BRD-SocGen, Romaniaes second-largest bank, last year made 656 million RON (about 186 million euros) net profit, an increase of 19 percent in nominal terms against 2005.
The cost/revenue index went up from 47 percent to 49 percent, due to investments in the territorial network.
The year 2006 was marked by a change in the bankes streams of revenue, with the share of fees and gains from operations on the market increasing compared with the interest margin, whose share went down from 54.9 percent to 52 percent of the total net banking revenue.
The fastest to increase in value were the revenues from market operations, which went up 42 percent from 2005, to a share of 12 percent, followed by revenues from fees, which increased by 33 percent to a share of 36 percent.
Patrick Gelin, BRD-SocGen chairman, says this move will continue, so as the streams of revenue, among the three above-mentioned cores, will achieve a greater diversification.
He also anticipates a decline in the share of the corporate sector of the business, which will lose ground to the faster rising sector of services for individual customers, as well as to the market operations, which are also "growing strongly."
The net banking revenue went up 21 percent in real terms compared with 2005, to 1.7 billion RON
The total expenses were somewhat faster to progress, by 25.9 percent in real terms, reaching 861 million RON.
BRD invested 67 million euros last year, 29 million euros of which were in real estate, to expand the network by 274 branches, and a further 31 million euros were spent on the IT infrastructure.
Other expenses went to personnel, which increased by 1,650 people to almost 7,300.
Despite the increase in the total volume of loans by 68 percent to 18.7 billion RON, the share of non-performing loans in the portfolio fell from 1 percent at the end of 2005 to 0.35 percent. This trend has been maintained over the last four years, after the peak of 2.9 percent was reached in 2002. However Patrick Gelin does not rule out an increase in this area in the coming years, especially where the individual customer loan portfolio is concerned.
"An increase in the percentage of non-performing loans over the next few years is not out of the question, considering that the increase in the credits granted to individuals comes with a greater risk cost, than in the case of legal entities," Gelin says. He also includes risk cost in the "uncertainties" chapter for 2007, taking into account a potential slight increase.
What is certain, on the other hand, is that costs will remain high.
Gelin says that the offices opened in 2006 are supposed to reach the first phase of profitability as late as in 2008; in addition to their expenses, new investments in the IT system and real estate will be made.
In conclusion, BRDes chairman estimates the net banking revenue to follow a similar trend to that of 2006.
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