Summer to melt down bank profits

Lenders posted total losses worth €50 million in the first three months of 2009, and earnings in excess of €70 mln in the second quarter. Analysts expect the profitability of the local banking system to slide, but say that banks will not end 2009 in the red, as they are well capitalized, meaning they have sufficient funds at their disposal to make a profit.

“The largest banks in Romania have a chance of making a profit in the third quarter of this year, but on the whole, the banking system will most likely post losses,” said Radu Limpede, economic analyst. Regarding the structure of the profit of lenders, most of their earnings in the first quarter of this year came from trading activities, namely operations on the foreign currency market or with state bonds. “Revenues obtained from trading activities will drop, because the Ministry of Finance is no longer willing to issue state bonds to banks, and it is looking for other sources to finance the budget deficit. The end of this year will bring almost zero profits for local lenders,” the Secretary General of the Chartered Financial Analyst (CFA) Romania association, Adrian Mitroi, said.

In previous years, the first and final quarters were the best in terms of bank revenues.