“It is not a tragedy if the exchange rate reaches RON 4.8/€1. Romania’s real problem is that there is €30 billion worth of European funds available. Infrastructure projects are needed. It is time for politicians, the government, and the National Bank to work together to get Romania back on track,” Erste Bank’s General Manager, Andreas Treichl, said Friday in Vienna.
The Austrian lender does not expect the National Bank of Romania (BNR) to adopt measures that would ease lending, but is expecting increased stability. However, Romania should take out a loan from the International Monetary Fund (IMF) as a “safety belt.” A possible foreign loan would help restore the trust of international investors in the domestic economy. “Romania should sign an agreement with IMF. This is no time for pride,” Treichl said. According to Treichl, the Austrian banking system is not the only one depending on the future of economies in Central and Eastern Europe, but the European Union itself cannot remain indifferent to the evolution of an area which is part of the common market. “There is no other EU bank that supports the Romanian economy the way we do. We have 25 percent of the Romanian economy,” Treichl added.
The Austrian bank’s business in Romania would remain profitable even at a RON 5/€1 exchange rate, said the Chief Financial Officer of Erste Group, Manfred Wimmer, and the company’s exposure on the local real estate market is rather low, of some €1 bln, compared to its total exposure on the Romanian market of €11 bln.
“Even if the exchange rate amounts to RON 5/€1, lending will continue to be profitable. Our average client earns three times more than the average Romanian salary. Their financial capacity to absorb the fluctuations of the exchange rate is substantial,” Wimmer told Business Standard. Erste Bank has postponed plans to list BCR on the Bucharest Stock Exchange, due to the crisis, for a time when the market will provide better conditions, even though the deadline included in the privatization contract is fall 2009. “I think the SIFs [financial investment companies] have a relatively limited interest to list BCR at this time. We should forget about doing this in 2009. Markets are very nervous. It will take some time before the trust of investors in the growth potential of Romania and other European countries is restored. If we are lucky, we can wait until 2010, but my personal opinion is that we should wait until 2011,” said the company official.
The BCR group increased its loan and down payment risk provisions some 3.8 times in 2008, to €170.2 mln, due to the deterioration of the macroeconomic environment and the conservative approach of risk management. Wimmer added that BCR is well capitalized, but if provisions rise significantly a capital infusion may become necessary.
