"In the years to come, inflation will drop and profit margins will shrink so that, unless volumes increase, the banks' earnings will be endangered." This statement belongs to National Bank of Romania vice-governor Mihai Bogza and was made early this year. However, the gloomy forecast came true perhaps even sooner than its author expected it to.
Whether they have bigger or smaller market shares, whether they operate on the retail market or not, whether they have been dealing with restructuring or changes in the shareholding structure, most of the banks on the Romanian market have one thing in common: poorer financial results than in the year-ago period. #leadend#
Moreover, should this trend continue by yearend, 2003 may be the first year (after many years of growth) when profitability in the banking system enters a downward trend.
How do bankers explain this evolution? The answer comes from at least three directions: plunging profit margins (the gap between lending rates and deposit interest rates) prompted by fiercer competition, increased provisioning expenses for the non-payment risk and bigger investments (at least at a declarative level), mainly in infrastructure.
After the Romanian Commercial Bank (BCR) released, three weeks ago, its first-half results (which reflected a net income drop from 97 million dollars in the first six months of 2002 to $75 million in H1, 2003), it was the turn of the Romanian Development Bank - BRD-SocGen, the second-largest bank in the system, to confirm the spiralling trend. The net profit posted by BRD-SocGen dropped 14.3% in nominal terms in the first half of 2003 since the year-ago period, down to 1,043 billion ROL (around 27.7 million euros). In the first half of 2002, the Romanian Development Bank reported net profit worth 1,193.2 billion ROL (some 35.8 million euros).
The bank's officials ground the drop on the new regulations regarding the classification of lending and provisions, introduced by the National Bank of Romania (NBR) early this year.
Gross operating profit went up 30% in nominal terms as compared to the year-ago period, to 1,820bn ROL (49.8m euros).
Still, BRD granted 160% more loans to natural persons in the first six months of the year, up to more than 9,000 billion ROL (246 million euros), whereas corporate lending increased 42%, to 30,800 billion ROL (843 million euros). The number of clients exceeded 1.5 million, up 25% since the first six months of 2002.
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
