Group results- summary of 2008

Group results- summary of 2008

BRE Bank strengthens the core business- Profit before tax of PLN 1.00 billion. BRE Bank accomplishes the set up targets- Q4 results under pressure of exceptionally difficult market conditions- BRE Nova – sustainable business model for market challenges.

In 2008, the BRE Bank Group generated a consolidated profit before tax of PLN 1.00 billion (PLN 857.6 million net), compared to PLN 954.5 million (PLN 710.1 million net) year on year

„For many reasons, the last year was a turning point for the BRE  Bank Group . It was driven by both, internal factors, such as change of the Management Board term of office which, by definition, implies some reorientation of strategic plans in each organization, and external ones, i.e. conditions of more and more difficult economic environment. In the Autumn, the whole economy clashed with a dramatic change of market conditions, whose consequences will have to be faced up by us for a longer period of time "- says Mariusz Grendowicz, president of the Management Board of BRE Bank. “The bank has achieved set targets, but new market circumstances require change of the approach in running the business ”- he adds.

Profit before tax achieved in 2008 was higher, as compared to PLN 45.6 million, i.e. up by 4.8%, which is connected both, with growth of PLN 21.6 million (increase by 2.6%) in continued operations and result achieved on discontinued operations (increase of PLN 24 million i.e. up by 22%). Key planned business targets were achieved, including:
- growth in the number of corporate clients up to 13 098 (up by 6.6% compared to December 2007) and retail clients up to 2.5 million (up by 24%, and including CZ and SK market up to 2.8 million).
- loans granted to corporate clients totaled PLN 25.4 billion (up by 30.2% compared to December 2007), and retail clients up to PLN 25.0 billion (up by 90.3%).

In Q4 only BRE Bank group generated consolidated profit before tax of PLN 44,9 million. The key factors which affected financial result negatively are as follows:  
1.                   Worsening market conditions and liquidity, limiting the chances of generating incomes.
2.                   Increase in the costs of obtaining sources for business financing and negative influence on the valuation of liquidity and derivatives instruments.
3.                   Significant increase of credit provisions connected with effects of the economic slump.
4.                   Inclusion of BRE Ubezpieczenia TU SA and BRE Ubezpieczenia Sp. z o.o.  into the full acquisition accounting method, which resulted in a decrease of the Group result by PLN 40.4 million by elimination of intergroup transactions.
5.                   Continued expansion of the retail and corporate branch network, and the implementation of mBank’s transborder expansion project.

Key Performance Indicators:

The solvency ratio amounted to 10.03 % by the end of 2008, compared to 10.16% year on year and 10.51% at the end of September 2008. Although the own funds significantly increased, a solvency ratio was reduced  compared to the last year due to the increased capital requirement, both from the credit and operational risk, which has been included from the beginning of 2008.  
The return on equity before tax (ROE) of the BRE Bank Group as at the end of 2008 amounted to 30.8% compared to 35.9% a year earlier (ROE before tax for continued operations amounted respectively 26,7 %, compared to 31.8% year on year).

Cost/Income ratio (C/I) amounted to 55.1 % in 2008 compared to 55.5% year on year. The CIR net of one-off transactions was 60.6 %, ca 2.8 p.p. higher than in the previous year, which was a year of exceptionally high returns in particularly favorable market conditions.

„I can safely say that today we are at a turning point. We are regrouping each other focusing on our strengths and reviewing each field of our business activity.  We are gathering up our strengths, so if the market recovers, we will be ready to take challenges dynamically"- says Mariusz Grendowicz.  

„That is why the BREnova project is to be launched from the beginning of Q1 2009. The project is aimed at revision of the currently applicable business model and at adapting it to the present market conditions.   The project consists of two parts, first of all, it forecasts the increase in profitability in the bank's core business, including focusing on cross selling, or product innovations, secondly, it assumes the cost discipline and continuous monitoring of expenditures. ”adds Grenodwicz.
appendix-2-retail-banking (1).doc

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appendix-1-corporates-and-financial-markets (1).doc

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