Net profit in the Romanian banking system exceeded one billion euros in 2008, reaching a record high of over 1.27 billion euros, following an approximately 67% growth compared with 2007, according to the reports submitted to NBR.
The year 2008 therefore stands out as the best year the banking industry has had after 1990, with profits made in the first half of the year offsetting the decline that started in the autumn, as a result of the international crisis fallout.
Profit remained concentrated around the big banks, with the bulk made from the sale of insurance-related assets. BCR, BRD, CEC and Banca Transilvania each collected 62 million euros in net amount from the sale of their stakes in Asiban, BCR got 244 million euros from the sale of BCR Asigurari and of its majority interest in BCR Asigurari de Viata, while Banca Transilvania made another 90 million euros from the sale of BT Asigurari.
The aforementioned banks found a last window of opportunity in 2008 to part with their insurance businesses in exchange for hefty prices, before the mergers and acquisitions market froze in the aftermath of the crisis.
Besides the profit made from the respective deals, many banks posted solid first-half growth of their incomes derived from the still fast lending rise, as strong demand allowed them to maintain their interest margins. Many players continued to reduce the pressure of costs, too, pushing the cost/revenue ratio to less than 50%.
BCR and BRD alone, which are the leaders in terms of credit and deposit market shares by far, posted 626 million euros in net profit together nine months into the year.
The third quarter, however, came with the first signs of a slowdown of the entire market, with the last three months registering the abrupt decline of lending, along with the deterioration of the credit portfolio as a result of the successive interest rate raises and the fast-paced depreciation of the RON.
Consequently, banks started setting aside increasingly larger reserves, which amounted to the equivalent of 1.9 billion euros at the end of the year, double the 2007 level. These reserves ate a significant chunk of the fourth-quarter profits and some banks made even special provisions in advance for fear of a higher default rate in 2009.
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