BCR, the largest bank on the Romanian market by assets, reported a net profit of 158 million lei (EUR37.3 million) in the first six months of the year, down by over 67% against the similar period of last year. The second-quarter profit amounted to RON82 million, up 7.8% against the first quarter, but three times lower than in April-June of 2010.
“The third quarter will continue to be difficult, but I think the fourth quarter will already be very good and that the improvement will continue into 2012. Our business is also very much dependent on people’s psychology. At present I think perceptions tend to be emotional rather than fact-based,” says Treichl.
The notable differences from the result recorded in the first half of last year are the 14% decline of interest income, to RON1.64 billion, and the 20% decline in net trading income, to RON178 million. In the first half of 2010, interest income and trading income had gone up by 10% and 12% respectively.
The short-term prospects of the banking system remain tough, at least on the retail segment, as long as wages are not going up and there is no increase in job security, says Dominic Bruynseels, CEO of BCR. Under the circumstances, the efforts of raising volumes of new loans through promotional offers with price discounts are immediately reflected negatively in the bank’s result.
“The decline in interest margin earnings primarily resulted from the fact that we cut loan prices in order to generate volumes… But demand will continue to be low until people feel they have more money in their pockets, until wages go up,” Bruynseels said.
The bank had an overall loan portfolio of RON48.9 billion, slightly up, by 0.6% against December 2010. The volume of corporate loans rose faster by 4% in the first six months, while the retail segment only saw a rise starting in May, say BCR officials.
In addition to the low demand for loans, the cost of risk remains problematic for Austrian bankers. Bernhard Spalt, head of risk at Erste, is not yet in a position to announce a downward trend for BCR provisions.
“We are seeing the beginning of recovery, but the economy is still under pressure and we expect the cost of risk to remain high this year. But we are noticing stabilization and I don’t think the situation will further deteriorate. In 2012 we also expect an improvement in the SME portfolio,” explains Spalt.
Taken separately, according to Erste reports, the BCR’s retail and SME division had a negative contribution of EUR3.3 million to the group’s result, after in the first half of last year, it had contributed a profit of EUR57 million. On this segment, the share of non-performing loans reached a new high of over 19%, above the one in Hungary.
However, loan-loss provision spending, which in 2010 climbed significantly, by nearly 25%, fell by 3% in the first half of this year, to RON946 million. The rate by which non-performing loans in the BCR group were covered by provisions and guarantees reached 126% at the end of June.
Bruynseels deems the situation of the SME portfolio as worse than expected, with the segment continuing to suffer because of weak demand. On the other hand, the head of BCR notes a better than expected improvement in the retail loan portfolio, given the lower level of non-performing loans following the policy pursued in the last few years of focusing on secured loans.
“On the corporate segment, the fact that we focused on our relationship with big companies and on infrastructure has started to bear fruit,” he said. “We are prepared to finance works on 7 out of 12 sections of Corridor IV, which will amount to significant working capital, and this will show in BCR’s 2011 balance sheet.”
BCR’s overall assets rose by 5.6% in the first six months, reaching RON72.4 billion, i.e. a 20.7% market share, up one percent against December last year. (EUR1=RON4.2403)
(English version by Daniela Stoican, Editing by Loredana Fratila-Cristescu)