Profit Of Banking System Exceeds RON1B In 1H

But the return to positive territory has nothing to do with a rebound of the banking business, with total net assets eroding by over 4% in the past year. Their equivalent in euros fell below EUR80 billion at the end of June. This reflects low demand, coupled with deleveraging, whereby parent banks reduce their exposures to local subsidiaries.

Deleveraging is also seen in the fast adjustment of the loan to deposit ratio, which fell from 120% in June 2012 to 113.7% in June 2013, with local banks being pressured to finance their activity using their own resources.

The ratio of non-performing loans continued to rise in the second quarter, exceeding 20%. However, most banks remained well-capitalized, with the solvency ratio at 14.67% in June – a comparable level to that recorded last year.

A major contribution to the profit of the system in the first half of the year came from BCR, which went from losses of RON548 million to a profit of RON557 million, especially through the release of delayed fiscal liabilities.

Return on equity (ROE), an indicator watched closely by bank shareholders who have had to make several capital injections in the past few years, reached a peak of almost 6%, returning to the March 2010 level, but it remains far behind the double-digit level seen before the crisis.

The Romanian central bank notes a significant improvement in the profitability of the overall banking system, but remains skeptical as to the chances of consolidating this trend, believing there are not reasons for enthusiasm for now.

The reason for the central bank’s skepticism is easy to see: the ratio of non-performing loans did not stop growing in the second quarter, reaching 20.3% at the end of June.

This year’s economic rebound encourages many bankers to hope that 2013 will in fact see bad loans peak.

Loans in lei have not managed in June to make up for the decline of the foreign currency lending segment, so the volume of loans for private-sector clients declined by 1.6% in June 2013 against June 2012 (6.3% in real terms).

The Romanian central bank has lately been in a hurry to expand lending in lei by cutting its key interest rate by three quarters of a percent through two steps made within a month.

But the effort to shift lending from euros to lei comes late on a market where 60% of loans are in foreign currency, especially medium and long-term ones.

(English version by Daniela Stoican)