BRD - Groupe Société Générale S.A. (BRD) Earnings Call Transcript & Summary

Good morning, and thank you. Hello, everyone. Welcome to our call. As usually, we are going to present end of the period end of December results, which have been examined yesterday by our Board of Directors. As you know, they have been prepared according to IFRS standards. And the figures which you will see and which we will present are not positive yet. So now I will move to the introduction to give you a summary of our performance in the last quarter and for the full year. As we indicated in previous calls, we had, again, a very well-developing commercial activity, though slightly impacted by the macroeconomic environment in the sense that we grew our lending activity in terms of outstanding by only 13% in -- year-on-year in December '25. As you remember, we have been quite dynamic in the past, but of course, everything we do has been connected with the development of the economy. As you can see on this slide, we have particularly grown in the corporate -- large corporate segment, which is also very robust in terms of the quality of the profile. In the retail segment, we have grown our production year-on-year by 14%. And in terms of the lending activity related to our sustainability commitments, we have added almost EUR 1 billion new sustainable financing, namely EUR 919 million in 2025, above what we have expected for this period. On the deposit side, we have also performed quite well by growing more than 10% year-on-year in terms of the balance of deposits and current accounts at the end of the year. As to the digital channels, we have grown by 13% the subscribers of our most important digital tool, YouBRD, our mobile app for private individuals with 1.9 million users, almost 1.9 million users. We have a penetration of almost 90% of our client base by enhanced tool. And here, I would really recommend or welcome Madalina talking later on the concrete features we have introduced to our tool, which enables also the growth of the subscribers and the usage of the tool. 60% of our clients have enrolled in cashback loyalty program. You remember, we started it about year-end 2 months ago. So it's gaining popularity. Now this, of course, commercial performance has resulted in good gross operating income of 9% year-on-year growth. Here, we are -- for better comparability, we are removing the tax elements and the charges which are not related to our operational activity, especially the turnover tax, which, if you remember, has doubled in the middle of last year, and it is impacting a lot the OpEx since -- I just want to remind, it is a gross revenue tax, which is booked according to IFRS in the OpEx of all banks. NPL ratio, 2.4% below the market average. Again, as usually, we sustained the quality of our portfolio despite the macroeconomic turbulences, despite the difficulties economic factors across the market are facing, which proves that our origination, monitoring and collection performance has been traditionally strong and remains strong in 2025. The cost of risk, you see significantly increased compared to '24. And yes, in basis points, Philippe is going to clarify later is in line with what we have told you some time ago. We call it normalization because we are coming from very low levels. And as you can see, it has not impacted too negatively our performance. And now our return on equity around 17% if we exclude the turnover tax. Again, I repeat the turnover tax is impacting our OpEx with a net profit above RON 1.5 billion. So now I will stop here with the summary because my colleagues are going to give you more details and we will transfer the mic to Claudiu to talk about the environment.

Thank you, Maria, and good morning, everyone. We are indeed satisfied by the results the bank delivered in 2025, and this is in spite of the headwinding macroeconomic environment. We know the measures that started being implemented at mid-2025 to allow for the fiscal consolidation. In spite of those measures, the economy still grew even though at a lower pace than the average of the EU economy. Most probably we will still wait for confirmation on the last quarter, but most probably the economy grew by roughly 1% in 2025. And the silver lining in all this is that we saw some improvement signs in economic growth starting in the third quarter, mainly driven by investments. And I think this is a good sign in a context where the economy tries to balance more its economic growth model from consumption towards investments. Still inflation remained high, the highest in Europe at 9.7% year-end. It's now on a gradually improving path, i.e., a decreasing path. it will probably stay sticky in the first half of the year to then starting gradually going down in a more accelerated way till end of 2026, where it's expected to be at slightly below 4%. On the monetary policy, the liquidity situation in the banking sector is fully restored. Now it's putting downward pressure on interest rates. They corrected quite significantly on the money market rates. They are now approaching the deposit facility rate of the Central Bank. Still, most probably the Central Bank will not act prior to see convincing signs of the entering of the inflation expectations. At the same time, as we see encouraging signs on the fiscal consolidation, probably in the second quarter of this year, if those measures are still being firmer, the Central Bank may preemptively act and there to decrease to operate the first cut in the monetary policy in the second quarter. I was speaking about the interbank liquidity. It's now again comfortable approaching the RON 30 billion. We all remember that last year in May surrounding elections, the economy, the liquidity was almost converging towards 0. Now the Central Bank is again somehow creating liquidity due to the inflows of money coming from European funds and portfolio investments. And we believe they are at times even buying RON against the euro to not let too much the RON appreciate, which is adding up to the liquidity in the banking sector. And I will wrap up on the banking indicator. They continue to be comfortable as far as liquidity and capital are concerned, well above regulatory levels and even comparing to the EU levels. Whereas on the NPL ratio, if we look at the EBA definitions, the country still scores in a low-risk bucket category, even though the NPLs are showing some signs of increasing due to the economic headwinds that we see. But the coverage levels remain strong, well above those of the European Union. And now I will be passing the floor to my colleague, Madalina to drive you in the commercial performance.

Thank you, Claudiu. Hello, everyone. So an interesting and a very good 2025. I will start actually with the digital performance, which is the core of our strategy and 2025 was a year in which we focused to engage customers and onboard customers in our existing digital channels as well as develop a lot of new features either for sales or for service in the digital ecosystem. A part of the double-digit increase in number of users or number of transactions or transactions on the acquiring system, we are very proud that 2025, mainly for fourth quarter, but the entire year marked some very important new features. Apart of the ones, I will pick actually some of them, which are really innovative. So we were the first bank connecting with Police database. This actually enabled in both sales service, risk and security -- cybersecurity systems to actually engage customers and protect as well our business. In the fourth quarter, we also enrolled ourselves in RoPay e-commerce for BRD merchants, P2M, e-commerce, deep link, QR code and refund. This is an important step in for the corporate business in our acquiring transactions. Fourth quarter marked as well a very welcomed by the customer new feature, fully online onboarding, native in the app, a flow with which in 5 minutes, customer can enroll, activate in the bank and issue a card. Also, multicurrency is one of the features that we differentiate with in the market. A part of the digital banks, we are the first bank launching this multicurrency that optimize the cost of payments for our customers and allow simple usability for them. Partial repayments, Fidelis subscription, these are services that we actually add into our digital ecosystem in order to enable the contact with the bank. This actually support us, and we continue to optimize our branch network, now offering 24/7 self-service in 272 locations. And our customer support remain fast and reliable with 75% calls answered during the 20 seconds in contact center, positioning us with a very good service level on the omnichannel. BRD continued to champion sustainability. In 2025, we hosted the fourth edition of the Climate Change Summit in Romania, promoting awareness and inspiring actions. Our commitment to responsible financing on top of this presence is reflected also, as Maria mentioned, in the almost EUR 1 billion sustainable financing, EUR 919 million, out of which EUR 137 million in retail, almost EUR 800 million for corporate. And as reflected in the presentation, I will actually mention some key notable transactions. We are very proud to be the ones launching the first sustainability-linked loan for our SME clients in the Romanian market. Some landmark transaction, a strategic partnership between BRD and Auchan, the loans, actually the joint global coordinator, structuring bank and joint sustainability coordinator in Autonom syndicated loan. And of course, 2 new products, new guarantees with investment and development bank covering for all our SME customers. In terms of lending, I will move to the lending portfolio, year-on-year growth of 13%. This is actually -- we are very proud to have a balanced contribution in both retail and corporate in terms of market share. However, the main driver in the lending growth for our portfolio this year were the large corporates, almost 24% year-on-year increase on large corporate, while SME and retail actually continue a responsible growth. This performance is basically not only for -- compared with our previous performance, is also a better performance compared to the market. End of 2025, BRD increased 50 basis points in its market share for lending, very well balanced between retail and corporate. 14.8% end of December '25 for retail, 50 basis points increase year-on-year, 8.6% market share for corporate, 50 basis points increase year-on-year. So we are very actually proud that a part of overperforming in our segment across the segments, we overcome the market as well. In terms of deposit base, we actually continue growing our deposit base, having above 10% increase year-on-year with a significant improvement in the corporate as a result of increasing the relationship and growing in market share in lending also in becoming main bank for these customers. We had actually continue the growth as well in the individual deposits. Of course, according to the macroeconomic environment, we actually managed to leverage on the universal bank and growing on the segments with potential. Apart of the on-balance sheet growth in our portfolio, we continue to be the leader in diversifying assets under management for our customers. We confirm and consolidate our first position in asset management, reaching 51% year-on-year growth and the balance of RON 9.3 billion assets under management. And this is actually very sustainable for the future growth as actually we reached almost 200,000 clients. It's well diversified the portfolio in the 12 investment funds that our asset management subsidiaries having. I will pass the microphone to Vladimir to talk about liquidity and our financial performance.

Thank you, Madalina. Good morning from my side as well. I will continue with the liquidity. So traditionally, like the liquidity of BRD as well in 2025 stayed at a very good level. Despite like the more volatile environment, which we have experienced mainly in the first half of the year, we are able to keep our liquidity position very solid and allowing us to continue our lending activity, which Madalina described. Our loan-to-deposit went up to slightly below 75%, which is staying very safely in line with our strategy and very in line with all the regulatory indicators, which we are fulfilling. From the liquidity buffer point of view, we are still having 27% of our assets as a high liquid buffer like to overcome any potential liquidity issues, which we might see on the market. Moving to the revenues. Speaking about the revenues, the result of BRD for 2025 ended like almost 8% growth of revenues overall. The growth was driven by all lines of the NBI. Starting with NII, the NII was positively affected by the volume effect in both retail and corporate segments, which is like offset by a slightly negative effect due to the interest rate environment and the overall competitive pressure. Our NIM stayed at the level of 331 basis points, roughly 4 basis points behind the last year. So even at this level, we are quite resilient and we are able to defend our margins. We can as well like somehow show like the development of the index of IRCC, which went down from 5.93% to 5.71% during the 2025 and impacted obviously as well the pricing on our mortgage portfolio. The second item, which was growing 10% year-over-year is the fees and commissions. The fees and commissions like were supported by the activity of our clients and the positive development of active clients overall. We have the growth linked to cards, custody and as well to the activity of our corporate clients. Among the cost fees, which we paid this year, it's mainly linked again to the SRT transaction, which we concluded during the 2024 and are allowing us basically to optimize our risk-weighted assets. For the other income, the growth was almost 14%. It's linked to the comparison base of 2024 and as well to our investment and disposal of investments which we did during the 2025 and helped the overall result of the NBI in 2025. Moving forward to the cost base. As Maria already mentioned, the cost base was this yearly influenced by the changes in the regulation and the growth of the turnover tax. With this turnover tax included, our OpEx base went up by 9.9%. If you would exclude this effect of the tax increase, the cost base will be growing 6.6% and having still the positive jaws compared to the NBI of 8%. If you look a bit more into the structure of our OpEx growth, starting with the staff cost, the staff cost year-over-year went up by 2.4% and quarter-over-quarter staying flattish. It's a result of the transforming the organization and like overall reduction of the fees and capacity as we have year-over-year decreased our staff around 10%. Speaking about other expenses, the other expenses are more dynamic, growing by 11%. Worth to mention that in 2024, we have the comparison base as we had as well as some income from the sales of assets during 2024, which were not posted in 2025. And as well, like good to mention like that from the structure point of view, like we were in line with the strategy and the new features, which Madalina introduced, investing mainly in the IT assets and the development of the OpEx is therefore influenced mainly by the depreciation of IT and the investments which we did in the technology and, let's say, scaling of our digital capabilities to the higher volumes. If you look at the underlying cost-income ratio in 2025, we reached 45.3% and declined by 60 basis points without the impact of the turnover tax. And we are pursuing like our target to converge closer to the 40% cost income. I will stop here, and I will hand over to Philippe, our CRO, regarding the credit quality.

Thank you, Vladimir. So in last year for the cost of risk, we had a guidance of 40 -- 50 basis points for the full year. In Q4, so we decreased the cost of risk to [indiscernible] 25 basis points, which globally brings us in the lower range of this guidance, which was 40. And because of [indiscernible] we see that's the normalized [indiscernible] portfolio and in the [indiscernible]. So the asset quality remains very strong at 2.4% and we actually have seen comfortable coverage ratio at 63.4% as to recognize that on this one, we were disappointed because we had a corporate default towards the end of the year that [indiscernible] would have expected to be more on the 65% coverage ratio. [indiscernible] this shows that the portfolio remains quite resilient and actually this is also a bit [indiscernible] because [indiscernible] remained very conservative in terms of [indiscernible]. And -- so globally, the portfolio remains quite [indiscernible]. We see results for September 2025 in terms of coverage of the system was at 65.1%, expect it to decrease further towards the end of the year. So globally, I think [indiscernible].

Thank you, Philippe. I will continue with the capital position. We ended the year with a capital adequacy ratio at 22.6%. If you look at the development from the December of the last year, the main growth of risk-weighted assets is linked to the growth of the loan portfolio, which consumed almost 400 basis points. On the positive part of our capital ratio development are the retained earnings. As you know, like we paid out 50% of our profit from 2024. And as well as the market rates went down, we have posted a lower reserve on our OCI bond portfolio revaluation. So this helped as well as to partially offset the growth of the risk-weighted assets. In 2025, we were like for the full year, benefiting from the SRT transaction, which helped us like to reduce partially the risk-weighted assets. And as well during the 2025, we fully implemented the CRR3 regulation, which slightly increased the risk-weighted assets on the operational risk. Regarding the MREL, we are fully compliant with the regulation, and it's fully included in our results. Because we already like received the guidance from the National Bank for the dividend payout for 2025, we are proposing to the General Shareholder Meeting at the end of April, the payout of 50% of our profit for 2025. This is all from my side, and I will hand over to CEO for the final remarks.

Yes. I think everything was said. But just to summarize once again, we have behind us a quite successful and solid commercially and financially in 2025. When we talk about the commercial part, we grew exactly in the lending activity where we wanted to. The mortgage loans grew -- the origination grew by 29%. The large corporate grew by 17%. These are the most robust segments of our client base in terms of risk profile. In the ESG focus of the bank and in the sustainability financing, more than EUR 900 million, almost EUR 1 billion of new sustainable loans. The deposit base, healthy growth of above 10%, 10.5% year-on-year. Our digital tools are developing with accelerated pace. We are catching up with the market and our clients can enjoy new very important features, some of them quite innovative, some of them offered only by the purely digital competitors. All this resulting in strong performance on the top line and despite the heavy burden of the tax on turnover reflected in the OpEx, very good operational performance. Asset quality remains very stable. Once again, I want to emphasize, not an easy year. And yet, with this growth of our commercial activity, very robust risk performance. And finally, the growth of our profit, if we exclude the tax of the revenues is 6% and the ROE, if we exclude the turnover tax stands at 17%. Capital base, liquidity ratios, everything in line with our budget with our predictions and very comfortable. Here, I will give you the floor for questions. Thank you once again for your participation today.