Romania’s banks hit all-time assets at end-2018 just before the “greed tax” on decade-low NPLs

Sorin Melenciuc 18/02/2019 | 16:08

The 34 banks operating in Romania have registered at the end of last year the highest assets in history, as improved credit demand combined with low NPL rates have boosted assets and earnings, central bank data show.

The total bank assets in Romania increased by 5,4 percent year-on-year in December, up to RON 451.1 billion (EUR 96.7 billion), equal to around 48.3 percent of the estimated GDP in 2018.

Running out of revenue sources, the government has recently introduced a tax on bank assets of 0.3 percent from January 1st, 2019.

The tax is due quarterly – and at the value registered at end-2018, the quarterly tax would amount RON 1.35 billion per quarter and RON 5.4 billion (EUR 1.14 billion) per annum.

The return on assets (ROA) key-index jumped by 22 percent in December 2018 compared with December 2017, to 1.59, but declined compared to September (1.76 percent), 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 close to RON 7 billion in January-December 2018, in annual terms.

A recent BR Analysis showed that Romania’s major banks have posted impressive profits in the first nine months of last year as their interest income, related to rising interest rates on loans in a moment when inflation peaked, significantly increased.

During the last few years, the government has adopted a strategy of wage-led growth, stimulating household consumption and GDP growth rates, but this model has generated larger fiscal and current account deficits – as well as higher inflation rates.

The improved results of Romanian banks are due to a sharp decline of non-performing loans (NPL) ratio, from 6.41 percent in December 2017 to 4.95 percent – the lowest level since 2009 – in December 2018, according to central bank’s data.

But banks still struggle to find clients for their loans, as loan-to-deposit ratio key-index has continued to decrease – from 74.7 percent in December 2017 to 73.6 percent in December 2018, despite higher consumer and mortgage loans’ demand from individuals.

Romania’s banking system has currently 34 banks, after a period of consolidation.

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