MKB Romexterra, the local branch of the German Bayern LB group, posted losses worth 27.3m RON (7.4m euros) in the first half of the year, following a significant increase in reserves made. In June 2007, the bank had posted a 12m RON (3.6m euros) profit.
The bank derived an operating income worth 11.6m RON in the first six months. The losses were caused by the significant increase in reserves, especially against the loans granted to individual clients and small and medium-sized enterprises, which reached a total of 39m RON (10.7m euros) in June. "Anticipating that the main sources that require reserves to be made have been identified, the bank expects reserves to reach 45 million RON (some 13 million euros) by the end of the year," reads a release of MKB Romexterra.
The operating income should reach 36 million RON (more than 10 million euros) by the end of the year. The total assets of the bank reached 2.3 billion RON (632 million euros) in June, an increase of 53% in RON compared with the middle of last year. Assets increased by 16% compared with December 2007.
"As a result of the unfavourable economic environment, the bank did not reach its sales target. However, the business plan structure will not be modified, although current forecasts indicate that the figures set for 2008 are extremely ambitious in light of the current circumstances," the release adds.
The credit portfolio was slower to rise and reached 1.4 billion RON (385 million euros), 50% higher than the middle of last year. The bank focused more on corporate clients, a segment where funding increased by 61% to 975 million RON (268 million euros). As for the retail business, the growth was not as high, just 30%, after the balance of loans increased to 442 million RON (121 million euros). MKB Romexterra has expanded its territorial network by 18 branches in the past year, and operates 87 branches and offices with a staff of 1,100. Hungarian MKB Bank, a subsidiary of the Bayern LB group, bought the controlling interests in Romexterra two years ago, and later began a reorganisation process that involved rebranding. Representatives for the bank say that the projects to harmonise Retail and Corporate business lines were fully implemented and now the focus is on the development of the client portfolio. The bank still has to complete the implementation of risk management and IT projects this year. The deterioration in the quality of the loan portfolio is apparent across the entire banking system, as both the value of overdue loans and their share in the total are on the rise.
System-wide, the reserves witnessed a significant increase and reached 4.8bn RON (1.3bn euros), compared to 1.9bn RON last June. On average, each bank had almost 121m RON (33m euros) in reserves set aside, compared with 53m RON a year ago.
Small players are more affected by such trends, given that the small size of their business makes it hard to accommodate problems like these.
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