In 3Q 2003 BRE Bank once again proved that it had learned a lesson after the painful experience of 2002. In 3Q 2003 the Bank generated a profit on the order of PLN 13,4 million, exceeding market expectations and growing the BRE Bank Group’s incremental net profit to PLN 68.6 million. The total assets of the Group also grew to over PLN 29.5 billion; according to estimates, this helped the Bank to remain in a high fourth position among Polish listed banks.
Selected financial data, 2Q and 3Q 2002 and 2003 [PLN’000]
It should be noted that despite meagre upward trends in the Polish economy, affecting also the result of banking operations, BRE Bank managed to generate a stronger net commission income (compared to 2002 and to 2Q 2003) and a stable net interest income close to that earned in the previous, profitable quarter (despite the downturn in the Treasury market and interest rate cuts). This corroborates positive trends in the Bank’s financial performance in its core business, as well as optimistic projections, especially since BRE Bank experts forecast continued improvement of GDP growth at ca. 4% in 4Q 2003.Compared to the same period of 2002, the Bank’s results on operations and financial transactions clearly improved in 1-3Q 2003. Both these figures are much better than in 2002.With regard to financial transactions, BRE Bank (which pursues its strategy of reducing the risk profile of equity investments) has recently managed to close the refinancing of the debt of ITI Holdings, which significantly reduces the debt exposure to the ITI Holdings Group. The disposal of the second tranche of Elektrim stocks will be closed in the coming days.All this justifies expectations of even more dynamic growth in the results of the Bank in the nearest future. The strong outlook of the Bank is supported by the intentions of its strategic partner, Commerzbank AG, which was allowed by the Banking Supervision Commission (KNB) as of 11 September 2003 to exercise between 66% and 75% of votes at the General Meeting of BRE Bank. This intention to increase the equity investment is good proof of BRE Bank’s rising importance in the growth plans of Commerzbank. Mr Klaus-Peter Müller, the CEO of Commerzbank, named BRE Bank one of Commerzbank’s four strategic investments globally. The Bank’s good outlook is also confirmed by recent decisions of Moody’s which increased several ratings of BRE Bank, Rheinhyp-BRE and the Eurobones Issue Programme of BRE Bank subsidiaries in late October 2003.3Q 2003 was a time of dynamic growth in several businesses of BRE Bank. The Bank remained the unquestionable leader in money markets and came first in an NBP ranking of banks active as money market dealers. According to Fitch Polska, the Bank remained in the second position in terms of the value of placed short-term and mid-term debt securities denominated in PLN. The Bank retained its strong third position in the market of municipal bonds.While the climate of unfavourable business conditions continues in Poland, BRE Bank traditionally strives to be a close partner to corporate clients. The Bank services ca. 30% of large Polish companies and is improving its position in the SME market. In 3Q 2003 the Bank again expanded its product offer for SMEs (EFFECT and EFFECT Plus Packages) and now offers free-of-charge intermediation in and simplified terms of leasing (BRE Leasing 48h) as well as attractive terms of foreign exchange and VISA Business Electron cards.BRE Bank’s significant share in the corporate banking market is confirmed by the high 6% growth in the Bank’s loan portfolio (compared to 2Q 2003). The share of non-performing loans in the risk portfolio of the Bank (and Rheinhyp-BRE) was only 4.3% at 30 September 2003. Another traditional asset of BRE Bank is its service in financing Poland’s foreign trade. The share of BRE Bank in this market grew to 18.5% at 30 September 2003 (from 17.1% at 31 December 2002) amounting to over US$ 13.7 billion. BRE Bank ranked second in a Gazeta Bankowa weekly ranking (3 November 2003) of the best Polish exporter banks.In 3Q 2003 BRE Bank was dynamically growing its retail banking operations. Despite negative trends still prevailing in the market (household deposits fell by ca. PLN 6 billion in the banking sector in January-September 2003), mBank attracted ca. PLN 0.5 billion of new deposits and crossed the mark of 500 thousand clients (now: over 507 thousand) and 600 thousand accounts (now: 617 thousand). mBank deposits are still growing (now: PLN 2.42 billion) and so is mBank’s Investment Fund Supermarket whose clients invested over PLN 193 million. MultiBank also grew as it won over 105 thousand clients who invested over PLN 325 million in deposits. MultiBank’s lending products are increasingly popular with clients: over PLN 800 million of loans were granted under Financial Plans (PLN 583 million disbursed).Subsidiaries of the BRE Bank Group also performed very well. In the second half of October Rheinhyp-BRE Bank Hipoteczny made a successful second public issue of mortgage bonds worth PLN 200 million and consolidated its leading position in Polish mortgage banking. Given the growing role of Rheinhyp-BRE Bank Hipoteczny in the BRE Bank Group, BRE Bank and Eurohypo AG, the other shareholder of Rheinhyp-BRE Bank Hipoteczny, signed a letter of intent concerning the sale of 50% of the bank’s stocks. BRE Leasing remained in a strong second market position (in 3Q2003); in passenger car leasing, it moved from the fifth position in mid-2003 to the third position now (a 9% market share). The subsidiaries of the Intermarket Bank Group are also growing: their total profit was EUR 3.6 million in 1-3Q 2003 and their total turnover was nearly EUR 2 billion (up 30% compared to 3Q 2002).The Skarbiec Asset Management Holding performed very well too: its assets under management grew to ca. PLN 4.9 billion at 30 September 2003 (up ca. PLN 400 million in 3Q 2003).The clients of Skarbiec TFI funds invested PLN 2.54 billion at 30 September 2003, and the company remained the fourth largest market player with a market share of over 7%. All the portfolios managed by Skarbiec Investment Management were profitable in 3Q 2003; SIM managed assets worth PLN 3.36 billion, including PLN 820 million in investment portfolios and PLN 2.54 billion in TFI Skarbiec investment funds. PTE Skarbiec-Emerytura pension fund remained in a strong fifth market position: its assets grew PLN 327 million year to date and stood at PLN 1.53 billion at 30 September 2003.BRE Bank’s net consolidated profit at PLN 13.5 million in 3Q 2003 was stronger than market expectations. The average forecast of banking analysts published by the Polish Press Agency (PAP) on 4 November 2003 was PLN 7.7 million. In view of on-going economic recovery which still has failed to significantly improve the financial standing of banking clients, especially businesses, these results are strong, though they fall short of the expectations of the BRE Bank’s Management whose priority for the coming years is to restore the Bank’s profitability on the order of above-average results generated in previous years. In order to achieve these goals, the Bank pursues a policy of cost rationalisation and a strict regime of credit and investment risk controlling. These measures are an integral part of the Bank’s strategy and will ensure continued dynamic growth in successive quarters and years. BRE Bank’s positive outlook is very realistic, as confirmed by the results and the dynamic growth of Group subsidiaries. Importantly, the negative effect of the results of the subsidiaries (some of which have not yet reached the break even) on the net profit of 1-3Q 2003 was only ca. PLN 3.5 million, compared to a loss of nearly PLN 100 million a year ago. The growth of the retail banking operation, faster than expected, is just as promising: this business line will turn profitable in 2005 and become another important source of the Bank’s revenue.