It also does not expect any shocks from a surge in risk costs as other major banks experienced in the fourth quarter, not even after the asset quality review conducted by the European Central Bank now, he added.
“I hope the ‘myth’ of sound profitability and non-performing loans kept under control will remain true at our bank. We are very comfortable with our provision level and I think we’ve shown a conservative approach since the onset of the crisis when we set aside high provisions.”
Raiffeisen Bank Romania chose to be cautious and set aside reserves to have them ready so as not to be taken by surprise. That caused its owner to wonder what it was doing because at the time the provisions seemed excessively high compared with competitors’, van Groningen says.
The bank continues to boast a NPL rate of less than 9% last year, while the sector average rose to 22%. Market leader BCR, posted almost 30% NPL rate in 2013, while second leading bank BRD’s NPL rate reached 22%.
Van Groningen says his bank is now reaping the fruit of a policy to use a centralized loan approval system, which did not allow it to get carried away in the ebullience of the boom years, 2007 and 2008.
“No local manager could influence the lending decision. Everything was directed to the central office via a very well-oiled system.”
The management did receive complaints from branches in 2007 and 2008, pointing out that competitors accepted less collateral and were granting bigger loans, that the bank required too much paperwork, Raiffeisen CEO says. It did lose some business it would have liked to get, but offset it with the transactions the system filtered out, he added.
“If we look at market share of performing loans we can see it is on the rise and I think that’s what matters.”
After successive assessments conducted by Romania’s central bank BNR last year, the major European group subsidiaries are now being probed by foreign inspectors as part of the asset quality review of the European Central Bank. Raiffeisen is being assessed by the experts of Austria’s central bank. What could the AQR test bring out?
“The question is how the entire banking system in Romania will be affected, not an individual bank. It may not be good for us as a country. We have enough capital at Raiffeisen and I don’t expect any shocking result.”
Raiffeisen budgeted single-digit growth of its loan portfolio this year, after having seen it go up 4% to RON15.4 billion, partly on the back of the takeover of Citibank’s retail portfolio.
“We have no other option because if you don’t grow, your choice is to cut. We have a very good infrastructure and I think it would be a pity to cut it, especially since we’re profitable. If there’s overcapacity on the market, I expect our competitors to do it, because we are fighting to grow.”
The bank had 528 branches and almost 5,200 employees at the end of last year.
Van Groningen says the lending market is moving though very slowly.
“It’s not easy even for us who are focused on growth to do business. One in, say, 30 talks results in a deal, this is how great an effort it takes. Retail is moving slightly, we can feel greater interest from customers, but trust remains rather low.”
Raiffeisen’s CEO expects a change of attitude towards taking out a loan soon but does not see anything significant moving the market.
The state of the economy, too, is becoming more favorable, but 2014 is an election therefore hectic year and uncertainty is greater.
Van Groningen says the system could end the year with an increase of almost 5% in lending in real terms compared with 2013, but that depends on the extent of the write-off banks will resort to in order to get rid of loans they feel they can no longer recover.
The central bank is now working on new regulations to make it easier to write off bad debt already provisioned in full, for which there is no reasonable hope of recovery.
“I think we’ll witness a gradual regulation relaxation. It is important because we will no longer look as bad compared with other markets. An easier write-off will allow us to sell non-performing loans more easily.” (EUR1=RON4.4660)
(English version by Loredana Fratila-Cristescu)