Romanian government to take EUR 1.1 billion from banks’ profits through "greed tax”

The Romanian government will take this year close to RON 5.3 billion from banks’ profits through the newly imposed tax on assets, as it will be calculated and paid quarterly, according to Business Review calculations based on official data and declarations.

The Romanian government has recently introduced a tax on bank assets of 0.3 percent from January 1st, 2019, calculated at the current ROBOR 3M-6M level.

Last week, Darius Valcov a special counselor of the prime minister and a close confident of the PSD head Liviu Dragnea, said that the tax on assets will be calculated and paid quarterly.

The average ROBOR value in the last three months of 2018 stood at 3.17 percent per annum, which corresponds to a 0.3 percent bank fee. As the tax is applied quarterly, the annual tax rate is 1.2 percent.

In September 2018, the total assets of the local banks amounted RON 445.2 billion, according to central bank data.

At this level, the new tax will take RON 5.3 billion (EUR 1.1 billion) from the banks this year but the value off assets probably increased during the last quarter of last year.

The value of the tax is close to the value of cumulated profits of Romanian banks registered last year.

The 35 banks operating in Romania have registered in the first nine months of 2018 the highest profits in the last decade, as improved credit demand combined with low NPL rates have boosted earnings, central bank data showed in November.

The return on assets (ROA) key-index jumped by 29 percent in September 2018 compared with September 2017, to 1.76 percent, the highest level since September 2008, according to central bank series consulted by Business Review.

ROA is calculated by dividing annualized net profit by average total assets, and this means that the Romanian banks have registered a total profit of RON 5.8 billion (EUR 1.2 billion) in January-September 2018, in annual terms, according to Banca Transilvania.

This means that the tax on assets will take around 91 percent of cumulated profits of the local banks, according to BR calculations.

But some banks will be more affected than others, as many major banks posted large profits last year while some smaller banks have had lower profits or even losses.

Based on the balance sheet of banks registered in the first 9 months of last year, the new tax will take less than half of the profits of BCR or BRD and close to 50 percent of total profit of Banca Transilvania, in a ceteris paribus assumption.

Last week, the main banks in Romania have reacted to the new taxes imposed by the government for this year, saying that these measures will have a huge impact on credit activity and on the entire economy.

The heads of the main banks said that the new taxes risk generating “a perfect storm” in the economy, as investment plans will be frozen, credit activity will decelerate and many companies will struggle to survive.

Some banks have accused the government of “profit nationalization” through this new tax.

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