Patria Bank : Budget & Business Plan 2024

Budget and Business Plan 2024

March 2024

Patria Bank SA - Soseaua Pipera nr. 42, cladirea Globalworth Plaza, et. 8 ssi 10, Bucuresti, Romania, cod postal 020309 | Banca participanta la Fondul de Garantare a Depozitelor Bancare (FGDB) | ORC: J40/9252/2016 | CIF RO 11447021 | Nr. RB-PJR-32-045/15.07.1999 | Capital social (subscris si varsat) 327.881.437,60 lei | Cod operator date personale Registrul ANSPDCP: nr. 753 | Nr. Registru ASF: PJR01INCR/400026 din 28.03.2019 | Tel: [phone] | Fax: [phone] |[e-mail]| www.patriabank.ro.

1

Summary

I. THE BANK'S OBJECTIVES AND BUSINESS PLAN FOR 2024 3

II. FINANCIAL PROJECTIONS FOR 2024 6

I. The Bank's objectives and business plan for 2024

• • Increasing the balance of net loans granted to customers by 12%, RON +237 million, expected to take place in 2024 compared to 2023

• • Extension of financing sources in correlation with the evolution of the loan portfolio granted to clients and diversification of financing sources by seeking to contract a loan from a financial institution

• • Attracting new customers and increasing the number of products per customer is a priority goal for business lines in 2024

• • Development of operating income by 10%, RON +19 million, through the contribution, mainly, of net interest income and net commission income representing the core activity of the bank

• • Managing costs in a responsible manner (+6% 2024 vs. 2023) taking into account the forecasted inflationary restraints but in line with the development and investment plans assumed by the Bank for 2024

• • Continuing the capitalization of non-productive assets

• • Optimizing the business model so that increasing efficiency leads to achieving a sustainable cost / income ratio; for the year 2024, the aim is to reduce the ratio to 70% from 72% in 2023

• • Decreasing the NPL ratio by continuing the recovery and write-off actions and maintaining the NPL coverage ratio above the 55% level.

The strategic ratios targeted by the Bank in 2023 are presented below. These are presented from the perspective of Management Accounting (according to internal monitoring):

2021	2022	2023	2024	24 vs. 23
Loans (gross) to Customer Deposits ratio	65%	68%	70%	73%	3%
Loans (gross) in Total Assets	56%	56%	54%	56%	2%
Securities (no funds units & participations) in Total Assets	25%	23%	27%	29%	3%
Return on Assets (RoA)	0.30%	0.5%	0.6%	0.6%	0.1%
Return on Equity (RoE)	2.80%	5.9%	6.2%	6.2%	0.0%
Cost to Income ratio	76%	71%	72%	70%	-2%
Non-performing exposures rate (NPE)	7.88%	6.0%	5.2%	4.8%	-0.41%
Coverage of Non-performing loans	60%	57%	60%	55%	-5%

During this period, the Bank will pursue an optimal capital adequacy, following the simultaneous realization of the following desideratum:

• • Observance of the prudential parameters (OCR and TSCR) in order to ensure the capital base necessary for the bank's development

• • Optimal allocation of capital in productive assets with superior yield

  In this respect, the Bank will ensure an optimum between interbank investments, the portfolio of governmental bonds and investments in loans

• • in the area of commercial lending, the Bank will ensure that the investments to optimize the return on capital, establishing the pricing policy according to all relevant parameters (level of RWA involved in each financing / customer sub-segment, acceptable risk level etc.) and the lending decision will imply the fulfillment of a minimum level of return on capital.

The Bank propose an increase of the loan portfolio in the conditions of achieving a significantly higher level of efficiency. In this sense, the Bank will seek to reach a minimum level of credit volumes / employees and credit volumes / bank unit, regardless of the business sub-segment that generates the respective assets. The realization of this desideratum will be fulfilled both by increasing the productivity of the sales force, and by optimizing the entire approval process.

Increased attention will be paid to increasing non-risk revenues, both in the retail area and in the area of legal entities and also to the revenues coming from financial activity.

Further details on the bank's objectives and prospects for the future are presented in the Income and Expense Budget for 2024, subject to the approval of the General Shareholders Meeting.

Loan sales plan for 2024

For the budgeting of new loan production, the Bank will seek to reach a minimum level of loan volumes / employees and loan volumes / branch, seeking the alignment to the market, on each business subsegment that generates these assets.

The realization of this desideratum will be fulfilled both by increasing the productivity of the sales force, and by optimizing the entire approval process, the on-going optimization of sale processes, the simplification and automatization of target flows, the applications writing and decision-making processes.

M RON	Retail	IMM&Corporate	Micro	APIA	TOTAL	YoY
Actual 2021	194	509	73	234	77	1,087	32%
Actual 2022	200	424	66	208	71	968	-11%
Actual 2023	135	365	99	162	43	804	-17%
Budget 2024	187	501	154	226	58	1,125	40%

Agro

%	Retail	IMM&Corporate	Agro	Micro	APIA	TOTAL
Actual 2021	18%	47%	7%	22%	7%	100%
Actual 2022	21%	44%	7%	21%	7%	100%
Actual 2023	17%	45%	12%	20%	5%	100%
Budget 2024	17%	45%	14%	20%	5%	100%
NPL Strategy

For the budgeting of financial projections, the Bank considers the acceleration of NPL recovery rates from the old portfolio, as well as the increase in quality management activities regarding new loan production.

The Bank has as strategic objectives:

- Maintaining the Coverage Ratio of NPL above 55%

- Reduction of NPE rate

K ron	dec.23	dec.24
EAD ON NPL IFRS 9	135,718	125,360
EAD ON NPL alte debite	12,794	11,244
TOTAL EAD NPL	148,512	136,604
ECL ON NPL IFRS 9	-79,285	-66,581
ECL ON NPL alte debite	-10,172	-8,622
TOTAL ECL ON NPL	-89,457	-75,204
EAD ON IFRS 9	2,172,734	2,410,754
EAD ON alte debite	79,878	79,878
CLS 1 + CLS 4	482,646	340,730
EAD ON TOTAL	2,735,258	2,831,363
88%	88%
Mngt Acc	NPL Coverage (%)	60.24%	55.05%
NPE% cu numerar	5.43%	4.82%
FINREP	NPE FINREP (%) cu numerar	5.23%	4.82%
NPL Coverage FINREP (%)	58.60%	55.00%

Regarding the non-performing loans recovery activity , the Bank's estimation of recoveries embedded the historical recoveries of NPLs and the future projections for recoveries, incorporated in the strategy and the operational action plan regarding the NPLs, which takes into consideration the borrowerstypology, the collateral coverage, the available staff and the market conditions, the identified actions to be undertaken at the level of each subportfolio of NPLs and comprising the whole NPL portfolio (securedand unsecured).

During 2024, the Bank also considered the write-off of NPLs from the balance sheet in amount of RON 30.2 million.

II. Financial projections for 2024

Profit and Loss account

The Budget and the Business Plan reveals the strategic objective of Patria Bank - the profitability consolidation - accomplished through:

✓

The increase of net banking income by the contribution of all its components

✓ The evolution of operational costs in line with inflation and support of business activity, but with a lower trend comparing to the increase of net banking income

resulting the improvement of Cost / Income Ratio from 72% in 2023 to 70% in 2024.

Net banking income presents an increase of 10% in 2024 compared to 2023, due to the development of the loan portfolio (+10% in 2024 vs 2023), the increase of clients' transaction volumes and the number of active clients. An important component is represented by the fees and commissions income which will register an increase of 14% in 2024 vs previous year.

The budgeted profit for the year 2024 was affected by the additional turnover tax calculated by applying a rate of 2% on the annual turnover. The amount budgeted by the Bank for the payment of turnover tax is RON 7.3 million.

Management Accounting Presentation

ActualBudget

values in k RON

2023

2024

kRON

%

Interest Income before UNW UNW

Interest Income after UNW Interest Expense

280,274 (5,593) 274,681 (156,159)

Net Interest Income 118,522

Fee and commission income 38,355

Fee and commission expense (5,388)

Net fee and commission income 32,967

Financial income commercial 5,760

Gain/loss from FX trs. & Trading 10,377

Gain/loss Collect & Sale portfolio

7,427

Dividend income 9,094

Gains from financial income 32,658

Other income 12,673

NET BANKING INCOME 196,821

292,771 (4,210) 288,561 (145,578) 142,983 42,943 (5,445) 37,498 6,685 7,077 8,000 6,752 28,514 7,112 216,107

• 12,497 4%

• 1,382 -25%

• 13,879 5%

• 10,581 -7%

• 24,461 21%

• 4,588 12%

• (58) 1%

• 4,531 14%

• 925 16%

• (3,300) -32% 573 8%

• (2,342) -26%

• (4,145) -13%

• (5,561) -44%

• 19,286 10%

  Staff costs (73,653)

  Administrative expenses (57,649)

  Depreciation and amortisation (10,886)

  (78,360) (61,615) (11,329)

• (4,707) 6%

• (3,966) 7%

• (442) 4%

  OPERATING EXPENSES (142,189)

  (151,304)

• -9,115 6%

OPERATING RESULT

54,632

64,803

10,171

19%

COST OF RISK

(24,488)

(23,638)

850 -3%

RESULT BEFORE INCOME TAX Current & Deferred Tax

30,144 (6,990)

Tax 2% on turnover

NET FINANCIAL RESULT

0 23,154

41,165 (7,630) (7,343) 26,192

11,021 37%

(640) 9% (7,343)

3,039

13%

Operating expenses → cost optimization will continue to be pursued at the Bank level, in order to develop the commercial activity.

Administrative expenses 2024 vs. 2023

➢ RON3,966 thousandscostsincrease, referring to:

• o IT costs, due to software maintenances related to new IT projects, as well as cost increases in telecommunication

• o Real estate costs: energy, security services, rent

• o Local taxes

• o contributions to the Bank Resolution Fund

• o costs with card processing services and in the area of ATM network

Balance Sheet

Patria Bank proposes to increase its assets by 7%, the generating elements being the increase in the loan portfolio, as well as that of the government securities portfolio.

The structure of the balance sheet will improve → the share of loans (gross) in total assets will increase from 54% to 56%, contributing to the consolidation of profitability.

As before, financing remains predominantly from the diversified commercial area with interbank resources, loans from financial institutions and REPO operations.

Loan to deposit ratio

Loan to deposit ratio is to increase from 70% in 2023 to 73% in 2024, the loan portfolio is to expand more rapidly than the deposit and the current accounts portfolio → evolution 2024 versus 2023:

Loans (gross) + RON 204 M, +10%

Deposits + RON 203 M, +6%

Management Accounting Presentation

Actual

values in k RON

2023

Liquid Assets

Cash and Central Bank Placements with other banks Securities

Equity InvestmentsNet Customers Loans

Gross Loans PPA Adjustments Unwinding Provisions

1,665,933 469,113 82,305 1,114,515 40,296 2,052,572 2,177,921

2,289,875

237,302 12%

(5,989)

(8,633) (110,727)

Subordinated loans Tangible

5,956

60,786

Intangible assets Goodwill

30,613

20,103

Right of use assets IFRS 16 Investment Property

27,002

90,358

Other debtors and other assets Deferred Tax Asset

37,998

TOTAL ASSETS

1,783 4,033,400

Due to BanksDue to Customers Borrowings from IFIs Liability IFRS 16 Other liabilities Subordonated debt Subordonated securities Deferred Tax Liability TOTAL LIABILITIES EQUITY

182,799 3,124,154

Share Capital Merger premium Retained Earnings Current result Revaluation reserve Other reserves

0 3,634,514 398,885 332,178 (67,569)

TOTAL LIABILITIES & EQUITY

61,787 23,154 18,472 30,864 4,033,400

98,918 201,200 102,282 103%

28,698 22,335 -6,363 -22%

65,368 77,141 11,773 18%

69,385 60,360 -9,025 -13%

65,193 66,331 1,137 2%