“There might be a consolidation, either because of the strategy of parent banks or because of the local performance, such as low market share and unsatisfactory profitability,” Toader said.
There are also banks on the local market that continue to pursue growth by acquisitions. Some banks will probably focus on certain market niches (such as private banking, SMEs, professionals, cards etc.), he added.
Banks, like any other organizations, have to justify their operations economically, generate business and have clients. If they cannot find clients what can they do? They will wait a year, two or three and will then have to decide what to do. “I think it’s time they made a decision,” Toader told ZF.
As for the stated plans of certain banks to leave Romania, the KPMG official believes “we should not take it personally,” explaining that a number of companies such as Nokia and Tnuva and some banks have decided to leave Romania lately but the decision had to do with their parent companies’ strategies.
Banks “still have work to do,” Toader believes, adding it is obvious that “they have to become more efficient.”
Bankers say they needed to keep their large networks, the development potential, to use when the market rebounds. Their large network is also necessary to attract a higher volume of deposits from the local market.
Toader says there are a number of ways to attract savings, which provide an alternative to the traditional branch networks, as Internet banking is a solution that is not used as much as it should be and mobile banking is almost non-existent.
“Maybe banks should take a cue from players in other industries – such as those that use a mobile distribution force and even reach the rural areas, like insurance and retail companies do. (…) As electronic data transmission and telecommunications systems are getting better and more affordable, a wide territorial network is no longer justified.”
On the other hand, the KPMG official says, even if banks become really efficient and cut costs, that does not mean lending will rebound.
“It takes two to tango. On the one hand, there are banks, which provide access to funding, and on the other, there need to be clients who apply for loans. If we look at corporate clients for instance, why should they apply for an investment loan if they have no confidence in the economy? Likewise, in retail [banking], if people do not know what will become of their lives, of their jobs, they are not willing to take on debt.”
Commenting on how banks conducted restructuring of troubled loans and the fact the banks are having trouble with more and more of the restructured loans, Toader says their purpose is to not sell their clients’ homes. He explains that if the restructuring was not done properly it may be the bankers’ fault for not knowing their clients well enough or it may be that the clients did not provide accurate information about themselves. “This is why they say it is best to know your clients and analyze whether they can repay their loans or not.” Ideally, Toader went on, clients cooperate and banks work with them to find a solution.
The number one priority of many European lenders, including some of those operating in Romania, Toader believes, will become optimizing solvency as a result of the new minimum capital adequacy level, 9%, required by the European Banking Authority, for which they have until June 30, 2012 to comply.
The steps banks can take to improve solvency include sale of portfolios of performing or non-performing assets, sales of non-core assets/lines of business, halting dividend payment) or restructuring non-performing loans.
(English version by Loredana Fratila-Cristescu)