Deleveraging continues in Romania

Foreign banks’ exposure against Romanian banking system down 11% y/y at mid-2012, XR effects filtered out.

The exposure* to Romanian banks of BIS-reporting Western banks, assets alone, decreased sharply by 4.1% q/q in Q2 of 2012, according to our calculations based on BIS data. Q3 data will be released in January 2013. Q2 marked the fifth consecutive quarter of decrease in this regard and the sense of flow for the foreign banks’ resources is unlikely to change any soon. Phasing out foreign currency lending from among the banks’ range of products goes hand in hand with the consolidation of deposit base as the main source of financing for local branches.

* exchange rate adjusted

Assets and liabilities of BIS banks versus Romania [banking and non-banking sector]

These are only a few of the insights in the new Intellinews Report : Romania Financial Sector. Learn more and purchase now>>

 

Unofficial data leaked from central bank paints bleak picture of Romanian banking system

Romanian banks incurred aggregated losses of RON 325mn (EUR 73mn at eop XR) in Q2, 2012, according to our calculations based on central bank data. Out of 41 banks, 23 reported profits and 18 losses, according to unofficial data leaked from the central bank. The banking system thus dipped back into the red after it posted aggregated RON 125mn (EUR 29mn, @ eop XR) profit in Q1.

Big picture: dividends vs. interest incomes derived by BIS-reporting banks in Romania [and elsewhere in region].

Nonetheless, this picture has to be put in the context of foreign financial groups. The foreign banks derive two types of benefits from their Romanian subsidiaries: firstly via dividends [probably the smallest portion of the benefits these days, most of the time re-invested when they were higher in the past] and secondly via the interest for the money lent at an interest rate that is driven by the country’s sovereign rating – meaning at high interest rates. The ROA for the foreign financial groups have thus nothing to do with the ROA reported by their local subsidiaries [assuming they finance their own subsidiaries, which is mostly the case].

Much more in the Emerging Markets Direct report: Romania Financial Sector