Portugal's Millennium BCP is set to conduct the first major greenfield operation on the banking market in the last seven years, as the bank prepares to launch 39 branches.
Banks that have entered the Romanian market since May 2000, when Austria's Volksbank first arrived in Romania, have done so by acquiring existing players. Most banks have been reluctant to conduct greenfield operations, even though this spares the investor the effort of restructuring an existing bank.
The main exceptions are the niche banks, with limited expansion, such as Raiffeisen Banca pentru Locuinte, HVB Banca pentru Locuinte and Porsche Bank.
Market statistics indicate there is plenty of room for established banks to grow, as well as for new players. Even through two years ago, some bankers forecast the radical consolidation of the market, which would be dominated by 3-4 players, the fast expansion of lending and branch networks shows there are still resources, with the game dependng on the sums a bank or another is willing to invest to gain customers. Mortgage lending accounts for a mere 2% of gross domestic product, compared with 12% in the Czech Republic and Hungary, and 48% in euro zone, while placements in investment funds are estimated at around 7 euros per capita, 100 times lower than in Slovakia.
Overall, nongovernmental lending barely reaches 34.3% in GDP (according to NBR estimates) because of a 7% leap registered this year, still far from the European average.
Out of banks' overall financing, retail lending accounts for around half this year, while relaxed lending conditions are also helping to bolster loan sales.
Romanian banks' territorial networks included more than 5,000 branches in late July, up around 1,000 against last year. In addition, Portugal's Millennium BCP launched another 39 branches onto the market in one move.
A greenfield operation has its own costs, with Millennium estimating it will post losses until 2011. The Portuguese bank has been extremely aggressive on the labour market. Banking sources have revealed that Millennium offers almost twice as high wages as other banks, in order to attract specialists to certain segments. Outside Bucharest, the bank also offered substantial wages to attract staff. However, it still remains to be seen how fast these costs can be covered.
Most banks have aggressive expansion plans, while banks with a solid foothold on the market believe the situation will become clearer in a year at the latest, although small players could be unable to cope with costs. The situation also depends on the overall economic climate.
Should Romania face "hard landing" amid rising imbalances, banks will find it more difficult to attract customers and easily recoup released financing.
Room for growth
Fast lending and branch network expansion indicate there are still resources
Mortgage lending accounts a mere 2% in GDP, against 12% in the Czech Republic and Hungary, and 48% in euro zones
Placements in investment funds are estimated at around 7 euros per capita, 100 times lower than in Slovakia
Nongovernmental lending barely reaches 34.3% in GDP (according to NBR estimates), still far from the European average
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