Fierce battle at the top of Romanian banking system between Banca Transilvania and BCR

Sorin Melenciuc 17/12/2018 | 13:03

The first two major banks in Romania are posting similar profits and assets this year and the current figures suggest the battle for the first place is far from being settled.  

By mid-2018, a historical move happened in the Romanian banking system. Banca Comerciala Romana (BCR) was dethroned from the top of the banks by Banca Transilvania after almost two decades of reign. Banca Transilvania has reached RON 75.3 billion in assets, while BCR stayed at RON 70.2 billion.

The difference has maintained by end-September, when Banca Transilvania posted assets of RON 76.5 billion while BCR kept its second position with assets of RON 72.2 billion.

BCR was the leader of Romanian banking system since the end of the 1990s. Over the years, the main competitor was BRD – Groupe Societe Generale.

But it was not BRD that had overtaken BCR as the leader of the local banks but Banca Transilvania. Back in 2006, BT was just a small bank with headquarters in Cluj, trying to make its way in the system.

The bank grew organically over the years, but changed the strategy after it grew big enough and started to buy small competitors.

This strategy was good enough to ensure that BT overtakes BCR following the acquisition of Bancpost.

Banca Transilvania bought Bancpost from Eurobank in November 2017, but the transaction was approved by the banking authorities in March this year and the integration of the operations was finalized in the second semester of this year.

The group around Banca Transilvania is composed of BT Leasing, BT Direct IFN, BT Microfinantare IFN, BT Assest Management, ERB Leasing IFN and ERB Retail Services IFN.

Record profits on government’s inflation-boosting policies

Recent central bank data show that the 35 banks operating in Romania have registered in the first nine months of this year the highest profits in the last decade, as improved credit demand combined with low NPL rates have boosted earnings.

The return on assets (ROA) key-index jumped by 29 percent in September compared with September 2017, to 1.76, 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.

A recent BR Analysis showed that Romania’s major banks have posted impressive profits in the first nine months of this 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 total bank assets in Romania increased by 9.5 percent year-on-year in September, up to RON 445.2 billion (EUR 95.7 billion), equal to around 46.9 percent of the estimated GDP in 2018.

The improved results of Romanian banks are due to a sharp decline of non-performing loans (NPL) ratio, from 8 percent in September 2017 to 5.6 percent in September 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 80.3 percent in September 2017 to 76.4 percent in September this year, despite higher consumer and mortgage loans’ demand from individuals.

Romania’s banking system has currently 35 banks, after a period of consolidation.

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