surging wages (average nominal wages growing by +12.5% Y/Y as of Dec-18) and record-low unemployment (3.8% as of Dec-18), inflation accelerated (from 0.1% as of Jan-17 end to 3.3% as at 2018 end), prompting a tightening of the monetary policy and an upward correction of money market rates in the last quarter of 2017 and 2018 Romania s fiscal stance has considerably eased in recent years : the authorities lowered VAT and excise taxes in 2017, and significantly increased public sector wages in 2017 and 2018 The country s structural deficit is now the largest in the EU As part of a larger fiscal package also impacting telecom and energy sectors, a banking tax on financial assets was introduced in late December 2018 through an emergency ordinance The tax would be levied on financial assets of banks as of quarter end, and would be linked to the quarterly average value of Robor 3m and Robor 6m* Considering the current Robor level, the annual tax rate would be 1.2%* (and the collected amount would reach 5.3 bn RON, representing 0.5% of GDP) With the fiscal package hitting lending and investment, economic growth is expected to slow down The impact of the fiscal package will add to already deteriorated perspectives, following the downward revision of the Euro area GDP growth Romania GDP growth forecast** has been revised down to 3% for 2019 and 1.9% for 2020 Exchange rate likely to be under pressure, with appetite from foreign investors getting lower (RON/EUR exchange rate projected at 4.82 at 2019 end vs 4.66 at 2018 end) Interest rates should remain relatively flat in 2019, and may follow a downward trend starting 2020, in a context of economic slowdown Average ROBOR 3m assumption: 3.1% in 2019 * considering the provisions of OUG 114/2018 ** BRD internal forecast P.2

3 Banking environment Lending to individuals is expected to slow down starting with 2019 Lending to households has been dynamic in the last 3 years, in line with disposable income and private consumption rising trends. Housing loans (with loans granted under Prima Casa a key factor of support) posted a strong performance (+6.8% average annual growth rate). With gradually reduced envelops within Prima Casa program (2 bn RON/year during period and 1.5 bn RON in 2021, vs. 2.5 bn RON in 2017), a lower cap on the DSTI for debtors and a less supportive economic environment, households lending dynamic should slow down from 2019 onwards. Lending to corporates rebounded only very moderately in 2018 and is likely to be affected by the economic slowdown in the coming years After contracting almost continuously over the period , loans to the corporate sector rebounded only moderately in 2018 Looking ahead, we expect loans to companies dynamics to be hit by the economic slowdown, and volumes should grow at a still moderate pace The share of fx loans has strongly decreased The regulator has actively encouraged loans in local currency The share of fx loans to total loans consequently decreased from 56% in 2008 to 33% in 2018 end, reducing the vulnerability of the banking sector to fx shock. P.3

4 COMMITTED TO POSITIVE TRANSFORMATION RETAIL towards a more customer centric, digital, and efficient bank CUSTOMIZE THE VALUE PROPOSITION Customized approach per sub-segment on individuals with differentiated offers and levels of service Create full cycle customer journeys Concentrate resources on most attractive segments STREAMLINE THE OPERATING MODEL AND INVEST IN PEOPLE Enhance processes through an increased level of digitization and workflow automation Improve organization efficiency Further grow and engage employees via upgraded training journeys and enhanced performance management system ADAPT THE DISTRIBUTION CHANNEL MIX Accelerate the development of our omnichannel platform Increase the capacity and role of the contact center Physical network fewer branches (-60 planed for 2019), increasingly focused on expertise and advisory services OPEN BANKING After being the first bank in Romania to launch an account aggregator in 2018, continue to actively exploit open banking opportunities CORPORATE fully activate value growth levers FOCUS ON VALUE GROWTH LEVERS Compensate for price pressure on traditional activities by intensifying cross selling and further activating value growth levers Structured Finance, Corporate Finance, derivatives, GTB - ensuring their promotion to all customer segments Capitalize on the specialized EU and national funds structure capabilities Implement a superior sales management and monitoring set up to increase commercial performance ` ENHANCE PROCESSES Further streamline and digitalize processes DEVELOP SYNERGIES Continue to develop synergies with retail, specialized affiliates and SG group P.4

5 Key commercial trends per segments RETAIL CORPORATE Less supportive economic environment expected to lead to a decrease of the production of loans to individuals in 2019 While traditional commissions will be pressured, new growth drivers are to offset the decrease Higher value extraction from Affluent and upper Mass Market segment, driven by insurance and alternative savings activities Development of positions on small business segment improve in priority daily banking footprint push on credit volumes Development of business flows Moderate increase of credits volumes Expected slump in prices of services (transfers, acquiring ) from effects of market digitalization and regulation. Credit margins under pressure owing to abundant liquidity/competition.to be offset by intensified cross-selling and higher activation of value growth levers (derivatives, corporate finance, corporate health insurance plans) P.5

6 PROFITABILITY EVOLUTION Net banking income Net interest income is expected to benefit from higher lending volume (EOP net outstanding amount of loans growth budgeted at +4%) and positive rate effects. Fees and commissions income should be impacted by opposite forces: price pressure, with regulatory evolution and competitive constraint negatively impacting daily and transactional banking revenues growing volume of transactions development of new growth drivers (insurance, asset management) Operating expenses Operating expenses to be strongly impacted by the tax on financial assets impact of the tax on financial assets: 627 M RON (tax rate of 1.2%, considering the provisions of OUG 114) continued pressures on salary costs impact of investments in transformation and regulatory projects doubled contributions to Deposit Guarantee Fund and Resolution Fund in 2019 vs 2018 Cost of Risk Cost of Risk to be significantly less influenced by exceptional items than in P.6

7 2019 BUDGET - KEY INDICATORS A 2017 A 2018 Evo A18/ A17* Budget 2019 Evo B19/ A18* Net loans (RON bn) Total Retail Non Retail % % % % % % Deposits (RON bn) Total Retail Non Retail % % % % % % Net loans/deposits 63% 64% 1 ppt 68% 5 ppts * Variation at constant exchange rate P.7

8 2019 BUDGET - FINANCIAL TARGETS Evolution 18/17 Perspectives for 2019 RON m NET BANKING INCOME 2,639 2, % > +6%, solid NII growth, fees and commissions under pressure FINANCIAL RESULTS OPERATING EXPENSES (1,388) (1,400) 0.9% GROSS OPERATING INCOME 1,252 1, % NET COST OF RISK % +54% including tax on fin. assets* +6% excluding exceptional items Below 30 bp NET RESULT 1,380 1, % RATIOS COST/INCOME RATIO 52.6% 47.0% -5.6 pts ROE 20.6% 22.0% +1.4 pts >10% including tax on fin. assets* > 17% excluding tax on fin. assets * considering the provisions of OUG 114/2018 P.8