Liquidity increased as the reduction of minimum reserve requirements on bank’s foreign liabilities at the end of 2009 led to the 30% decline of Piraeus Bank’s deposits with the BNR, to EUR278 million at the end of December last year, according to the bank’s annual report.
“Having the constraints derived from the agreement with IMF regarding the Group exposure towards Romania, the excess liquidity generated problematic challenges in finding the optimum placement solutions. (…) The excess liquidity derived from the relaxation of the NBR’s minimum reserves requirements was absorbed in the increased volumes placed in T-bills and Government Bonds,” reads the report.
The nine largest foreign financial groups on the Romanian market in the spring of 2009 sealed an agreement with the International Monetary Fund and the European Commission in which they committed to retain their exposure to the local market. The agreement played an important part in financing the budget deficit.
The banks that were parties to the agreement bought massive amounts of government bonds following the collapse of loan demand. Piraeus Bank, for instance, had a portfolio of government bonds of RON1.15 billion (EUR270 million) at the end of last year, double compared with that in December 2009.
The volume of loans granted by the bank to individuals and to companies, however, fell by 12.8% to RON5.47 billion (EUR1.26 billion). But the local subsidiary had EUR1.49 billion in overall funding in its portfolio, to which extra EUR1.84 billion sold to the London subsidiary were added. However, even the volume of loans moved abroad fell by around EUR65 million last year.
Loans were moved to London as part of the asset cost and distribution management policy, but Piraeus Bank Romania continues to manage the portfolio. The risks and the income were, however, transferred to the UK, and the local subsidiary collects fees in exchange for its management activity.
Loan demand declined significantly both for individual clients and for companies, but the structure of the loan portfolio remained stable.
“The lending evolution for the whole year 2010 should be completely understood by also taking into consideration as well the amounts of the loans committed by Piraeus Bank-London Branch which decreased by 3.4%,” reads the bank’s annual report.
The largest volume of loans granted to companies went to the real estate sector, i.e. 33% of the total.
Personal loans dominate retail portfolio
On the retail segment, most funding was accounted for by personal loans, including mortgage-guaranteed ones. Their value reached EUR1.12 billion at the end of last year, accounting for almost 90% of loans granted to individuals.
Real estate loans totaled EUR139 million, up 23% compared with 2009. “The mortgage loan product keep the balance in the face of the decreasing trend generated by the market,” according to the 2010 report. Mortgage loans saw two-digit annual growth in each month of 2010 and 2011, thanks to the support of the “First home” government scheme.
Because of the rise of mortgage loans, the currency structure of the loan portfolio changed last year. The share of foreign currency funding rose by more than 3% compared with 2009 to 72.5%.
Piraeus set up provisions to cover losses from non-performing loans amounting to EUR108 million, up 17% compared with 2009. But the growth rate was slower than in the previous year, when it had risen 2.5 times.
The bank ended last year with EUR2.25 million in assets, from EUR2.3 billion in 2009, and was ranked 11th among local banks. Two thirds of its assets were foreign denominated.
Deposits attracted from clients remained at the same level as in 2009, at EUR1.24 billion. The bank retained its volume of deposits, offering interests above the market average amid tighter competition. Funding received from other banks, however, fell by EUR116 million, to EUR592 million.
The bank’s net profit fell 17% in 2010, to EUR15.8 million, despite the rise of operating income and the lower spending. But the still high provisions did have a significant impact on the net result. Income rose from EUR216 million to over EUR224 million thanks to higher earnings from interests and fees, while the trading activity contracted.
(English version by Daniela Stoican)