Closer to the Customers: BRE Bank Group Q1 2007 Results

Closer to the Customers: BRE Bank Group Q1 2007 Results

High profitability of regular business operations Fast growth in Retail Banking business and profitabilityIntegration of Corporate and Investment BankingThe BRE Bank Group generated a consolidated profit before tax of PLN 295.87 million* in Q1 2007, up 170% year on year (the net profit was PLN 222.7 million). The profit before tax on regular business operations was PLN 206.4 million excluding the profit on the sale of the Skarbiec Asset Management Holding (SAMH). All of the Group’s business lines and strategic subsidiaries were growing dynamically and the upward trend continued in 2007. The Retail Banking Line reported very good results in Q1 2007. The contribution of Retail Banking to the profit before tax on regular business operations was over 33% (10.9% in Q1 2006), and the Line became a pillar of the Group’s profitability. Corporations and Financial Markets contributed a profit before tax of over PLN 137.6 million, more than 66% of the profit before tax on regular business operations.

The return on equity (ROE) before tax at 32% in Q1 2007 proves the high profitability of funds entrusted to the Bank by the shareholders. As a result, BRE Bank joined the sector leaders in terms of financial effectiveness.

“Early this year when I summarised BRE Bank’s 2006 financial results exceeding the original targets, I emphasised that we managed to permanently rebuild strong financial foundations of the BRE Group. Today’s results are another proof of that statement. I am proud to announce the good results of the first quarter and to confirm that we are on track to exceed the mid-term targets,” said Sławomir Lachowski, BRE Bank’s CEO.

Significant Contribution of Retail Banking to the Group’s Results
The BRE Bank Group’s Retail Banking Line grew its profit almost  by a factor of 6 year on year in Q1 2007.** At the end of March 2007, the Line’s profit before tax was PLN 69.3 million, accounting for 33.6% of the profit on the Group’s regular business operations. The number of mBank and MultiBank customers was 1.73 million, up by over 100 thousand year to date, and the number of accounts was 2 million, up by 137.2 thousand and at the end of Q1.In Q1 2007, the mBank and MultiBank loans portfolio was PLN 9.6 billion, up 16.4%, and deposits were PLN 7.9 billion, up 12%.Private Banking’s assets under management were PLN 4.8 billion, up 7.7%.
(See Appendix 1 for details)

New Business Line: Corporations and Financial Markets
The new business line Corporations and Financial Markets which includes Corporate Customers and Institutions as well as Trading and Investments generated a profit before tax of PLN 137.6 million and a net profit of PLN 102.6 million in Q1 2007.

“In 2007 we decided to integrate two strategic business of the Bank by defining a new business line: Corporations and Financial Markets. The line will be managed jointly by the current Corporate and Investment Banking Lines. This solution will enable a focus on the core business; it is consistent with the way the Bank manages sales by providing customers with a comprehensive offer covering both traditional banking products and more complex investment products. In addition, investors will get a more transparent format of reporting by business line, much closer to the nature of the BRE Bank Group’s business,” said Mr Lachowski.

Corporations and Financial Markets
Corporate Customers and Institutions generated a profit before tax of PLN 95.3 million in Q1 2007, up 73.4% year on year. Active customer acquisition produced tangible results in Q1 2007. BRE Bank acquired 606 new corporate customers (of which 76% were SMEs: companies with annual sales between PLN 3 and 30 million) in Q1 2007, up 22% year on year. BRE Bank currently serves 11,658 corporate customers. Corporate customers’ interest in credit products rose sharply. Lending to enterprises was PLN 9.1 billion in Q1 2007, up 18.5%, and the market share was 6.0%. Balance-sheet corporate loans were PLN 10.4 billion at the end of March.“We can see a clear shift in the corporate banking market as companies start to invest and take debt. The corporate loans market will grow in view of large investment projects including EU co-financing. The strong growth will be mainly driven by an increasingly optimistic sentiment of companies about their future financial standing, their improving liquidity, and consequently their plans to leverage the strong market in order to expand their business and markets,” said Janusz Wojtas, BRE Bank Board Member and Corporate Banking Head.BRE Bank’s position is even stronger in corporate deposits (8.7% compared to 8.5% in March 2006). Corporate customers’ deposits with BRE Bank (including deposits of enterprises) were PLN 16.6 billion at the end of March 2007, up 27.1% year on year.

Trading and Investments
Trading and Investments contributed PLN 42.3 million to the Group’s profit before tax. The profit was mainly driven by trading transactions and issues of trading securities as well as risk and liquidity management. BRE Bank remained a leader in non-Treasury debt. According to Fitch Polska, BRE Bank’s position in Q1 2007 was as follows:- 1 in issues of bank bonds (33.5% market share);
- 2 in issues of short-term debt securities (17.6%);
- 3 in issues of corporate bonds over 1 year (14.51%).

Group Subsidiaries’ Profit Before Tax Up 30%
The consolidated subsidiaries of the BRE Bank Group generated a profit before tax of PLN 51.8 million year to date, up 30% year on year (excluding profits of SAMH). The strategic subsidiaries contributed 17.5% of the Group’s profit.
(See Appendix 2 for details)

Key Indicators
In Q1 2007, the consolidated return on equity (ROE) before tax was 32%, one of the highest indicators in the sector. Although the scale of business grew, the strict cost discipline continued: the cost/income ratio was down to 57.7%, much lower than a year ago (66.1%). The Group’s capital adequacy ratio also grew and was at a safe 10.86% in Q1 2007 (11.5% at the Bank). The proportion of irregular loans (under NBP rating) was down to 4.8% (5.5% at the end of 2006).

Summary
“Q1 2007 confirmed the upward trend in all of the Bank’s strategic business areas. In the nearest future, we will focus on further high growth, attaching greatest importance to the quality of customer service and product offer as well as a high return on equity for the shareholders,” added BRE Bank’s CEO.

Investors also acknowledge BRE Bank’s positive outlook as demonstrated by BRE Bank’s stock price on the Warsaw Stock Exchange. BRE Bank’s stock price reached its historical high of PLN 500 per share on 23 April 2007.
* Including a one-off capital profit before tax on the sale of the Skarbiec Asset Management Holding (SAMH) at PLN 89.46 million.** mBank, MultiBank, Private Banking, BRE Wealth Management, emFinanse and BRE Ubezpieczenia TU S.A.
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