The balance sheet cleanup process and the slow sales of loans caused the portfolio of MKB Romexterra, the subsidiary of Hungarian group MKB, to shrink to 390 million lei (EUR89 million) in December 2011, one quarter of what it was in 2009, RON1.8 billion.
“The granting of new loans slowed down in 2011 because of the plan to resume it once the new lending rule was agreed upon with the group. The bank is prepared to restart retail and SME lending and will launch new rules and products to improve sales and develop new distribution channels and partnerships to gain clients,” the directors’ 2011 report shows.
The volume of the assets managed by the bank reached RON1.1 billion at the end of last year, almost three times lower than in December 2009, because of an extensive cleanup process, during which the non-performing loans were transferred to a special vehicle and then sold to the MKB group.
The loan portfolio shrank by 38% in 2011 alone because many corporate customers refinanced with other banks after MKB Romexterra decided to reduce high-value exposure, and after it sold its affiliated leasing company, MKB Leasing, to the MKB group.
The sale of the leasing company had been requested by the central bank of Romania, as a step to avoid the worsening of the prudential indicators.
Romexterra took a loss of about RON24 million as result of the sale of MKB Leasing to the MKB group for RON7.4 million, which had been previously valued at almost RON32 million. About 60% of the loss was caused by the provisions set aside before the sale.
The leasing market was badly hurt by the plummeting sales of cars during the crisis period and the surge in the number of bad payers among customers. Car financing accounts for 70% of MKB Leasing’s portfolio and the company only financed acquisitions of goods repossessed from bad payers.
The transfer of troubled loans allowed MKB Romexterra to cut losses to RON39 million last year according to the international financial reporting standards (IFRS) from RON247 million in 2010. Under Romanian accountings standards (RAS), which are stricter about spending on risk provisions, the bank lost RON100 million.
The lower losses were also because of the decline in operating spending to one third of the previous level, thus reaching RON146 million, but the bank’s performance was affected by the decline in revenue.
To cut costs, MKB Romexterra fired another 50 people last year, after having laid off 200 in 2010. The bank had 628 employees and 47 offices at the end of 2010.
MKB Romexterra posted RON107 million in operating revenue last year compared with RON264 million in 2010, as a result of the lower interest and fee revenue, caused by the shrinking portfolio.
The bank had about 96,000 customers at the end of December, while at the end of 2010 it had more than 194,000. The number of retail customers halved last year after problematic accounts were closed.
It had 1,700 corporate customers left, 331 of them with ongoing loans. The bank took steps to reduce exposures over EUR1 million. Therefore the number of customers with loans higher than this went down from 22 to 14, and the department of large corporate exposure was dissolved.
Romexterra bank rebranded as MKB Nextebank in 2010, a name that is now above the front door of all its 47 branches and offices, but the legal entity is still called MKB Romexterra Bank. (EUR1=RON4.373)
(English version by Loredana Fratila-Cristescu)