Romanian Banking Overview
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www.rolandberger.ro
CODRUŢ PASCU
Managing Partner
ROLAND BERGER STRATEGY CONSULTANTS S.R.L.
IOANA LEAUA
Consultant
ROLAND BERGER STRATEGY CONSULTANTS S.R.L.
For the Romanian banking system, the first half of 2009 brought the pressure of financing costs and the rise of low-performing loans - banks began to turn increasingly to strict prudential regulations, translating in both a sharp decline in lending appetite and in high provisions.
According to NBR data, the domestic banking system ended the first quarter of 2009 with a loss of approximately EUR 50 mn, mainly due to the high amounts directed toward provisions. Thus, almost half of the banks activating on the Romanian market recorded losses during the first quarter.
Recent developments in the Romanian banking market
It is a turning point for the Romanian banking system. Pressure on costs is pushing banks to reanalyze their network size, cost structure, credit portfolios and short-term business strategies.
The central bank is no longer absorbing excess cash from the system, but is instead financing banks, as the inter-bank market still cannot provide players with the necessary liquidity.
Required minimum reserves for national currency-denominated liabilities with residual maturities of up to two years were lowered by 3 percentage points, to 15%, so as to stimulate lending in RON. Moreover, reserve rates for foreign currency liabilities with residual maturities of up to two years were also lowered from 40% to 30% (starting August 24th), in an attempt to unfreeze credit intermediation. Furthermore, in March 2009, NBR also decided to cut the minimum reserve ratio on foreign-denominated liabilities with residual maturities of over two years to 0% from 40%, starting May 24th 2009.
Banking assets as of March 2009 - valued at EUR 84.96 bn - posted an increase of around 14% compared to the same period of 2008. In terms of per capita levels, bank assets reached EUR 3,955 at the end of the first quarter of 2009. The Q1 2009 level is nevertheless lower than the one registered at the end of 2008, as a direct effect of exchange rate depreciation during the first quarter of the year.
- Romanian banking system - total assets1) as share of GDP, 2003-2009 Q1 [EUR bn, %]
Source: NBR - National Bank of Romania; NIS - National Institute of Statistics; Roland Berger analysis
Notes: 1) The share of banking assets in GDP is calculated for RON figures;
2) Penetration of bank assets in 2009 Q1 calculated based on annualized GDP (2008 Q2 - 2009 Q1)
Benchmark versus CEE 4 and EURO zone
Romania continues to display a lower degree of financial intermediation compared to other countries in CEE and EU. Hence, although Romania exhibits the highest growth rates over the last years, it still bears significant potential for future growth. At the end of Q1 2009, a significant development gap in terms of bank assets per capita (Romania: EUR 3,955) was still noticeable, relative to the EURO-zone level of EUR 96,578 and even to that of CEE countries such as Czech Republic or Hungary, with bank assets per capita of EUR 15,027 and EUR 12,062 respectively.
Furthermore, the banking penetration ratio, of 71%, is considerably below the level of EU countries and it is still lower than that of CEE states such as Czech Republic, Hungary and even Bulgaria where banking penetration exceeds 100% of GDP.
- Overview bank penetration in the EURO zone and CEE, 2009 Q1 [%, EUR/capita]
Source: National banks and official statistics; ECB; Roland Berger analysis
Notes: 1) CAGR for banking assets 2003-2008; 2) The size of the bubble represents bank assets/capita in 2009 Q1
