Provisions set up to cover losses from non-payment of loanscontinued to bite into the earnings of BCR, the biggest financialgroup on the Romanian market, but their impact fell to 110 millioneuros in the first three months of 2010, from nearly 188 millioneuros in the last quarter of 2009, when an all-time high wasreached.
Under the circumstances, the BCR group reported a 243 million-RON(58.7 million-euro) net profit, down 26% in RON against the similarperiod of last year. The result is calculated in line withinternational financial reporting standards.
"The data indicate a defensive approach of the bank. Risks havebeen removed from the balance sheet (by outsourcing loans grantedto clients i.e.), and the decline has been offset by investments ingovernment securities, which carry a lower risk, but also fetchlower profits. The rise in provisions has been controlled via thesame mechanism. The priority has been to improve the risk profile,very likely in order to reduce capital requirements," commentsFlorin Ilie, head of the Capital Markets department of INGBank.
Expressed in euros, the quarterly decline in net profit was 25%,because the RON's appreciation makes it more favourable to useforeign currency figures for comparisons. The rate of decline hasthus significantly improved against the last two quarters of 2009,when it had climbed to 80%, reflecting pressure generated by thedeterioration in loan quality.
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