The First Vice Governor of the National Bank of Romania (BNR), Florin Georgescu, said that capital increases in the banking system totaled €468 million in the past year, of which €225 mln in the past six months.
Calculations made by Business Standard indicate that lenders could post earnings worth over €185 mln in 2009 from the interest rate difference alone for money withdrawn from BNR and lent to the Ministry of Finance. The budget deficit forecast for the end of this year is 8.1 percent of gross domestic product (GDP), namely more than RON 40 billion (some €9.3 bln), of a total of RON 497.3 bln (approximately €115.7 bln). At an average interest rate of 10 percent, interest-related costs amount to RON 4 bln (€0.9 bln). At a two percentage point profit margin, banks will obtain some RON 800 mln, the equivalent of €185 mln. Practically speaking, banks could gain €50 mln more than the latest estimate, from the loan granted by UniCredit to the state. Thus, indirect capitalization on the part of the state is helping the banking sector to end 2009 in the black, in spite of the significant deterioration in the quality of their loan portfolio, which registers a nonperfomance ratio in excess of 18 percent, compared to 10.1 percent in September 2008. These percentages indicate the share of loans classified as loss, questionable, and substandard in total loans.
Loans classified as loss made up for 8.5 percent of total loans at the end of September, according to data presented by Georgescu. In other words, nonperforming loans in this category total almost RON 17 bln (some €4 bln).
“Loans in the standard category had a 60.6 percent share of the total, compared to 66.4 percent in September 2008, which shows there was a passage towards riskier categories,” Georgescu said.
The First Vice Governor of BNR indicated that the exposure of the nine banking groups which signed the Vienna agreement declined by €700 mln, or two percent, in the March-September 2008 period. Georgescu stressed that, during the Brussels meeting scheduled for 18 November between the officials of the nine lenders, BNR, and the International Monetary Fund, a reconfirmation of initial commitments will be requested.
Following the first meeting in Vienna in March, nine large financial groups committed to support their operations on the Romanian market and, if necessary, supplement the capital of their local subsidiaries. However, this commitment took the form of a “gentlemen’s agreement.”
