“The banks posted aggregate profit of more than 1.6 billion lei (EUR358 million) in October, after profit of RON1.5 billion in the first half of 2013. They will most likely report profit at the end of the year,” said Nicolae Cinteza, head of the central bank’s Supervisory Department.
In 2012, the local bankers reported a combined loss of RON2.3 billion, hurt by higher provisions.
He said around half of the 41 banks operating in Romania are estimated to record losses in 2013, but the overall performance of the system will remain positive.
Romanian banks reported a combined net profit of RON1.46 billion after the first nine months, despite an aggregate loss of RON61 million reported in September.
However, provisioning for bad loans rose to RON34.36 billion at the end of September, from RON33.74 billion a month earlier. The figures are calculated under international accounting standards.
According to Cinteza, loan-loss provisioning is expected to increase substantially in November and December, as banks estimate the European Central Bank will revaluate its collateral rules. The increase could also stem from a series of inspections at local banks conducted by the central bank, he added.
“Provisions will increase significantly in November and December. The ECB’s proceedings for asset quality valuation will include next year harsher rules for collateral revaluation, which means the collateral value will drop substantially. Therefore, the level of provisions will increase,” Cinteza said.
The central bank’s official said most local lenders have already considered this possibility and they started to book provisions in advance.
On the other hand, commercial banks are likely to book new provisions following a series of checkups conducted by the central bank amid suspicions that lenders were repaying “too fast” a series of credit lines taken from their parent banks, Cinteza said. (EUR1=RON4.4687)