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SocGen’s Romania Unit Sees Bad-Loan Cost Drop Aiding 2013 Profit

BRD-Groupe Societe Generale SA said it sees bad-loan costs declining “significantly” this year from a peak in 2012, helping Romania’s second-largest bank return to profitability.

Bucharest-based BRD plans to improve its cost-income ratio, a measure of bank profitability, by bringing it down 1 percentage point to 45.5 percent, according to its 2013 budget plan posted on its website today. Shareholders are expected to vote on the plan in a general meeting on April 18.

BRD posted its first loss last year since at least 2003, according to stock exchange data, mainly because of a 62 percent jump in bad-loan charges as a stagnating economy made it difficult for citizens to repay loans. The Romanian banking industry posted the third consecutive year of losses in 2012.

“Last year was an accident and the losses must remain exceptional,” BRD Chief Executive Officer Philippe Lhotte said at a news conference on Feb. 13, when he presented the bank’s 2012 earnings.

The bank targets a 2 percent growth rate in net banking income, its main source of revenue, this year, after posting a 6 percent decline in 2012, according to the budget plan. Operating expenses are expected to remain stable this year, while the bank plans to “adjust its network size in a pragmatic manner” and close 30 branches in 2013.

BRD plans to raise funds from the market through its 3 billion-euro ($3.9 billion) medium-term notes program, which is valid until 2015, “if conditions are favorable enough” and to increase deposits to diversify its funding sources, the budget plan showed.

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