Real economy over-indebted, to the limit that should not be crossed, ING Bank President Misu Negritoiu says.
Romania has too many banks and we should expect the system to consolidate in the long run, Steven Groningen, CEO Raiffeisen Bank Romania told, during a bank summit. ‘I can see two patterns for the Romanian banking system, in the long run: on the one hand, there are the large, universal banks, operating on corporate and retail, maybe four of them, and the specialized banks, focusing on specific segments. There can be many niche banks, this will not be a problem. […] But this is only what is going to happen in the long run. The situation in the Romanian banking system is pretty good right now and we should expect the system to consolidate in the long run. And even if we are looking at the larger markets, such as Germany, the Netherlands, Austria, how many large banks do they have?,’ Groningen asked. According to him, as customer, if there are four large banks on the market then there are alternatives and one will have the possibility to choose.
He also thinks a loan in foreign currency over a long term should not be analysed from the point of view of certain moments of speculative depreciation and added there is additional demand for financing in euro and customers who understand the risks, but are restricted. Groningen expects all sectors, including retail, to bring an increase of the balance of credit this year, but with a more visible impact on production, exporters, agriculture, IT and services. ‘I understand BNR’s ambitions are to reduce the systemic risk of currency depreciation, but depreciations are speculative. If you take a loan on a long term, you do not take it with the speculative moments in mind (…). The fact that a credit in euro is cheaper is somewhat offset by the risk of currency depreciation,’ van Groningen added.
Also attending the banking summit, Misu Negritoiu, President of ING Bank, believes the economy is over-indebted and there is no more room left for lending. ‘The corporate sector allocates half of the revenue for repaying loans. The retail sector in now in the same situation. Seventy per cent of the bank assets are allocated to credit. We keep speaking about a poor demand for credit, but there is no one to lend to these days. Financing in Romania is on a short term. Half of the loans to companies have maturities of less than a year. The entire financing pressure in Romania falls on the banks. In Romania you barely see corporate bonds, for example. We wanted to launch commercial papers 15 years ago, but BNR told us the law didn’t allow that. It is a 1932 law and it seems that nobody has been interested to change it,’ he explained.
Negritoiu also thinks something solid should be built instead of putting pressure on banks to stop bringing money into the capital and the problem the banks have is not market share, but the optimisation of the banking model. Among other things, he stressed that the problem of Romania is not the banking system: ‘Not only that, but our banking system is one of the best capitalised in the region.’
Raiffeisen Bank completes transaction with Citibank on July 1
Raiffeisen Bank will complete on July 1 the transaction concerning the department of Romania devoted to natural persons of Citibank Europe to Raiffeisen Bank Romania, van Groningen also said. “It is a transaction that I like, it concerns the portfolio. Strategically, it is an organic growth, but, at the same time, opportunistic, tactical. … If there is a possibility to buy something, a portfolio, we shall definitely look into it and it helps us tactically. To me, a takeover is not necessarily needed to reach the long-term strategic objectives,’ Groningen mentioned.
According to a release of PeliFilip Law Firm, which assisted Citi in this transaction, Raiffeisen Bank will take over a portfolio consisting of 100,000 customers, assets worth over RON 460 M (over EUR 90 M), deposits worth over RON 770 M (over EUR 175 M), as well as all the employees of the Citi division for natural persons in Romania.