Bankers set out their stalls

With lenders continuing to adopt a very cautious strategy for the Romanian market this year, their focus will be on sustainable growth and a prudent approach to lending activity. Business Review surveys some of the key trends that are likely to emerge this year.

Anda Dragan

Lenders need to co-finance projects with EU funds

The local banking system has high liquidity so lenders need to turn their attention to offering financing for attracting EU funds, while the Ministry of Public Finance (MFP) will not be so active on the domestic public securities market as in 2009, Sebastian Vladescu, the minister of finance, said recently. “The banking sector is doing its job. It is trying to finance, but at the moment it is being forced to finance because the level of liquidity is very high. It has more liquidity that it needs now,” said Vladescu.

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He added that lenders would need to focus their liquidities on financing to attract European funds, especially because the MFP will be much more present on international markets in 2010 and will take

less money from the domestic market. But he also emphasized that banks are looking for customers to whom to offer co-financing and pre-financing to attract European funds, although they cannot lend to everybody because customers need first to prove they are eligible.

Banks have some aces up their sleeve on card market

The local bank card market is reaching new heights of innovation. Many players have tried to meet the needs of as many customers as possible, by launching specific cards for specific needs. In this vein, GarantiBank launched the credit card Bonus Card, which comes with a mirror attached; Volksbank Romania has also come up with a novelty on the card scene, launching

Pink, a shopping card with large discounts throughout its partner network; while Libra Bank has enriched its card portfolio with Libra Jolie, designed exclusively for women. While many lenders have focused on women as financial consumers, BRD Groupe Societe Generale took a different tack. The lender recently launched its first ‘a la carte’ bank card, which allows users to personalize the card with their own photos.

“Everything started with the idea that people like to be able to choose. The card is becoming more than it has been until now, a reflection of the personality of the customer, who has the opportunity to own a unique and personalized banking product,” said Phillipe Lelarge, executive director of the strategy and marketing department at BRD. Premium and super premium cards are also playing a significant role in developing the market by offering their customers both bank benefits and social status. All of this indicates that lenders feel they need to stand out from the crowd because consumers have become more sophisticated and the market has reached a mature stage. As for the trends, specialists expect credit cards to be among the most popular lending tools in 2010 because they offer quick access to financial resources and flexibility in managing them.

According to Credit Bureau data, the number of reports requested by financial institutions for

credit cards increased by about 100,000 in October 2008-September 2009 on the previous year, to 515,000. In exchange, the demand for consumer credit almost halved, from 5 million during 2007-2008 to 2.8 million. Meanwhile, the number of payment transactions made using debit cards rose from 14.33 million to 16.3 million in the last quarter on the first quarter of 2009, while the number of credit card payment transactions reached 4.22 million from 4.03 million in the same period.

Pursuit of consumer credit

The current turmoil has affected the Romanian banking system, with lending activity falling during 2009. As Radu Ghetea, president of the Romanian Banking Association (ARB), recently said, a good scenario would be for lending to increase 2 to 3 percent this year. Saving activity will continue to grow more slowly.

In other words, lending needs a significant impetus from banks. And some of them have already started to make their contribution, by launching promotions for the credit they have in their portfolio. For example, BRD is charging annual interest of 7 percent for its BRD Expresso de Primavara loan between March 15 and April 30. The credit, up to RON 60,000, can be taken in the local currency, for a maximum period of five years. Meanwhile UniCredit Tiriac Bank has come up with a promotion involving a reduction of 20 percent on the interest charged for “Credit for anything without a mortgage” (Creditul pentru orice fara ipoteca). The promotion is valid until May.

What’s in store in 2010?

Along with their financial results for 2009 many lenders also announced their strategy for this year which generally remains cautious. “We intend to increase incomes and lending in 2010, while maintaining prudent risk policies. We also want to consolidate our branch network and to increase our market share. Besides that, we intend to exceed 1 million individual customers and to support medium sized companies by offering consultancy services for financial management,” said Misu Negritoiu, CEO of ING Bank Romania. UniCredit Tiriac Bank, another significant player on the market, is also adapting its strategy according to the current economic conditions.

The lender expects a slow recovery in the local economy in the second half of the year. “It would be naive for us to think that we will help bring about a sudden recovery in demand and the risks will quickly vanish along with the first green shoots. Despite this, we are optimistic about the long-term perspectives of the local market and will continue to take advantage of the existing opportunities,” said Rasvan Radu, CEO and executive president of UniCredit Tiriac Bank. He added that the lender would build its strategy on a sustainable increase basis, with the development plan for this year being focused on customer satisfaction. Intesa Sanpaolo Bank, meanwhile, will continue to grow its catalogue of products and services, modernize its branch network and always try to stay close to its customers through quality service and innovative offerings this year, its representatives have said. Banca Transilvania also expects hard times this year and is building its strategy accordingly.

“We are aware that 2010 will not be an easy year for anyone, especially in the first half – which we expect to be a difficult one both for customers and the banking system. As for us, we have a strategic plan that is bold but adapted to the current situation,” said Robert Rekkers, general manager of Banca Transilvania.

Breaking it down by type of product, this year lenders will focus on mortgages (including the national First House program), co-financing and consultancy services for the attraction of European funds, corporate credit based on solid business plans and cash flow forecasts, credit for SMEs, treasury products such as forward contracts, financial swaps and options on the exchange rate.