The results of BRE Bank in Q1 2003

The results of BRE Bank in Q1 2003


The results of BRE Bank in Q1 2003 are best proof that the measures adopted in mid-2002 in order to put BRE Bank back on the profitability track were most adequate. In Q1 2003, the BRE Bank Group generated a net profit of PLN 33,841 thousand. Its total assets grew to PLN 28,880,658 thousand. The results of BRE Bank were similar: its net profit was PLN 31,842 thousand and its total assets grew to PLN 25,431,988 thousand.

Selected financial data, Q1 2003, Q1 2002, and Q4 2002 [PLN’000]
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The results of BRE Bank in Q1 were generated in the context of continuing harsh economic conditions which caused negative trends in the banking sector, in particular falling deposits and a lower than expected demand for loans. Nonetheless, the consolidated result on banking operations was clearly stronger than in Q4 2002; the operating profit of the Bank and the Group, negative in Q4 due to high provisions, was much higher than in Q1 2002. This opens prospects of upward trends in the profitability of BRE Bank’s core business, though the Bank and its clients are still affected by the difficult macroeconomic conditions.The result of BRE Bank on financial transactions is particularly noteworthy. According to plans, in the context of continuing negative trends, BRE Bank has recently strongly reduced the risk profile of such transactions. This ensured additional profits in this business (compared to a loss incurred in 2002), although capital gains from such planned disposals as that of Elektrim (most of the shares to be sold in Q2), Polcard or Telbank did not yet materialise in Q1.In proprietary investment, 2 transactions were particularly important in Q1 as they helped to significantly reduce the Bank’s risk and exposure in the capital market. First, the Bank executed agreements to sell the shares of Elektrim SA at a profit of over PLN 20 million; the Bank also released provisions for loans secured with Elektrim shares. Second, the Bank signed a letter of intent concerning refinancing of the debt of ITI. These measures planned for mid-2003 will reduce the investment in debt securities of ITI Holdings and give the Bank a stake in the equity of the promising company TVN.In Q1 2003, BRE Bank remained the unrivalled leader in money market operations: it came first in an NBP ranking of banks active as money market dealers. According to Fitch Polska, the Bank was the second largest issuer of mid-term debt and moved up to the second position in terms of issued short-term debt.In order to relieve the difficult conditions of business of its corporate clients, especially small and medium-sized enterprises, in Q1 2003 BRE Bank launched an intensive promotion campaign of a new SME product package marketed in mid-January 2003. BRE Bank’s EFFECT and EFFECT Plus Packages facilitate SMEs’ access to banking services, including attractive products like overdraft facilities up to PLN 200 thousand (under simplified lending procedures); lower thresholds for individually negotiated fx rates; lower thresholds for automated one-day deposits; and others. In Q1 2003, BRE Bank was an active partner and lender for corporate clients. The BRE Bank Group’s lending grew 9% (compared to Q4 2002) while the Bank’s loans to clients and the public sector grew less fast (only 0.5%), mainly due to the repayment of several large loans and reduced exposure. The share of irregular loans in the Bank’s portfolio was 20.3% under the methodology of NBP, close to the Q4 figure of 19.9%.Despite difficult macroeconomic conditions and negative trends in the banking sector, the results of the retail business of BRE Bank were a great success.mBank reported a 15% growth in deposits, the number of accounts and clients in Q1 2003 compared to 31 December 2002. It now has over PLN 2.14 billion in over 480 thousand accounts of more than 400 thousand clients. The Investment Fund Supermarket concept is very popular with mBank clients who have invested ca. PLN 50 million.MultiBank is also growing fast and now has 28 outlets throughout Poland. It has over 74 clients who have filed over 3 thousand credit applications for over PLN 0.5 billion of loans in the innovative Financial Plan service (loans of over PLN 310 million have already been granted).The subsidiaries of the BRE Bank Group also grew successfully in Q1 2003. Rheinhyp-BRE Bank Hipoteczny reinforced its position as the unquestionable leader in Polish mortgage banking thanks to a successful first public issue of mortgage bonds worth PLN 200 million. The demand for the bonds in subscription (PLN 340 million) was 70% greater than the actual size of the issue. BRE Leasing is still the strong second largest leasing company in Poland. The company’s share in the market of passenger cars grows dynamically: this new business accounts for 20% of all leased movable assets in the portfolio. The factors of the Intermarket Bank Group also grow: they all recorded profits (totalling PLN 4 million) in Q1 2003 while Intermarket Bank, the unparalleled leader in the factoring market in Central and Eastern Europe, earned a net income of ca. PLN 12 million. Polfactor SA also reported good results in Q1 2003: its total turnover was up 25% compared to Q1 2002, including a growth of 250% in export factoring.The Skarbiec Asset Management Holding (SAMH) also prospered: its assets under management grew to nearly PLN 4 billion in Q1 2003 (up PLN 700 million compared to 31 December 2002). Skarbiec TFI, part of SAMH, closed Q1 2003 as the fourth largest investment fund manager with a market share of over 7% and in February 2003 was awarded the prestigious Bull and Bear prize as the Best Investment Fund Manager. The assets of  the pension fund company PTE Skarbiec Emerytura were PLN 1,304.5 million, a strong fifth position in the market.In the context of the financial results of Q1 2003, the projected ROE of over 5% at the end of 2003 seems very realistic and will be a step forward to achieve an ROE of 15% in 2005 pursuant to the long-term strategy. The Bank entered 2003 with books fully cleaned up and with high provisions and thus won’t need to set up large additional provisions as it is hedged against risks that may arise in 2003. Due to the repayment of the loans secured with Elektrim shares, net provisions were (PLN 34,644 thousand) in Q1 2003 (i.e., more provisions were released than created). Other positive aspects of the Bank’s business in Q1 2003 include the decrease in its overhead costs by 19.4% compared to Q1 2002 (the Group’s overhead costs fell 13%); however, due to the development of retail banking, the costs are not expected to go down dramatically in 2003. The first effects of measures taken to mitigate the risks of equity investment are also apparent; this should drive stable growth in the coming quarters, especially in the context of expected gains from the disposal of Elektrim, Polcard and Telbank. In addition, and just as importantly, 2003 will be a vital year in terms of growth expectations and opportunities due to Poland’s forthcoming accession to the European Union. Fully aware of this momentous process, BRE Bank was the first Polish institution to become actively involved in the promotion of Poland’s membership of the EU as it joined the recently established Citizens Initiative for a YES Vote in the Referendum. As of 1 April 2003, the BRE Bank internet portal www.brebank.com.pl and the websites www.mBank.com.pl, www.multibank.pl, as well as the web sites of many subsidiaries of the Group feature banners advocating for the European Union and encouraging Poles to vote in the referendum. The Bank’s official participation in the Initiative is based on a deep belief in the idea of a united Europe; BRE Bank also supports EU assistance programmes which will be available to Poland after the accession and may help many Polish companies, including the Bank, to grow.Kontakt dla mediów