Responsible for the Romanian bank, which continues to pile on losses, is Volksbank Austria’s deputy CEO Michael Mendel, whose mandate ends in 2016.
The Austrian bank says Volksbank Romania’s 2012 loss is “above expectations,” according to the annual report published in Vienna. The bank’s loss amounted to around EUR170 million.
The main official explanation is the increase in provisions for bad loans as a result of the depreciation of guarantees and of lower-than-expected sales of assets recovered from bad-paying clients.
Romanian central bank put significant pressure last year on all banks to re-evaluate their guarantees based on the actual conditions on the market as much as possible. As a result, the fourth quarter in particular came with massive provision rises for the overall system.
Volksbank Romania bears the burden of a portfolio of non-performing retail loans guaranteed with real estate collateral. As the value of homes continued to depreciate, the bank had to set up additional provisions.
On the other hand, the Austrian bank says it is happy with last year’s results of the restructuring process carried out by the new management.
The bank’s main reason to be happy is the rise of deposits by around 40%. In 2013 Volksbank Romania plans to draw an impressive EUR200 million from clients, which would increase the volume of deposits by a further 30%.
Of course such a target can only be reached by offering interest rates above the market average, but the local management has officially committed to this target in order to reduce its structural gap between loans and deposits.
It remains to be seen how the market will respond to generous interest rates on deposits after recent Cyprus-related developments.
Volksbank Romania is a subsidiary overseen by the Romanian central bank and whose deposits up to EUR100,000 are guaranteed by the Romanian Deposit Guarantee Fund, but the bank has significant losses and slim chances of returning to profit this year, with the management hoping to at least end the year at breakeven.
(English version by Daniela Stoican)