The banking system slipped into the red again in May, posting an about 54 million-euro (228 million RON) decline, according to the Romanian accounting standards, under the pressure of the cost on provisions required by non-performing loans.
A year ago, when the crisis had not hit Romania yet, the same banking system post a five-month net profit of 438 million euros.
The situation has been rapidly deteriorating since January 2009 – the first month after 2000 when the Romanian banking market posted loses as a result of the expenses required to cover the growing number of overdue loans. At the end of May, the loans rated as doubtful and loss, that is loans overdue by more than 90 days, have come to account for 11.5% of the total loans granted by banks, a share twice and a half higher than a year ago.
April recorded a passing return to profit of the banking system, while in May the overall loss soared to a peak of 228 million RON.
The data centralised by the NBR are in stark contrast with the image presented by banks, most of which continued to post profit, but calculated in line with the international accounting standards, which allow a much more favourable treatment of provisions as opposed to Romanian standards used in reporting to the National Bank.
The gap between the two reporting systems has become so wide that a lender that reports profit to the parent bank may happen to actually record net losses according to the Romanian central bank’s data.
That is why in May four of the top ten banks on the market posted losses according to the local accounting standards. Bancpost, the eighth bank at the end of 2008, posted losses in the first quarter also in line with international standards (4.1 million euros).
The banking system is beginning to show the worsening crisis in the economy, with more and more individual and corporate clients rendered unable to repay their debt.
Banks are bending over backwards to restructure loans so as to avoid having to provision them as potential loss, resorting mostly to an extension of the maturity, in some cases even doubling it.
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