The Romanian banking system's aggregate net profit shrunk by 19.5% in 2020 to RON 5.16 million (EUR 1.06 bln) from RON 6.39 bln (EUR 1.37 bln) in 2019, Ziarul Financiar reported.

The banks' earnings in 2020 come amid a moderate increase in lending (the stock of loans rose by only 5.1% through the year), declining interest rates, and in the context of a 3.9% decline of the economy.

Most banks set aside provisions ahead of the expected deterioration in their loan portfolios, which hurt their profits.

The leading lender by assets, Banca Transilvania, reported 35% lower profit in January-September (latest data available).

The banking system's aggregate assets rose by 5% during 2020, to RON 560 bln (EUR 115 bln).

The banking system's loans to deposits ratio dropped to 66.9% at the end of the year from 69.9% twelve months earlier as lending could not catch up with household savings during the lockdown.

Separately, the NPL ratio improved as the bank loan repayment moratorium prevented the loans contracted by companies hit by the crisis to surface in the banks' portfolios as bad loans.

The NPL ratio dropped at the end of 2020 to 3.83%, significantly below the value at the end of December 2019 - 4.09%.

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andrei@romania-insider.com