Romania's banking sector is the fourth largest in the Central and Eastern Europe, with total banking assets below the CEE average, but lending was down while saving went up in the country, found a recent banking sector report on Romania and the Central and Eastern European region by Ensight.  Net assets in Romania's banking system are up, but lending is down, according to the report. In 2010, Romania's bank assets were of almost EUR 80 billion, while the region average was EUR 81.6 billion.

Total banking loans continued a downwards trend in 2011, to EUR 61.2 billion last year, from EUR 64.2 billion in 2009, with risk aversion by the banking sector an influencing factor. Corporate loans were, however, up in 2011 and reached a value of around EUR 26.7 billion.  The average interest rate for RON new credits was 12.66 percent per year in December last year,   higher than in December 2010.

Bank customers are showing an increasing inclination to save rather than spend, and the nominal value of total deposits had increased to some EUR 40.5 billion by December 2011. Although Romania followed the regional trend of increased bank assets, the picture for loans was different, with loans up overall at a regional level.

Non performing loans,  reduced revenues due to lower credit activity, and funding pressures at group level  hit profits in Romania's banking sector last year. Ensight's analysts give aggregated losses of around EUR 100 million overall for the local banking system in 2011, and there is increasing competition between banks for what the report terms “good” customers, meaning  affluent clients who pay back promptly. The ratio of non-performing loans stood at 14.1 percent in December last year in Romania, lower than 18 percent in Serbia and higher than 3.9 percent in Slovenia.

Romania's banking sector is majority controlled by foreign owners.  Over three quarters of the Romanian banking system has foreign ownership, out  of which Greece has around  30 percent, Austria, around 21 percent, Holland, around 15 percent.  The Top 5 banks in Romania covered around 54 percent of the total  banking assets.  The trend has been slightly increasing in 2010, and  continued to be until 2011, but it is lower than EU average.  Banking penetration remained relatively stable in 2010 compared to 2009, but still below EU average. " This is especially true for the deposits  gathered in Romania, which  represented 34 percent of GDP, while in CEE  they were 55 percent in 2010," writes the report.

Romania and Bulgaria showed the lowest per-inhabitant card transaction values for regional EU members. Recent figures show increasing card use in Romania, with EUR 6 billion of ATM withdrawals and EUR 1.3 billion payment transactions, but the country is still behind others in the region. The value of transactions, as well as the total number of cards in use increased in 2011 in Romania.

Ensight is a management consultancy firm founded in 2000 and headquartered in Bucharest. The company became affiliated to Eurogroup Consulting in 2010.

Liam Lever, liam@romania-insider.com