Medium-sized banks are likely to continue to strengthen their presence over the coming years amid fiercer competition and rising costs linked with their efforts to remain on the market, believes Florin Georgescu, NBR first deputy governor.
Between September 2006 and September 2007, large banks consolidated their dominant positions and accounted for 63.2% of assets, up from 56.3%.
The NBR views large banks as institutions with a minimum market share of 5% in terms of assets. This category now includes six players, up from four last autumn.
Top players strengthened their presence to the detriment of smaller players. Medium-sized banks (with shares of between 1 and 5% of assets) saw their slice shrink by over 6%, from 35.9% last September to 29.7% this autumn. According to the NBR data, this category included 12 players in September 2007.
Small banks (with shares of less than 1%) also lost ground. In September, they held only 7.1% of assets, against 7.8% in September 2006. However, the smaller slice of the market is divided amongst no less than 22 banks from a total 41.
In late September, the overall banking system's assets totalled 63bn euros.
Small banks, which have not reached critical mass in terms of customers, felt the full pressure of increased personnel costs as the rapid expansion of large players' networks forced them to pay higher wages.
From late 2004 to September 2007, the banking network registered 2,137 new branches, up 70%, while the number of employees increased by 13,965 individuals, namely 28%, explains Florin Georgescu. Exclusively between September 2006 and September 2007, banks opened over 1,000 branches, with 93% located in urban areas.
The newcomers have embraced aggressive tactics to attract personnel and also aggressive price policies in order to gain customers.
In 2007, five foreign players notified the NBR of their intention to open branches in Romania.
Georgescu pointed out the fast rate of product renewal and the increasing efforts to secure customers' loyalty through loan interest rates or fee cuts and the pre-approval of new loans.
In addition, banks have recently started to promote refinancing products more heavily in a bid to attract customers who contracted loans from rival banks in the past.
Georgescu believes lending is the most competitive segment at the moment.
Banks have benefited from foreign shareholders strong support, which provided funds when the appetite for domestic saving was low.
Georgescu considers there is significant potential for corporate lending given that bank loans account for only 8% of companies' raised financing sources.
Banking market
Between September 2006 and September 2007, large banks consolidated their dominant positions on the market and accounted for 63.2% of assets, up from 56.3%.
Medium-sized banks saw their market share shrink by over 6%, from 35.9% last September to 29.7% this autumn
Small banks also lost ground; this September, they held only 7.1% of assets, against 7.8% in September 2006
In late September, overall banking system assets totalled 63bn euros
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