Banks borrowed €9 bln from the National Bank of Romania (BNR) in February alone, while Romanians forced bankers to set aside provisions worth €272 million in January. The crisis is now proving that the tactics applied by some lenders, who rushed to gain market share in previous years, when loans surged by over 60 percent year-on-year, was a mistake.
The depreciation of the leu, unemployment, and higher interest rates overturned their plans. Loans included in the loss and questionable categories make up 7.61 percent of total credits, amounting to €3.53 bln in January, compared to 6.53 percent at the end of 2008.
“So far, there are no serious problems in terms of our own funds. For this year, own funds should not be affected, but the increase in provisions is affecting bank profit. The situation is not yet severe, but evolutions are worrisome,” said Ion Dragulin, Head of BNR’s Stability Department. The solvency index is at an acceptable level, of 12.34 percent at the end of last year, but central bank officials said that the minimum in the system is 9.8 percent, considering that the approved lowest level is eight percent.
Some lenders began registering losses since last year’s fourth quarter, and experts are expecting poor performing loans to more than double, which would result to less than half of the 43 banks in the system remaining in the black. “If you do not pass on the higher costs of a loan, your revenues from interest will decline. If you do, the risk is that provisions will rise. Without a doubt, profitability in the system will slide. We will have higher provisions, lower revenues, lower commissions, and higher interest rates on deposits,” said Steven van Groningen, President of Raiffeisen Bank Romania.
