The return to profit of the Romanian banking system after the huge losses of RON2.3 billion recorded last year tends to consolidate, with the latest stress tests conducted by the Romanian central bank showing this is not a temporary improvement, but the result of an improvement in the system’s ability to absorb shocks.
With an average solvency ratio of almost 15% and a Tier 1 capital ratio of 13.8%, the Romanian banking system would manage to remain in positive territory even if a pessimistic scenario materializes, one whose main hypotheses would be an almost 2% GDP decline this year, an around 15% rise in provisions for non-performing loans, especially on the corporate segment, and a narrowing of the interest rate margin as a result of higher financing costs.
One also considers a depreciation of the leu against the euro, with over 62% of loans being in foreign currency.
Not all banks would be as resistant to such shocks, with the market being divided between loss-making banks and banks that have managed to keep profitable.
Non-performing loans reached a share of 20.2% in May, two percent higher than at the end of 2012. The share of non-performing loans on the corporate segment was 22.3% in May. According to surveys conducted by BNR, banks toughened conditions of granting loans in the first quarter for the first time in a year and planned to continue to do that in the second quarter, although more slowly.
More often than not shareholders continued to support banks, with capital increases conducted in the first five months of the year totaling EUR2.6 million.
But fresh capital injections were significantly cut after the impressive volumes recorded in 2011 – around EUR380 million and EUR111 million in 2012.
At the end of May the banking system had a share capital of EUR5.5 billion, slightly down from EUR5.6 million at the end of last year.
Austrian banks increased their share of the system’s capital by almost one percentage point, to 26.75%, while Greek banks held around 19.7% at the end of May. French banks hold 12% of the system’s capital, while Romanian capital barely exceeds 11%. Dutch banks have almost 9% of the capital.
The Romanian banking system had net balance sheet assets of EUR80.1 billion after the first five months of this year, down by EUR2.5 billion against December 2012.
(English version by Daniela Stoican)