Banks in Romania reported a profit of some 500 million Euros in the first nine months of 2015.
“Banks in Romania reported a profit of 2.25 billion lei (some 500 million Euros) in the first nine months of 2015, and will close the year on profit, but the profit rate depends on the provisions banks will have to make by the end of the year”, the head of the Supervisory Department of the National Bank of Romania, Nicolae Cinteza said. In late September, 15 banks registered losses, whereas 24 others made profit. The non-performing to total gross loan rate continued to decrease, down to 12.33% in September, according to the Methodology issued by the European Banking Authority. However, the non-performing loan rate in Romania is the highest in Europe, just like the provision coverage ratio, which stands at 58.05%. However, Nicolae Cinteza claims that banks in Romania are very well capitalised, the rate of their own funds, which stands at 18.7%, being incredibly high and unprofitable for the banks.
In turn, the President of the Romanian Banking Association, Sergiu Oprescu, says the banks’ lack of profit in the wake of the financial crisis seems to have come to a close in 2015.
“Almost all banks expect to make profit again in 2015. The problem is whether or not the banking system is now free of the non-performance excess created in 2007 and 2008. If we take a look at those two years, it was a period during which we followed an upward trend, the increase in non-governmental loans was the highest, but it was registered mainly at the level of consumption loans, that is non-guaranteed crediting. Back then, that type of loans had a 6-10 year maturity, so 2015 marks the end of a cycle. Anyway, the point is that the non-performance excess issue has been solved, from my point of view and I believe this is also the standpoint of the National Bank of Romania.”
The President of the Romanian Banking Association, Sergiu Opresu, points out that the still low paced crediting in Romania is the direct result of the little interest in loans taken by companies and eligible persons. In turn, the vice-governor of the National Bank of Romania, Bogdan Olteanu, says however that this demand deficit will disappear as soon as the effects produced by the fiscal relaxation decisions that have recently been made become visible. He has reiterated that the banking system is solid, but it has been affected by the long processes of cleansing balances of non-performing loans.
“The banking system is well capitalised and has liquidities. The level of activity, and the crediting level are lower than usual. Right, crediting should be re-launched. But before that, a real evolution should be registered by the real economy, banks should also evolve and adapt to the new reality, and get closer together. Naturally, after a deep financial crisis, the volume of non-performing loans has increased significantly. The system has been cleansed, to a large extent. Of course, the level of interest rates will evolve in keeping with the evolution of the monetary market. We shall see the evolution of inflation on medium and long term and what inflationary prospects we’ll have.”
Bogdan Olteanu also said that the crediting dynamics would also depend on the way in which the economy works in the upcoming period and, if the current tendency was maintained, Romania might reach its growth potential in the first half of 2016. Let us not forget that the International Monetary Fund and the European Commission have recently revised their economic growth forecast for Romania in 2016. The IMF set it at 3.9% and the European Commission at 4.1%.
The president of the Romanian Banking Association, Sergiu Oprescu, said that lending would increase in the upcoming period, following increased consumption and private investment. Sergiu Oprescu said the increase in lending would be around 5%.
“In 2016 non-governmental loans will increase up to 5%, a forecast based on the trends that emerged in 2014 and have gone upward in 2015, namely, the recovery of the general consumption and the boost of the real estate market. I believe we may also witness an increase in the level of loaning for companies in 2016, but to a smaller extent. This increase will be more visible in terms of the working capital loan and investment loans.”
According to Sergiu Oprescu, a balance between the demand for loans in domestic currency and loans in hard currency has been noticed lately. At present there is a tendency of taking out loans in domestic currency, which is a good thing, backed by the Romanian Banking Association.
There is a fairly high competition on the Romanian banking market, according to a report of the Romanian Competition Council. The two best ranked banks on the market, BCR, a member of the Austrian Erste group and BRD Groupe Societe Generale, respectively, have had, over the past six years, market shares of 10% to 20% in the case of BCR and 14% to 16% in the case of BRD. The market shares of those two banks are now on the decrease. Nevertheless, they continue to dominate the Romanian banking system, says the Competition Council’s report. The Transilvania Bank holds the third biggest market share, of about 10%, this year purchasing Volksbank Romania, which was ranking 9th in the banks’ chart in Romania. Raiffeisen Bank, UniCredit Bank and The Savings Bank, have almost equal market shares of 7% to 8%. “The remaining market share is held by the other 34 banks,” the report also reads.
(Translated by Diana Vijeu / Elena Enache)
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