SocGen’s Romanian BRD Net Loss Wider in 2013 on Bad Loans

BRD-Groupe Societe Generale SA, Romania’s second-biggest bank by assets, posted a net loss for a second consecutive year because of rising bad-loan costs and falling interest rates and fees.

The bank’s net loss widened to 385 million lei ($117 million) in 2013 from a net loss of 331 million lei in 2012, the Bucharest-based lender said in a regulatory statement today. The net cost of risk rose to 2.08 billion lei in 2013 compared with 1.94 billion lei a year earlier, according to the statement.

Romanian banks, most of which are owned by western European lenders, are struggling to contain a surge in bad-loan costs after the worst recession on record in the country hampered borrowers’ ability to repay debt. The banking industry 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.

“In 2013, the Romanian banking sector continued to go through a consolidation phase,” BRD said in the statement. It “witnessed an overall decrease in loan volume by 4.2 percent over the last 12 months, pushed down by the corporate segment.”

BRD increased its non-performing loan coverage ratio, gaging the provisions set aside to cover loan losses, to 68.9 percent at the end of last year from 51.9 percent at end-2012, it said in the statement. The increase was prompted by “decreasing loan collateral values” and a growing share of exposures under insolvency regimes, which triggered higher bad-loan costs with small and medium-sized companies, it said.

The bank’s 2013 net banking income, its main source of revenue, dropped 6.9 percent from a year earlier mainly due to a decline in its net interest margin stemming from a contraction in corporate lending volumes, according to the statement.

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