Erste Group, the main shareholder of the Romanian bank, recorded also a net loss of EUR 929.7 M.
Banca Comerciala Romana (BCR) recorded losses of RON 276.6 million (EUR 61.9 million) in H1 2014, amid a sustained provisioning, associated to the balance sheet-cleaning operation, the financial institution informs in a press release.
The bank has as target a 25 percent reduction in the balance of non-performing loans (NPLs) by end-2014, and it completed, in July, the sale of a portfolio of NPLs of RON 1 billion.
Cleaning the balance sheet has a limited impact on the solvency ratio, which is at a historic high of 16.4 percent, but the capital base remains strong, at RON 7.3 billion, and it can comfortably support the growth of the business, underscore the bank’s officials.
The operating profit stood at RON 1.097 billion (EUR 245.6 million), backed by the solid commercial performance of the healthy business segments, encompassing a strong market share related to new loans and the consolidation of the deposit base.
In the context of solvency level at a historic high (16.4 percent) and strong capitalization (RON 7.3 billion), the bank has engaged to accelerate the solving of the non-performing loan portfolio, estimating a significant improvement in the quality of the balance sheet and financial performance in near future, despite the fact that the profitability is affected in the short term by the sustained provisioning, say BCR representatives.
In the same time, Erste Group, the BCR main shareholder, posted a net loss of EUR 929.7 million for the first six months of 2014. The loss was almost exclusively attributable to one-off effects in Hungary and Romania in the total amount of EUR 1,250.9 million, most of which had no impact on the regulatory capital.
According to Andreas Treichl CEO Erste Group, in Hungary, EUR 130.3 million had to be allocated to provisions as a first step following the recent adoption of a consumer loan law. In Romania, the accelerated reduction of NPLs necessitated additional risk provisions and a re-evaluation of the future earnings potential of BCR.
“As we expect a net loss of EUR 1.4 to 1.6 billion for the full year of 2014, we are anticipating the following negative impacts in the second half of the year: an additional amount of approximately EUR 170 million resulting from the Hungarian consumer loan law and, possibly, costs of the forced conversion of foreign-currency loans to local currency – not covered by supreme court rulings – as well as additional risk provisions in Romania to continue the accelerated reduction of NPLs”, Treichl said in a letter to shareholders.
The NPL coverage ratio of Austrian Group reached 64 percent, the highest level since the onset of the financial crisis in 2008; the NPL portfolio shrank for the fourth straight quarter and fell below the level of EUR 12 billion for the first time in more than two years; the common equity tier 1 ratio pursuant to Basel 3 has risen significantly despite the loss; and in Romania, for the first time in several years, demand for retail loans has increased at a sufficiently strong rate to support growth of the performing loan portfolio.