Romania’s banking system immune to Corona crisis: record Jan-Sep profits

Some sectors of Romania’s economy may have faced problems during the Corona crisis, such as HoReCa or automobile industry more recently, and the economy as a whole has lost steam after recovering from the lockdown quarter - but this has nothing to do with the banking system that fares now better than ever.

And this comes as no surprise as the biggest share of their loan portfolio is placed in mortgage loans, Government papers and only to a smaller extent in risky corporate debt. Romanian companies instead rely more on self-financing and trade credit.

Furthermore, as the real estate market is still doing well, the loan portfolio looks good as well.

The expected rise in interest rates bodes well for the banks’ profits but not necessarily for the quality of their portfolio loans (or for their debtors’ balances).

The Romanian banking system posted RON 6.4 bln (EUR 1.3 bln) aggregated net profit in January - September, 37% more than in the same period of 2020 and 24% more compared to the same period of 2019.

“The banking system came out of this crisis in better shape than it entered,” said Bogdan Neacşu, the new president of the Romanian Association of Banks (ARB) and CEO of CEC Bank, quoted by Ziarul Financiar daily.

Indeed, the non-performing loan ratio dropped to 3.7% at the end of September from 4.1% one year earlier and 4.4% in the mid of 2020 during the climax of the crisis.

The net assets of the banking system rose by 13% YoY to RON 603 bln (EUR 122 bln) at the end of September, roughly in line with the rise in the non-government loans portfolio (RON 315 bln, +13.4% YoY).

The volume of government loans surged faster by 21% YoY to RON 163 bln at the end of September.

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