Deputy governor Bogdan Olteanu says some shareholders have grown ‘tired’ because their banks have been unable to make any profit.
“In a way, this consolidation process is normal in part because the old shareholders are tired by the years without any profit. There hasn’t been a lot of good news for them since 2009,” Olteanu said.
“Had they invested in energy, they would have been better off compared with the banking investment. Many of them have institutional obligations, too. The shareholders in their parent countries have their expectations and may always decide to focus on something other than the banking system.”
This consolidation means takeovers of banks, mergers and acquisitions of loan and deposit portfolios from those seeking to leave the market. According to calculations, Romania should be left with 10 to 15 large banks providing all kinds of services by the end of the decade, instead of the current 40.
The crisis dealt a heavy blow to the banking system, as bankers were completely unprepared for the decline in the companies’ business due to the economic decline and the drop in individuals’ incomes, which rendered them unable to repay their loans.
Whereas banks managed to sweep non-performing loans under the rug in the first years of the crisis, the central bank has been pressuring them in the past two years to bring them out into the open and sell them. The entire banking system posted 4.4 billion lei (EUR1 billion) loss last year, compared with 2008 when it had posted EUR1 billion profit.
Now that Banca Transilvania has taken over Volksbank, analysts expects faster developments in the banking system, especially since the central bank is pressuring shareholders of many lenders to make a decision about their future.
Ilie Carabulea, the main shareholder of Banca Carpatica, was pressured to find a solution for the bank in Sibiu, and he has already signed an agreement to sell to US private investment firm JC Flowers. Since the firm has the money and is willing to invest, it is being encouraged to buy other local banks, such as Piraeus, Credit Agricole, Banca Romaneasca and Credit Europe.
Piraeus, which ranks 11th in Romania, has several suitors interested in it, and one of them is Hungarian-held OTP Bank, which bought Portugal’s Millennium Bank’s Romanian operation.
“Negotiations have made progress. The decision will be made in Athens,” said Madalina Teodorescu, vice-president of Piraeus Bank Romania, at a banking seminar.
Before the shareholders, mostly foreign, find a solution for the operations in Romania, the lenders are pressured to restructure, starting with their operational model and going to their loan and customer portfolio, in an attempt to return to profit or at least curb losses.
“We can see that banks continue to restructure portfolios and operations. Adjustment of business models is necessary even though we are part of powerful groups,” said Bogdan Neacsu, vice-president Garanti Bank Romania.
(English version by Loredana Fratila-Cristescu)