The number of banks operating in Romania has outgrown the potential of the market and will go down to half over the next few years, says Patrick Gelin, general manager of BRD-Groupe Societe Generale, the second-largest bank on the market.
"I am not convinced the Romanian market can accommodate even as much as 20 banks right now," Gelin told the Romanian Banking Forum organised by Finmedia yesterday.
This is hardly breaking news, as this issue has been constantly mentioned over the last two years, even by the banking analysts of the international rating agencies monitoring the Romanian market. Thus, people kept talking about mergers and acquisitions, but no spectacular moves were made, particularly because the market is on the rise.
Still, something did move this year, as Banca Romaneasca was taken over by the National Bank of Greece, and Banca Columna - a regular zombie, as far as the National Bank of Romania is concerned, was finally declared bankrupt. Moreover, chances are we will see another takeover soon, as HVB Bank is still evaluating Banca Tiriac in view of acquiring its controlling interests.
The banking market currently comprises 37 institutions (from 41 in 2001), one of which risks losing its licence, as the central bank is dissatisfied with the poor management and shareholder quality. If the HVB-Banca Tiriac deal comes through, the market will comprise only 36 banks. The banking assets amounted to 13.3 billion euros by mid year, which accounts for only about 33% of GDP.
The market was most crowded in 1998, when there were 45 players, but then the banking system went through a purging period. Albeit the number of banks is still large, the market is extremely concentrated, as five institutions control over 75%. Only six banks are controlled by Romanian shareholders.
The expansion of the market could theoretically allow every player to find a niche to survive. Competition is getting fiercer by the day and, as the corporate segment being practically "cannibalised," the battle is getting worse on the retail market. It remains to be seen how many players will have access to enough financial resources to hold on.
Patrick Gelin says that, even though competition on the banking market is good for consumers, most of the time it impacts on the profitability and risk coverage.
He points to the other Central and Eastern European countries, which saw the number of banking institutions go down once they had reached a certain maturity. These markets now have only 7-9 major banks in operation.
The consumer credit, Gelin believes, will continue to significantly increase in 2004, although the growth pace will be slower than this year. He feels the margins used by banks for credits and resources will maintain next year, except when it comes to preferred clients that have a sound financial situation.
razvan.voican@zf.ro
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