Romanian banks lead EU in profitability despite lower lending activity

Romania's banking sector has recorded the highest profitability in the European Union, despite maintaining one of the lowest loan-to-deposit ratios in the bloc, Ziarul Financiar reported, citing a report by the National Bank of Romania (BNR) based on European Banking Authority (EBA) data.

According to the report, Romanian banks lend only 63% of their deposit base, significantly below the EU average, where the loan-to-deposit ratio exceeds 100%. Nevertheless, the sector continues to outperform its European peers in terms of profitability, with returns nearly double the EU average.

The BNR noted that the Romanian banking system remains in a favourable position across key financial and prudential indicators. Solvency, balance sheet structure, and profitability metrics are not only above European averages but also within the optimal thresholds set by the EBA.

Asset quality in the sector has also remained stable. While the non-performing loan (NPL) ratio has declined substantially - halving since 2018 - it still remains marginally above the EU average. The report attributes this improvement to prudent lending practices and effective risk management measures implemented in recent years.

"The resilience of the Romanian banking sector to potential shocks from the macroeconomic and political framework marked by uncertainties remains adequate," the central bank stated.

Romanian banks have benefited from a combination of high interest margins, limited lending exposure, and a relatively stable macroeconomic environment. This has allowed them to maintain strong capital buffers and absorb market volatility more effectively than many of their European counterparts.

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