Romania's banks, immune to economic slowdown and new tax, post record profit in Q2

The aggregated profit of Romania's banking system increased by 11% y/y to RON 3.75 billion (EUR 754 mln), marking a new record, marginally higher compared to the RON 3.72 bln (EUR 748 mln) figure announced for Q1, according to data published by the National Bank of Romania (BNR).

The performance was notable in the context of a new tax (2% tax on turnover) being levied as of 2024, estimated to have cost RON 321 mln (EUR 64 mln) in Q1 alone and expected at RON 1 bln (EUR 200 mln) for the whole year.

Driven by retail lending, the stock of non-government loans gained momentum to 6.7% y/y at the end of June from +4.7% y/y one quarter earlier and 6.4% y/y at the end of 2023 – which was all the more significant in the context of lower inflation: 4.9% y/y at the end of June (which makes the loans' advance positive in real terms) from 6.6% at the end of Q1 and 6.6% y/y at the end of 2023.

The improvement in banks' stock of loans was more markedly in the lucrative segment of consumer lending as the households' consumer confidence was boosted by the robust rise in their wage earnings.

The annualised return on equity improved to 20.2% in H1 from 19.8% in Q1, although this profitability ratio remains inferior to the 21.3% marked in H1 2023. The impact of the new turnover tax was visible.

The credit quality ratios have deteriorated slightly in H1 compared to Q1, remaining better than H2 last year.

Thus, the non-performing loan (NPL) ratio edged up to 2.5% in H1 from 2.4% in Q1, while the ratio was 2.7% in H1 2023.

(Photo source: Elizaveta Elesina/Dreamstime.com)