Lenders expect leu plunge to impact on profits

An exchange rate above RON 4.9 /€1 would annul the bank’s earnings from foreign currency lending. “In Central and eastern Europe, Ukraine and Romania were most affected by currency depreciation. In Romania, the depreciation was less severe compared to Ukraine, but more significant than we would have expected at this time,” said Wimmer, who is currently Chief Financial Officer (CFO) of Austrian Erste group, which controls BCR. He added that a solution to revive the trust in the Romanian economy is an agreement with the International Monetary Fund (IMF). Several analysts and officials, including Romania’s representative with the IMF, Mihai Tanasescu, recently told Business Standard that an agreement with the monetary fund would bring fiscal consolidation with positive impact and better macroeconomic stability. Finance Minister Gheorghe Pogea last week said that Romania could ask for an IMF or EU loan. The fall of the leu comes one day after the European Commission warned that Romania’s budget deficit could amount to as much as 7.5 percent of the Gross Domestic Product (GDP) this year and is likely to widen to up to 7.9 percent of the GDP in 2010. Meanwhile, arrears of Romanians who borrowed money from banks reached €740 million and are expected to exceed €1 billion in the coming months. This will force lenders to lower profits as they will have to make provisions for defaults. (G.F.)