Erste, SocGen, Raiffeisen and UniCredit will tighten grip in Romania, JPMorgan Cazenove says

Erste Group Bank AG, Societe Generale SA, Raiffeisen Bank International AG and UniCredit SpA will strengthen their grip on Romania’s banking market as bad loans rise and regulatory costs chip away at profits of smaller lenders, JPMorgan Cazenove said, quoted by Bloomberg.

Emerging Europe’s four biggest banks will gain market share in the next two to three years in the recession-hit country, JPMorgan Cazenove analysts said in a note to clients today. That will be at the expense of Greek banks’ units including Alpha Bank AE, EFG Eurobank Ergasias SAand Piraeus Bank SA, according to Bloomberg.

Erste’s BCR, BRD-Groupe Societe Generale, Raiffeisen and UniCredit “are likely to become the beneficiaries at the expense of smaller banks,” the analysts, led by Paul Formanko, said, quoted by Blomberg.

Romania is one of the most challenging banking markets in eastern Europe, having taken from IMF a bailout of EUR 20 billion last year. Romania will probably see its economy contract for a second year in 2010 because of austerity measures implemented in July to meet budget-deficit targets, IMF Mission Chief Jeffrey Franks said Nov. 1, says the article.

This will help driving up already high rates of bad loans in the country into next year, the analysts said, citing conversations with bankers in Bucharest, while bad loans are expected to decline in other parts of the former Communist countries of Europe next year. Romania has also introduced regulation for retail loans that may eat into banks’ earnings, JPM said, quoted by Bloomberg.

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