The Growth Continues: BRE Bank Group Results in Q1 2008

The Growth Continues: BRE Bank Group Results in Q1 2008

The BRE Bank Group reported a consolidated profit before tax at PLN 427.6 million (net profit at PLN 350 million) in Q1 2008, up by 145% year on year. All the business lines and strategic subsidiaries of the Group grew dynamically in continuation of the upward trend observed in 2007.

The generated profits were helped by the sale of  Vectra S.A. at a profit of PLN 137.7 million (compared to a PLN 89.5 million profit on the sale of SAMH in 2007). The return on equity (ROE) before tax was 52% in Q1 (ROE net of one-off transactions was 35.3%, compared to 32% in Q1 2007).

“The new Management Board came to a bank in a very good condition. I must stress that BRE Bank is a leading institution both in corporate and in retail banking. Today it is the third largest market player by assets and the retail customer base. It is a great challenge to match the achievements of my predecessors, whom I fully respect. We will continue to grow dynamically but the emphasis will shift from the growth rate to the quality of growth and financial performance,” said Mariusz Grendowicz, President of the BRE Bank Management Board.

The financial performance in Q1 2008 was mainly driven by:
1.      Steady growth of the portfolio of loans and customers deposits thanks to expansion of retail banking and continued upturn in the corporate loans market. The portfolio of credits and loans was PLN 37.9 billion in Q1 2008, up by PLN 11.4 billion or 44.3% YoY. The portfolio of retail loans and corporate loans both grew dynamically, respectively by PLN 5.3 billion or 53.6% YoY to PLN 15.2 billion and by PLN 6.3 billion or 40% YoY to PLN 21.8 billion.
2.      Significant contribution of the consolidated subsidiaries to the Group’s results. The profit before tax generated by the Group subsidiaries totalled PLN 88.7 million, compared to PLN 51.8 million in Q1 2007, up by over 70%.
3.      Strict cost discipline, both at the Bank and the subsidiaries.4.      Continued high quality of the loans portfolio(low credit and loans impairment provisions at PLN 22.2 million in Q1 2008 v. PLN 6.9 billion in Q1 2007).

“We care about sustainable growth. We uphold the main goals of the current strategy. Minor modifications aimed at a better balance between the sources of the Bank’s income will be probably announced at the turn of September. The Bank’s mid-term business plan will not be modified at this stage,” said Mariusz Grendowicz.

Corporates and Markets

Corporates and Markets (a line including the segments of Corporates and Institutions as well as Trading and Investments) generated a profit before tax of PLN 321 million in Q1 2008, up by PLN 183 million or 133% YoY. As a result, the contribution of the Line to the Group’s profit was crucial at 75%. Growth was recorded both in assets (up by 24% YoY from PLN 37.6 billion to PLN 46.5 billion in March 2008) and liabilities (up by 22.5% YoY from PLN 34.8 billion in March 2007 to PLN 42.7 billion in March 2008) in Q1 2008. The profit was mainly driven by the net interest income (PLN 182.2 million), the net commission income (PLN 91 million) and the net trading income (PLN 104.3 million). The Corporates and Markets subsidiaries retained their significant contribution to the profits of the Line. The highest contribution came from BRE Bank Hipoteczny, DI BRE, BRE Leasing, and Intermarket Bank.  
(see Appendix 1 for more information)

Retail Banking

The Retail Banking Line (mBank, MultiBank, Private Banking & Wealth Management) reported a profit before tax of PLN 76 million in Q1 2008 (PLN 69.3 million in Q1 2007) contributing 18% of the consolidated profit before tax of the Group. The retail banks served 2.16 million customers with 2.6 million accounts and PLN 12 billion in deposits. The profit was mainly driven by the growing net interest income (up by 52%) and net commission income (up by 10%). As a result, the contribution of Retail Banking to the total net interest and commission income of the Group grew from 37.4% in Q1 2007 to 40.8% in March 2008.(see Appendix 2 for more information)

70% Growth in Pre-tax Profit of Group Subsidiaries

The consolidated subsidiaries of the BRE Bank Group generated a profit before tax of PLN 88.7 million in Q1 2008, up by 70% year on year. The contribution of the strategic subsidiaries to the profit of the Group was at 21%. The main contribution came from BRE.locum, BRE Bank Hipoteczny, DI BRE, BRE Leasing and Intermarket Bank.
(see Appendix 3 for more information)

Key Performance Indicators

The significant growth in operating income combined with a strict cost discipline helped to improve the profitability and effectiveness ratios year on year.

The return on equity (ROE) of the BRE Bank Group was 52.0% in Q1 2008, compared to 45.8% in Q1 2007. ROE net of one-off transactions (sale of the held block of shares of Vectra SA in 2008, sale of SAMH in 2007) was 35.3%, compared to 32% in Q1 2007.

While the scale of business grew, the strict cost discipline was pursued: the cost/income ratio was down to 43.6%, much lower than in Q1 2007 (49% YoY).

The Group’s capital adequacy ratio was 9.48% in Q1 2008, compared to 10.16% in December 2007 and 10.86% at the end of March 2007. The modest decrease resulted from the changed calculation methodology following the implementation of Basel II as well as dynamic growth of lending. As a result, the Group’s own funds were PLN 4.3 billion at the end of March 2008, compared to PLN 3.5 billion at the end of March 2007, and the capital requirement increased from PLN 2.6 billion at the end of March 2007 to PLN 3.7 billion in 2008 (including PLN 0.3 billion for operational risk). 

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