The number of branches is the most successful aspect of the Romanian retail banking market, states Andrei Caramitru, managing partner at the Romanian office of McKinsey, one of the most important global consultancies.
"Large banks already have hundreds of branches and also the capacity to launch 100-200 new branches each year. Network investments entail financing in the form of much cheaper deposits compared to small banks, which makes major players' life much easier in light of the current financial atmosphere. Small banks are at a disadvantage and it will be hard for them to make steady progress because they face major structural obstacles, despite ambitious plans and budgeted market shares that reach a total of 100%, without taking into account the top 5 players. Of course there isn't room for everybody," says Caramitru.
He believes some second and third tier players may even exit the market. However, Caramitru does not expect a large number of deals on the banking market. At the same time, the consultant explains that banks, in particular medium and small ones, will have to cope with serious financing problems in the wake of the subprime crisis.
"The international financial system is hurt by the serious shortage of cash, Romania's country risk has risen because of our dependence on foreign financing, and the Romanian banking system has suffered from the very low level of the population's savings. Medium and small banks will be hit the heaviest by this phenomenon," adds Caramitru.
As a result, he believes competitors may be repositioned and medium and small banks could be consolidated.
On the one hand, he believes players with few branches will find it hard to raise cheaper cash and will focus on the lending market. On the other hand, he maintains there will be slower growth in terms of lending volumes due to rising interest rates and euro/RON exchange rate volatility.
Under the circumstances, Caramitru anticipates some small and medium banks will abandon their universal bank ambitions and become more specialised.
Caramitru considers large banks will choose to continue organic growth processes, and avoid difficulties related to the integration of smaller banks.
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