Overview of the financial sector in Romania - BSTDB

Overview of the financial sector in Romania

Commercial banks account for the largest part of the financial sector in Romania with a 77% share in the total assets. The importance of private pension funds has increased recently and by the end of 2020 they held around 8% of total financial sector assets. Non-bank financial institutions mostly provide short term loans to the market and hold 6% of total assets in the sector. Investment funds in Romania manage around 5% of the total financial sector's assets. Around 43% of investment funds assets are

ROM invested in equity and 36% in fixed income securities.

Figure 1. The structure of the financial sector in Romania, December 2020

8% 4%

6% 5%

Commercial banks Investment funds

NBFI

Insurance companies

Pension funds 77%

Source: National Bank of Romania

Asset/GDP Loan/GDP

Currently, 34 commercial banks operate in Romania with a large 25f0ore20ig3n participation in the shareholding. More than 70% of the200total banking sector's assets are owned by non-residents.

ROM Caiinncoggc11m505osl000emuesncesttro9fcto3rhiarailn1na2br07R2oa1o0unmnk%11sda67, n89aair0ane1%d1i15spt2orhcefeo1dt0moo3868tmpaleailnt9rbi7agt6aine5vnsteklty9iw6nb3pg7airtnishvk5ea8tsc2ht8teheoloryl5lada3o2ris2gwnsegens5te4ots2dn3.b,lTayah2nn48ek2d00bh%taohnledoky--f

b9ma%anr,k0khieniGtggrehsectseliregucThcutrtktoeiuynrrgGea8e%.otsrhgsiaeetBlusolg.awriaTlhAeremveenHial HoRfIusicsinaodnAeclbxaeninaotfRromacatoniianoMcnoeldanovntardaUkatraiinocenAozemribsapijanleotwitivaet

4%

The siz6e%of the banking sector relative to the economy in Romania has shrunk over the 10 years priCoormtmoer2ci0al2b0an.k2s 019 was the

firs2t5 ye5a%r since 2010 that the size of theInbveasntmkeinntgfusnedsctor in2c3reased

more than nominal GD2P0 reaching 58%.

HGoDwP1e8vgerre, wt1h9, iswiisth2s0ttihlleNIanB2sruFr0Iaeratlnaicotei2cvo1oemflyptaolno2ti2ewasl

assets to level com-

pared to15othe1r5coun15tries in the region. Romania is near the bottom

am1o5ng BSTDB countries in terms of credPeitnsoiountfusntdasnding relative to

the economy, with the ratio77o%f total loans to GDP at 28% at end 202100.

Figu5re 2. The size of the banking sector relative to the economy, December 2020

0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Asset/GDP Loan/GDP

250

203

22500

22

150 20 100

120 116 111 108

93 18 71

78

52

68

97 65

96

58

53

54

50 15

14

14 14

37 28 22 23 2820

0

10

Greece Turkey Georgia Bulgaria Armenia Russia10Albania 6Romania Moldova UkraineAzerbaijan

5

5

4

4

Source: National Bank of Romania

025 2011

20

20

15

15

15

10 10

2012 15

2013 15

2014 18

2015 19

12

2016 20

10

2017 20

13

2018 21

15

201292 12

202203 9

250

203

200

8% 4%

Tyea11505har000sed5ae%bqn6aud9%n3askcti1yan2gn07r1dasste1ioa1c67bt8(ooCrvA1ei1Rn15t)2hRheo1a0rms8e68aqinuncii9ra7re6e5diassm9we6id3CIenn7ovlimlsmestmc5teum8ae2amrep8cdnii.attillBfa5ybu3ylan2inodz2tksevhsede5r.4e2Tt3nhhdee2o8l2cfa0as2pt0it21a00l

the 0CAR had reached 23% of risk weigNhBtFeI d assets. Large capital bofuftfheersGsreyeacserteeTumarkne.y iGnedorgiica aBtuligoarina AormfentiaheRusssita roAlnbagnIPianessnRuhosrmiaooannncicakfeuMcnaoodldmbsovspaaonUrikebrasiinneAgzerbcaiajanpacity

Figure 3. Regulatory capit7a7%l to risk-weighted assets (%)

M

8%

25

23

22

20

19

20

20

21

18

15 15 15 15

Asset/GDP Loan/GDP

250 21000 203

1550 100

0 50

93 2011

120 116 111 108 97 96

71 78 52 68 65

58 53 54

2012 2013 2014 2015 2016 37201728 201822 201293

220820

0

SourceG:reFecienaTnurkceyialGeSorgoiaunBudlganriaesAsrmeInniadicRuasstiaorAslb,anIiMa RFomdanaiatMaobldaovaseUkraine

25

Azerbaijan

The performance22of the banking sector has improved over the last 7 years. NPLs have declined regularly since 2013 when

the2y0 reached1a8 record high of 23% of total gross loans. With the

25

qdeuca2105lliintyedo14ftoth4e%criend2it0p1o9r. tTf1ho4eliodiem11c49lpinroevo2i0nf gthsei2gN0nPifLicra2a1nttiloy,w2t2haes

N2P3L to a

ratio large

extent driven by actual 1i8mproveme1n0 t of asset quality, although

cDerfeef111esd5050pcitittseg1or5tofhwtehteph1a5panandndedm1we5mirciti,cet-ohoenfftNshPeoLfabrsaasteditoloqiaunan2lsi60thy2a0ovfedb5iadalnns'okt sip4nalcarreyeepad4rsoaeb. raTobhleley.

camouflaged and delayed due to the government's introduction of

deb50t se20r1v1ice20m12ora2t0o13ria 2a0t14the20b15egi2n0n16ing20o1f7 th2e01p8an2d0e19mic2.02T0herefore, the full impact of the pandemic on economic activity has yet

to b0e seen.

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Fig2u0re 4. Non-performing loans to total gross loans (%)

15

15

12

13

12

10

1205

9

22

5

Commercial banks

20

18 0

0

Investment funds

15 -5

14 -3

NBFI 14 14

-1100

-6 Insurance companies 10 Pension funds

-15 77% 5 2011

2012

2013

-12 2014

2015

2016

6 2017

5 2018

20419

20420

0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

So2u0rAcsese:tF/GinDPanciaLolaSn/oGuDnPdness Indicators, IMF database

15

T15ogether with an improvem12ent in asse13t quality, t1h2e profitabil10ity of banks has increased. For10the four years prior to9 2015,

20 71

116 78

banks incurred losses with ROE negative at -12% in 2014. Since

1t1h1e5n,1h08owe9v7er, t9h6e trend reversed with banks becoming profitable

aden5cd20lirneep6d8ocrotimn65gpadroe3u7db0tleo582td8higei5tp32r2ReOv5iEo42.u3Isny22e820a02r 0a,ndasstwoaosd

expected, ROE at 9%. The av-

key Georgia Bulecgaorri-aa1m-50gApremaenRria-aO3bERluessfiaot-or6AtlbohantieaheRlaormsacntioa6uMnoyldteorvaaierUsskraiwinneiAtRzheorbamsijainmaniliaaricsraerdoitunradt1in2g%s., a figure

-15

-12

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

23

22

19

20

20

21

18

15 15

BSTDB_Overview of the financial sector in Romania

5 140

4

4

0

2011

2012

2013

120 2205104

2015

2016

2017

2018

2019

2020

Figure 5. Return on Equ1i0t0y (%)

80

20

200 57

60

15

15

40 12

13

12

150

10

10

20

9

5

0

0

100

0

Jan-Al1b8ania Romania

MarM-o1l8dova Bulgaria

May-U1kr8aine Kosovo

Jul-1L8atvia N. Macedonia

Sep-1B8osnia Croatia

Nov-1I8srael Czech Rep. MJoannt-e1n9egro

Armenia Mar-19Malta

Slovakia May-E1st9onia

Poland Jul-C1y9prus

Greece Sep-T1u9rkey

-5 -3

-6

-10

180

Total (Non - interbank)

-15

1-1620

DeLpooasnissdtoollCauirsztaotmioenr Deposits Loan dollarizati

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

16450%

Source: Financial soundn1e56250s0%%s indicators, IMF database

The banking sector in15R000%omania maintains large liquidity buffers. By the end of 2020, 44480503%%% of the total assets in banks' balance sheets were liquid asset3s650,%whi5le7 the share of loans was 49%. The liquidity coverage ratio (3L0C%R) exceeded the 100% limit with a large margin both for local c2u450r%rency and euro liabilities. The funding of banks in Romania alm2200o%st entirely depends on deposits, which

account for more than 900% of total liabilities. Retail deposits, which are considered a more stable source of funding, accounted

CyprMuasy. 2017 GreecOcet. 2017 TurkMeayr. 2018

Aug. 2018

PolaDnedc. 2016

EstonJiaul. 2016

SlovaFkieab. 2016

MalSteap. 2015

ArmenAipar. 2015

2014 2014

MontenegJNruoonv..

Czech ReJap.n. 2014

IsrAauelg. 2013

CroatMiar. 2013

BosnOicat. 2012

N. MacedonMiaay. 2012

LatvDieac. 2011

KosovJoul. 2011

UkraiFneeb. 2011

2010 2010

BulgaSrAiepapr..

MoldoNvoav. 2009

RomaJniuan. 2009

Alba Jniaan. 2009

for around half of the deposit base in 2020. The strong deposit

base and lagging loans resulted in ample liquidity in the Romanian

banking system. With th1e8%loans to deAnpnousaligtrsowrtahtriaoteaoftlo6a6ns%, RomAannnuiaal growth rate o

again stands closer to t1h6e% lower side among the BSTDB member

countries.

14%

Deposis dollairzation

Loan dollarizati

Figure 6. Evolution of L6C152R%% for the banking sector in Romania

and regional comparis61o00n%% of loan to deposit ratio (%)

558%

50%

350

6% 45%

LCR - total

404%%

LCR - euro component

352%

LCR - lei component

300

300%%

25%

20%

250

Oct. 2017Sep-19 Mar. 2018 Aug. 2018Dec-19

Jul. 2016Mar-19 Dec. 2016 May. 2017Jun-19

Feb. 2016Dec-18

Apr. 2015Sep-18 Sep. 2015

Nov. 2014Jun-18

Aug. 2013Dec-17 Jan. 2014 Jun. 2014Mar-18

May. 2012Jun-17 Oct. 2012 Mar. 2013Sep-17

Dec. 2011Mar-17

22001111Dec-16

Sep. 2010Sep-16

Jun. 2009Mar-16 Nov. 2009 Apr. 2010Jun-16

Jan. 2009Dec-15

Feb. Jul.

200

150

100

180 160 140 120 100 80

57 60 40 20 0

Jan-18 Mar-18 May-18

Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

8%

20%

18%

Annual growth rate of loans

16%

14%

12% 10% 42%

8% 30%

6%

4%

2T%otal (Non - interbank) Loans to Customer Deposits

0%

7 6 5 4 3 2 1 0

42%

Mortgages in local currency Mortgages in euros 8%

20%

30%

Annual growth rate o Consumer loans Mortgages Loans to corporate Other loans

Business loans in local Business loans in euro

Consumer loans Mortgages Loans to corporate Other loans

Albania Romania Moldova Bulgaria Ukraine

Kosovo Latvia

N. Macedonia Bosnia Croatia JaIsn-r1ae5l

CzecAhprR-e1p5. MonteJnule-g1r5o

ArOcmt-e1ni5a Malta

SlJoavn-a1ki6a EAsptr-o1ni6a PJoull-a1n6d OCcytp-r1u6s JGarne-e1c7e ATpurr-k1e7y Lit Jhul-a1ni7a BOeclta-r1u7s GJaeno-r1gi8a RAupsr-si1a8a Finland Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19

Source: Financial Soundness Indicators, IMF database

Deposis dollairzation

Loan dollarization

65%

60%

Mortgages in local currency

55%

Business loans in local

200

140

14 14

120

15

S110i5m00 ilar12to

m101a0 ny

13

other

12

countries

in

9

the

region,

Romania

expe-

rienced a

80

the10fi0nan5c7ial

high 6level of dollarization. sector's bal5ance s4heet4was

In 2010 dollarization of around 60%. In the next

0 dec6a0de, however, Romania was relatively successful in reducing

Jan-18 Mar-18 May-18

Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20

fina4n0cial sector dollarization with loan dollarization down to 28%

012 2013 a2n0d14de2p0o15sit 2d0o16llar2iz01a7tio2n01t8o 32601%9 by202t0he end of 2020. Despite this

20

-6

red18u0ction, household loan dollarization remains around 20%, and

expo0ses ati1-o16n20 s.

those who haveLoabTnoostartolr(oCNuwosnteo-mdinetiernrDbeaFpnoXks)ittso exchange rate fluctu-

Albania Romania Moldova Bulgaria Ukraine

Kosovo Latvia

N. Macedonia Bosnia Croatia Israel

Czech Rep. Montenegro

Armenia Malta

Slovakia Estonia Poland Cyprus Greece Turkey Lithuania Belarus Georgia Russiaa Finland

2012 2013 2104104 2015 2016 2017 125018 2019 2020

Figure 71.2Evolution13of dollariz1a2tion in the banking sector

120

10

of Romania

9

100

0

80

57

6650%

Deposis dollairzation

60% 5450% 6 5200%

45%

-14200%

012 2013 203154% 2015 2016 2017 2018 2019 2020

Bosnia

Albania Romania Moldova Bulgaria Ukraine

Kosovo Latvia

30%

25%

20%

Croatia Israel

Czech Rep. Montenegro

Armenia Malta

Slovakia

Estonia

Poland

Loan dollarization

Finland

Russiaa

Cyprus Greece Turkey Lithuania Belarus Georgia

May. 2012 N. Macedonia

Sep. 2020

Apr. 2020

May. 2017 Oct. 2017 Mar. 2018 Aug. 2018 Jan. 2019 Jun. 2019 Nov. 2019

Dec. 2016

Jul. 2016

Feb. 2016

Mar. 2013 Aug. 2013 Jan. 2014 Jun. 2014 Nov. 2014 Apr. 2015 Sep. 2015

Oct. 2012

Jan. 2009 Jun. 2009 Nov. 2009 Apr. 2010 Sep. 2010 Feb. 2011 Jul. 2011 Dec. 2011

Deposis dollairzation

Loan dollarization

65%

60%

Sou5158r%%ce: NationaAlnnBuaalngkrowotfhRraotemofalonainas

Annual growth rate of deposits

O4451105046vm%%%%%earntihaewpaasstm5odyeeastr,s,wtihthe

growth of the banking sector deposits growing on average

in by

Ro6%

per3152a%%nnum and credits growing by 5%. In 2020 growth of deposits

in t31h0%e banking sector accelerated and reached 16% by the end of yea258r,%%while loan growth was only 6%. Expansion of banks' balance she20e6%%ts in the last year was supported by loose monetary and fiscal

poli4c%ies.

Jan. 2009 Jun. 2009 Nov. 2009 Apr. 2010 Sep. 2010 Feb. 2011 Jul. 2011 Dec. 2011 May. 2012 Oct. 2012 Mar. 2013 Aug. 2013 Jan. 2014 Jun. 2014 Nov. 2014 Apr. 2015 Sep. 2015 Feb. 2016 Jul. 2016 Dec. 2016 May. 2017 Oct. 2017 Mar. 2018 Aug. 2018 Jan. 2019 Jun. 2019 Nov. 2019 Apr. 2020 Sep. 2020

Figu2r%e 8. Growth rate of deposits and loans in Romania

0%

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

2%

18%0%

Annual growth rate of loans

Annual growth rate of deposits

Fi1g6u%re 9. The structure of the credit portfolio

14%

12%

10%

8%

8%

20%

6%

4% 2% 0%

42%

Consumer loans Mortgages Loans to corporates Other loans

30%

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

8% 20%

Source: National Bank of Romania

Mortgages in local currency

Consumer loans Business loans in local currency

As7a result ofMcoertngatgreas linbeuarnosk's tightenBiMnuosgirntegosasfgleomsanos nineeutraorsy policy, in-

terest

6

rates

for

local

currency

loanLsoanins ctorecoarpsoeradteisn

2018.

Last

year, 4a2f%ter pand5emic,

the central bank cut the polOicthyerralotaensin response to the interest rates in local currency followed. Interest rates

for

e4uro

denominated

loans,

30%

however,

have

been

low

for

the

last

5

years3, mainly driven by global market conditions.

2

Figur1e 10. Interest rate for different types of loans

0

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20

Mortgages in local currency

Business loans in local currency

7

Mortgages in euros

Business loans in euros

6

5

4

3

2

1

0

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 42%

Annual growth rate of loans 8% 20%

30%

Annual growth rate of deposits

Consumer loans Mortgages Loans to corporates Other loans

Source: National Bank of Romania

The banking sector in Romania is relatively small with loans accounting for only 28% of GDP. The sector is well capitalized with very strong liquidity buffers. The performance of the sector has improved in the last 7 years as NPLs dropped from 22% down to 4% of total gross loans and profitability improved with the ROE averaging 12% per year. In addition, Romania was able to reduce financial dollarization from around 60% to close to 30%.

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

Source: National Bank of Romania

8%

The banking sector in Rom20%ania is characterized by a relatively low share of corporate borrowers in the total credit portfolio

Mortgages in local currency

Business loans in local currency

acrsedbiu7tssinaeressgersaanMctecordotgutangoetshifnooeurusrooesnhloyld4s2o%utoofBufCtsowionnetshsausimlclohelaornmlsaoiannonsersu.trgo5sa0g%esoaf rteot3a0l

perce6ntage

points

and

the

rest

are

Mortgages

consumer loans.

5

Loans to corporates

4 42%

Other loans

3

30%

2

1

0

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20

Mortgages in local currency

Business loans in local currency

7

Mortgages in euros

Business loans in euros

6

5

4

3

BSTDB_Overview of the financial sector in Romania

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download