Banking Market Overview (CEE and Romania)

Ensight Management Consulting presents the key findings of the banking market analysis on Central and Eastern Europe and Romania. The objective of the study is to understand the market evolution over the past few years and to identify possible short and medium term trends.

The study included the following countries: Romania, Poland, Czech Republic, Hungary, Slovakia, Croatia, Slovenia and Bulgaria. The analysis and formulated trends have been realized based on data available until June 2014.


The main topics analysed are represented by banking assets, banking loans and credit quality, banking deposits, payment terminals and instruments, interest rates, modern banking technologies, profitability, costs and distribution network etc. Also, the study included a perspective on the competitive context and the main regulation overview in the Romanian banking system.


Central and Eastern Europe (CEE) Banking Market Overview


In 2013, the total CEE banking market reached 972.80 bnEUR. In this context, Romania maintained its position as the 4th largest banking market in CEE, amounting total banking assets of 91.40 bnEUR.


Similarly to 2012, the total CEE banking assets had a general positive trend in 2013, with an increasing value of 0.34% as compared to 2012.This overall trend was mainly driven by Poland, which experienced an increase of 6.91 bnEUR as compared to 2012, while the other countries showed a rather low increase in terms of banking assets. The overall bank deposits showed a general positive trend in most of the CEE countries, the value of total bank deposits in CEE increasing by 1.53% in 2013 as compared to 2012. On the other hand, the value of total loans in CEE decreased in 2013 by 0.22%, after a growth of 5.93% in the previous year.


The main reason behind the evolution of the CEE loans was a 4.60 bnEUR drop of total loans in Slovenia as compared to 2012, as a result of a weaker demand and a tightening of credit standards. In terms of loan-to-deposit ratios, there has been an increase for the countries where the ratio was below 1 in 2012 and a decrease for the rest of the countries, but maintaining a ratio above 1. The overall loan-to-deposit average in 2013 for the CEE countries was 1.07, slightly lower than the 1.10 value registered in 2012.


As payment instruments such as debit and credit cards are concerned, Romania and Bulgaria registered the lowest values of card transactions per inhabitant among CEE countries that are part of EU. Thus, Romania reached a level of 212 EUR/inhabitant for debit cards and 44 EUR/inhabitant for credit cards, while Bulgaria registered 127 EUR/inhabitant for debit cards and 61 EUR/inhabitant for credit cards.


Romanian Banking Market Overview


The dynamic of the aggregated net banking assets decreased with 0.94% in nominal terms in RON as for 2013. This is the first decrease in the last ten years as a result of both the deleveraging process and the loans volume decreasing by 2.51%. The evolution of loans is explained by a drop in both household and corporate segments.


Total banking loanspresented a slightly negative trend in 2013 (-2.51% as compared to 2012). On the other hand, the value of the total banking deposits attracted by the Romanian banking system in 2013 continued to increase at a moderate rate. This fact shows the population’s tendency towards savings and the increased prudency of large companies. Concerning the loans structure by segment, corporate loans decreased by 5.43% in 2013, reaching a level of ~112.34 bnRON, while household loans experienced a slight decrease of 1.16% as compared to 2012.


Loans to the public sectormaintained their total value almost equal to that in 2012, still a lot higher than the pre-crisis value registered in 2008 (9.88 bnRON in 2013 and 9.89 bnRON in 2012 as compared to 6.25 bnRON in 2008).


The nominal value of the total deposits continued to grow with ~17.11 bnRON in 2013 as compared to 2012, reaching ~200.52 bnRON. Along with the population’s increased tendency towards savings that continued in 2013, the corporate deposits increased with 15.68% as compared to 2012. The corporate deposits in RON increased significantly, despite a reduced interest rate for new corporate RON deposits, from an average of 5.15% in December 2012 to an average of 2.19% in December 2013. The evolution can be explained by a more prudent behaviour of the corporate environment in times of political and economic uncertainty.


Maintaining their trend from the previous year, both the overall number of valid debit and credit cards and the value of payment transactions have increased in 2013, as compared to 2012, by 3.23% for the number of cards and 13.87% for the value of payment transactions. This shows a tendency of the Romanian population for adopting more modern payment instruments.


Non-performing loans continued their ascending trend, increasing from 18.24% in 2012 to 21.87% in 2013. This growth lead to a far worse of credit quality for many banks, even though most of them cleaned their portfolios by selling non-performing loans. The evolution has come as a result of giving loans to riskier sectors and also due to the RON depreciating against foreign currencies.


As a conclusion, the main short and medium term trends on the Romanian banking system include: increased crediting activity, credit portfolio restructuring, continued cost control/branch network optimization, development and further improvement of alternative channels, change of the competitive landscape and a market share consolidation.


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