ACTIVITY PLAN AND BUDGET FOR THE YEAR 2019 - About Patria Bank
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ACTIVITY PLAN AND BUDGET FOR THE YEAR 2019
Patria Bank Individual (IFRS)
General Shareholders Assembly
May 2nd2019
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
1Patria Bank, hereinafter referred to as "the Bank", prepared the current Activity and Budget Plan for 2019, based on its business strategy as well as the
evolution of the Romanian banking market and the economic context.
I. Financial and economic environment considerations
Year 2018 and estimates for 2019
Romania closed 2018 year with an economic growth of about 4.1% YoY. We assisted to the 8th consecutive year of economic growth, the gap between our
economy and the developped economies has continued to decrease. Internal consumption represented the main growth engine together with exports
positive dinamics. For example, internal consumation increased by 5.9% YoY.
Comparative with Eurozone (with an estimated growth of 1.9% for year 2019), Romania further shows an agressive positive dinamics, an encouraging fact for
the next period. The YoY growth dinamics is a concern, which brings a significant correction risk in the years to come, when a sudden braking is likely to occur
in the EU.
However, regarding the GDP dinamics (4.1% YoY growth for 2018), as referenced above, this was based on rapid increase of internal consumption fueled by
important salaries increases in the public sector, including here also the minimum base salary increase in the previous year.
Otherwise, in February 2019, the retail trade indicator in Romania increased by 6.1% YoY.
For 2019, analysts estimate the increase of GDP to reach about 3.2%, in real terms, and for year 2020, the real GDP growth is estimated to 3%, both rates
beeing above those of the average EU countries.
Unemployment continued to decrease, the year 2018 ended with 3.3% unemployment rate. However, this low procentage may alter the reality, when taking
into consideration its main characteristic which is the lack of labor force. This is not a surprise when considering Romania the second largest emigration
country (after Syria) reported to the level of its population.
Obviously, considering its very low level, we forecast for the years to come the stabilization of the unemployment rate to its current level, maybe even a slight
correction.
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
2Inflation increased significantly in 2018 as compared to previous years, fueled by tax incentives. The year 2018 ended with 3.3% CPI, YoY.
The European Commission forecasts for Romania for year 2019 an inflation of 3.4% due mainly to energy prices decrease.
In the context of CPI growing rates, the interest rates for short and medium tenors continued to growth, the present ROBOR 3M rate reaching 3.09% and the
ROBOR 6M rate reaching 3.29% (as of March 15, 2019). Simultaneously with the increase of minimum base salary and the public sector salaries – which fueled
a higher inflation – the money market interest rates consequently increased.
Evolution of Romanian banking system
The year 2018 proved to be a good year as concerning the overall profitability of the banking system, pursuant to an increase in the demand for loans and
higher ROBOR rates.
Following the progress accomplished in the last years, the „cleaning” of banks’ balance sheets continued in 2018. For example, the non-performing loans rate
(NPL ratio) – as per European Banking Authority (EBA) definition – decreased to 5.6% as of September 2018. This process was realized by write-offs and
portfolio sale operations to third entities. For 2018 YE, the NPL ratio decreased to 4.95%.
The Loans/Deposits ratio (L/D) at banking system level shows a relative stabilization to the level of 74% by 2018 YE, with a larger proportion to LCY-
denominated loans vs. FCY-denominated loans (mainly EURO).
Return on Equity (ROE) shows a consolidation to the level of 14.85% by 2018 YE.
Capital adequacy ratio (CAR) shows a stabilization to the level of 20% by 2018 YE, provind the stability of the Romanian financial system, a ratio above the
levels of the neighboring countries.
Another ratio illustrating the strenght of the banking system is Base activity rentability ratio, stable around 181%, with a significant growth to 187% by 2018
YE.
International economic environment for 2019 will be marked by increased volatility, triggered by the following factors:
- the modification of the risk premium on the international markets with a propagation risk to the emerging markets,
- increased debt for the public and private sectors,
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
3- geo-political unrest, in the context of increased commercial tensions and new protectionist policies enactment (finalization of Brexit, commercial
disputes between the US and China),
- amplification of crypto-assets phenomenon and the risks associated to cyber-security, to new fintech and to other ressembling activities conducted
outside the prudential regulations.
Main domestic macroeconomic risks for 2019:
- the observance of 3% budgetary deficit to GDP rate;
- the increase of current account deficit pursuant to accelerated increase in imports fuelled by the dinamics of the internal consumption;
- the increase of current account deficit may trigger a depreciation of the local currency, the financial analysts estimate the EUR/RON exchange rate to
reach 4.8 towards YE;
- the increase of financing costs for the Ministry of Finance due to fiscal unpredictability;
- continous and negative natural growth, cumulative with a high level of emigration rate, which is putting supplementary presure on finding qualified
labor. It is estimated that Romania needs aproximatively 500,000 people in order to satisfy its working labour needs;
- contraction of real estate market and stagnation of prices;
- limitation of debt to income ratio for loans granted to consumers;
- the negative effects of 3 laws adopted by the Parliament in December 2018 (interest rates ceillings, limitation of recovery value of assigned contracts
and elimination of „executory title” of the loan agreements) - the Constitutional Court was notified with exceptions of unconstitutionality regarding
these laws, their promulgation was postponned until the judgements by the Constitutional Court of all exceptions of unconstitutionality. By the press
release dated 13.03.2019 (available at https://www.ccr.ro/noutati/COMUNICAT-DE-PRES-365), CC disclosed that it admitted all exceptions of
unconstitutionality and declared all 3 laws as unconstitutional.
- negative effects of Emergency Government Ordinance 114/2018 over the banking system, the private pension funds and other segments of the
economy. In the medium term, this Emergency Ordinance puts at hazards the most important economic indicators such as the economic growth,
inflation, interest rates, profitability of the banking system, etc.
The effects of Emergency Government Ordinance 114/2018 are difficult to measure in this moment, because it has a combined impact:
- on one hand, an immediate impact in banking costs and profitability;
- on the other hand, a contamination impact over the economic environment, in terms of worse financing condition for companies and consumers.
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
4II. Commercial Strategy
In 2019, the Bank will service the following business lines and clients segments:
✓ SME, Mid Market and Corporate segment
✓ Agro segment
✓ Micro-enterprises segment
✓ Retail segment
Year 2018 witnessed a consistent growth of operations in business segments area. By excluding non-performing loans, managed by workout area, the Bank
increased during 2018 its loan portfolio with more that RON 255 mio. The next 3 years will be marked by the same perspective.
In the Micro-enterprises area, the Bank continued to be one of the key players in the market and started a comprehensive training and enrollment process
of the retail staff in order to increase its capacity to originate a portfolio of small and very small loans in the geographical areas uncovered by a specialized
RM Micro. New flows and products had been lauched, in other to help the optimization of the new loans production and to ensure the premises of a sustenable
growth in year 2019. The Bank remains one of the main financiers of the micro-enterprises segment, especially providing small loans, also by making
partnerships with different regional and international centers of expertize (EFSE, EIF, EMN, etc). The Bank continued to implement its own IT platform in order
to better manage the leads received from alternative sales channels, which lead to a better monitoring of originated transactions, to an increased satisfaction
of its partners and to the optimization of the sale processes.
In the Agro area, the Bank continued the development of relations with its farm equipment partners, after a very favorable experience in 2017. Taking
advantage of the fact that the Bank has specialists and agronomist engineers, the process of creation of new products designed together with its
clients/partners/collaborators continued also in 2018, by combining the agro technicalities with the usual banking financing schemes, ensuring that the loan
products will comply with the industry requirements, both from the structuring scheme and the seasonal reimbursement plans.
In 2018 the Bank increased the weight of the loans granted to companies who applied for EU co-funded projects and this trend is likely to continue in 2019.
Also, the Bank become one of the main partners of the Rural Credit Guarantee Fund (RCGF) (top 3 in Romania ranking by the values of the guarantess ofered
by the RCGF). Pentru 2019, the Bank will develop the relation and will diversify the guarantee scheme.
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
5In the SMEs and Corporate area, the Bank is constantly focusing on the significant development of its customers’ base, through personalized offers and the
development of quality relations with its clients, as a main differentiator, a reason for which there is a recognition in the market, both from the competitors
and the clients perception enjoying a quality customer care. The Bank kept an optimal combination between secured and unsecured financing, structured
financing respectively, without exceding a maximum comfortable loan ticket, thus maintaining an equilibrated loan portfolio both from the perspective of
the value of the transactions and the financed business areas.
The Bank will continue in 2019 the process of simplification of its loan products catalogue, in order to offer to its clients a superior relation experience and
also an augmented flexibility towards the selection of the most appropriate financing package.
Also, in order to be aligned to the market and to the competitors’ offers, in 2019, it is necessary to differentiate the financing offers for the clients presently
placed in the „broad interval” of companies with > 1 mio EUR annual sales (SME&Corporate). Because of that, in 2019, the Bank will introduce an additional
segment by taking into consideration also the „exposure value” criteria, thus defining the Mid Market segment. In the same time, starting with 2019, stricter
eligibility criteria for corporate area will be set, ensuring that the growth on this segment is carefully controlled from the repayment ability point of view.
No mater the sub-segment, in the business entities area, the Bank’s objectives are the increase of productive assets level and the diversification of income
sources (transactional fees and commissions and FX income), by the increase of the penetration with non-lending products and a constant addition of
transactional volumes, by permanently continuing its risk control philosophy.
In the area of existing clients, there is room for the equipment of the current account clients with lending products, and also the equipment of lending clients
with complementary products. In this respect, in 2019 the Bank will continue its sustained actions to stimulate the increase of accounts turnovers and the
monitoring of clients transactions, and also the campaigns for the promotion of non-risk products (business card, POS, FX transactions, current account
packages, etc).
The Retail segment will represent a more moderate engine of growth in the next period, considering that the offer for the retail products significantly
improved compared to the pre-merger years, and the developments planned in 2018 and 2019 are consistent in the areas of products, credit risk control and
clients service, including also the implementation of strong criteria and policies for the creation of new loan portfolios in order to generate sustainable income.
Retail directions for the next period of time:
1. Market re-positioning
a. Target-market: employees and retired people from medium and large cities
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
6b. Loan-market with a focus on secured loans
2. Consolidation of clients portfolio and the increase of cross-sales with enhanced focus on collection of salaries and pensions.
3. Services quality (implementation of quality standards for services and merchandising, improvement of feed-back time, simplification of documents).
4. Technology: Internet Banking, Mobile Banking, rollout IBA, Online partners platforms, on-line and video lending solutions, self-service solutions for
cash and non-cash operations area.
The Bank aims to be recognized for simple products, sales force mobility and as a partner for local communities through the development of co-marketing
and lead generation partnerships.
III. Bank’s Objectives in 2019
The main objectives, on short and medium term, is the consolidation of the Bank’s profitability, in order to preserve its capital base, by:
- Increase of Bank’s productive assets (while keeping reasonable levels of risks generated by the lending activity),
- Efficiency in sale of the Bank’s non-productive assets, and
- Optimization of business model and organization structure, including also the downscalling of the structure/number of branches and the HO, such
that the growth in efficiency will determine the reach of a sustenable cost/income ratio.
IV. Financial Projections for 2019
The budget projections for year 2019 for Patria Bank were based on the following assumptions:
• Financial projections for individual Patria Bank based on organic growth;
• Maintaining of a moderate risk appetite accompanied by an efficient and ambitious sales program (increase of sales volumes by 8% compared with
previous year with focus on LCY-denominated lending);
• Optimization of the branch network, project initiated in January 2019 and consisting of 3 stages, by the end of which the footprint of the network will
reach to 46 banking units (agencies and cash-points) and a corresponding staff reduction (both from network and HQ), thus creating the premises for
reduction of the Bank’s costs base but also streamline of internal processes and functions;
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
7• Accelerated sales of non-productive assets: repossessed assets from lending activity, but also the optimization of Investment management process
with impact in capital preservation;
• the projection does not include the effect of the tax on financial asset; against this, taking into accounts the draft amendment of Government
Emergency Ordinance 114/2018 made public on the website of the Ministry of Finance and which is under approval by the Government, the estimated
impact is between 3 and 8 million lei. The effective level of this tax may be determined after the publication of the amended version of GEO 114 and
the methodological norms in its application as well as after the effective conclusion of the financial results of the relevant tax periods.
Balance sheet structure and liquidity KPI forecast
(thousands RON) 2018* 2019 % Evolutie 2018 2019 % Evolutie
Balance sheet indicators Actual Buget 19/18 Key ratios, before tax on financial assets Actual* Buget 19/18
Li qui d a s s ets 1,534,076 1,075,986 -30% Net l oa ns /Tota l As s ets 45% 56% 11.4 pp
Loa ns , net 1,543,019 1,825,192 18% Li qui d a s s ets /Tota l As s ets 44% 33% -11.4 pp
Securi ti es /Tota l As s ets 30% 21% -8.3 pp
Equi
Al te ty Pave
a cti rti ci pa ti ons i ncl . goodwi l l 54,080
322,293 54,658
299,340 1%
-7%
Loa ns /Depos i ts 55% 74% 18.3 pp
Total Assets 3,453,468 3,255,177 -6%
Ca pi ta l a dequa cy ra ti o 15.8% 16.9% 1.1 pp
Due to cus tomers 3,064,601 2,704,400 -12%
Cos t/i ncome ra ti o 101% 85% -16.1 pp
Subordi na ted Debt 23,373 71,361 205%
Return on equi ty - ROE -0.1% 2.0% 2.1 pp
Sha rehol ders ' equi ty 317,874 330,565 4%
Return on a s s ets - ROA -0.01% 0.2% 0.2 pp
*audited individual statements
*audited individual statements
The increase in the Bank's productive assets is the main balance sheet objective of the proposed Budget and is forecasted by the organic increase of net loan
portfolio with 18% as compared with 2018 YE level.
The organic increase in loans will also contribute to balancing the balance-sheet structure in the sense of increasing the Loans / Deposits ratio to a closer
level (74% in 2019 – according to Fin Rep) to the average of the banking system (74% as of YE 2018).
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
8Total assets - a decrease of 6% compared to the previous year, due to the decrease of the due to customer by 12%, simultaneously with decrease in liquid
assets by 32%. For the assets mix, the Banks envisages an optimization in the sense of reducing the lower-yields liquid assets and replacing them with higher-
yields productive assets (loans granted to customers).
Due to customers - decrease by 12% in the context of the consolidation of the territorial network from 81 to 46 banking units.
Equity funds affected by the positive result of the period before th tax on financial asset introduced by Emergency Government Ordinance 114/2018.
Subordinated debt – 205% increase compared to December 2018 from RON 23.4 mio to RON 71.4 mio, realised by a new subordinated loan agreement of
EUR 10 mio. In parallel, the Bank will continue the efforts to indentify new sources of capital and risk weighted assets (RWA) optimization in order to ensure
an optimal ratio between the capital requirements and the yield generated by the Banks’ assets.
Evolution of profitability
(thousands RON) 2018 2019 % Evolutie
Financial results Actual* Buget 19/18
Net Banking Income 160,003 169,039 6%
Operational expense (Excl. tax on financial assets) (161,759) (143,659) -11%
Operational result (1,756) 25,381 -1546%
Cost of risk 1,490
- (19,179)
- -1387%
0%
Net result (266) 6,202 -2428%
*audited individual statements
The Bank estimates that the Operational result, excl. tax on financial assets, will return to the positive teritorry, in the context of increased income from
operational activity (the increase of interest income from productive loans) simultaneosly with the reduction of operational expense and optimizations
planned for the first half of the year 2019.
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
9The Net Banking Income, budgeted for year 2019, is 6% higher that the NBI for 2018, thus the Bank planned for year 2019 the significant increase of post-
merger productive assets. The outlook for the next years is greatly enhanced, according to its organic growth projections the Bank will significantly increase
its productive assets.
Cost of risc – increase vs. last year, COR of 2018 was positively influenced by the sale of non-performing loans portfolios, from off-balance and on-balance
sheet.
The effect of optimization programs for operational expense initiated in 2019 will partially spread in 2019 and totally in the following years. Thus, in 2019,
the operational expense excl. tax on financial assets will be reduced by 11% vs. 2018, in the context of a 3 times larger contribution to the Deposits Guarantee
Fund.
Cost to income ratio excl. tax on financial assets will follow a decreasing trend with an improved level versus prior year, decreasing to 85% as at YE 2019
vs. 101% as at YE 2018.
V. Investment Plan for 2019
The Investment Plan for 2019 has been designed to meet the post-merger development and optimization needs of the Bank, taking into account the size
and structure of the new Bank, as well as the changes in the Bank's IT appslications in order to ensure superior quality services to its clients (powerfull accent
on digitalization) and also compliance with the legal and regulatory framework. Thus, at the level of this Investment Plan, the following categories have been
budgeted:
Investments
thousands RON
2019
Investment Plan 17,873
Admin 4,700
Cards 1,640
IT 11,533
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
10Following the growth in commercial activity (especially the increase in lending activity) and the recovery of non-performing loans, the management expects
the return of the Bank’s net result to positive territory in 2019 (the year 2018 has already created the premises of this objective), excluding tax on financial
assets, with a return on assets ratio aproaching the average figures of the banking system.
Achieving this ambitious goal depends both on reaching commercial objectives, in the context of preserving the current trend of economic growth and
financial stability for the next period and on identifying obpsortunities for profitable investment of the Bank’s liquidity surplus as well as strengthening the
capital base of the Bank needed to capitalize on such obpsortunities.
Signed on behalf of the Board of Directors of Patria Bank by:
Dragos Horia Manda
Chairman of the Board of Directors
Patria Bank S.A. Sediu Social: Str. Brezoianu Ion, actor, nr. 31, Et. 1, 2 și mansardă, București, România, cod poștal 010131; Bancă participantă la Fondul de Garantare a Depozitelor în Sistemul
Bancar (FGDB); ORC: J40/9252/2016, C.I.F. RO 11447021, Nr. RB-PJR-32-045/15.07.1999; Capital social (subscris şi vărsat) 311.533.057,50 lei; Cod operator date personale Registrul ANSPDCP:
nr. 753; Tel: 0800 410 310, Fax: +40 372 148 273, info@patriabank.ro; www.patriabank.ro
11You can also read
