Half of Romania's lenders in the red at the end of Q1

About half of the 43 lenders, operating on the local market, registered losses in the first quarter, a first in the last two decades, considering that bankers have pushed up provisions by €0.5 billion in the first two months of 2009. The banking sector lost some €50 million in the first three months of this year, compared to earnings worth about €200 mln in January-February 2008.

The National Bank of Romania (BNR) initiated a checkup in February, suspecting that the banking system has not acted in accordance with market regulations and transferred 2008 provisions to 2009, in order to report positive financial results last year.

"Less than half of the banks in Romania ended the first quarter in the red, and they were forced to raise their capital. The whole system lost up to €50 million," said Nicolae Cinteza, Head of the Surveillance Division at BNR.

The central bank was forced to take special measures in the case of some lenders, where arrears reached 18 percent, but even though provisions increased significantly, the degree of coverage of poor performing loans by provisions fell to 131 percent at the end of the first quarter of 2009, from 143 percent in November 2008.

The profit of Banca Comerciala Romana (BCR), the largest lender on the local market, was affected by provisions, and the bank posted a net income after taxes and the payment of minority interests worth RON 330.3 million (€78.3 mln) in the first quarter, down 13.7 percent year-on-year. The value of risk provisions for loans and down payments surged 27.1 percent compared to the level registered in last year's final quarter, to RON 308 mln (€72.6 mln), due to the evolution of poor performing loans, especially on the small and medium-sized enterprise (SME) segment and small real estate developers.

However, the profit reported by BCR for the first three months was 25.1 percent higher than the result registered in the fourth quarter in 2008. "We continued to perform well in 2009, considering a challenging economic environment. We are doing everything we can to support and help clients to overcome the difficult market conditions," said Dominic Bruynseels, BCR's Chief Executive Officer. The lender's assets rose 4.9 percent, to RON 67.66 billion (€16.82 bln) by the end of March 2009. The bank's loan market share increased to 22.1 percent, due to growth on the corporate loan segment.

Business Standard