May 7 (Bloomberg) -- BRD-Groupe Societe Generale SA, Romania’s second-biggest bank by assets, said its profit increased in the first quarter of this year as risk costs fell.
The bank’s net income increased to 37 million lei ($12 million) in the January-March period from 13 million lei in the same period a year earlier, the Bucharest-based lender said in a regulatory statement today. The net cost of risk fell 30 percent to 246.5 million lei compared with 350.5 million lei a year ago, according to the statement.
“We will continue to work on normalizing the cost of risk and we will continue our efforts to implement the needed measures to optimize the costs,” Philippe Lhotte, the bank’s Chief Executive Officer, said in the statement.
Romanian banks, most of which are owned by western European lenders, have been struggling to contain a surge in bad-loan costs as the worst recession on record in the country and the government’s austerity measures hampered borrowers’ ability to repay debt. Bad loans accounted for 22 percent of total lending in the banking industry at the end of March, Central Bank Governor Mugur Isarescu said on May 5.
“Romania’s banking system continued to see a decline in lending in the past 12 months, mostly triggered by the corporate sector,” BRD said in the statement. “Even though the companies demand for credits remains low, a stronger economic growth in the coming months should be a balancing factor.”
Romania’s banks faced a “shock” increase in bad loans at the end of 2013 due to a central bank probe into lenders’ bad-debt reporting practices, the head of the central bank’s supervision department said in December.
BRD increased its non-performing loan coverage ratio, gaging the provisions set aside to cover loan losses, to about 71 percent at the end of March from 69 percent at end-2013, it said in the statement.
The bank’s 2013 net banking income, its main source of revenue, dropped 12 percent from a year earlier mainly due to a decline in its net interest margin and an increase in the bank’s liquidity reserves, according to the statement.
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