Romanian banks post second-highest profit of last decade in Q3

Romanian banks post second-highest profit of last decade in Q3
By bne IntelliNews November 20, 2018

The Romanian banking system’s aggregate net profit soared by 57% y/y in Q3 to RON2.15bn (€461mn), which was the second-best performance in the past decade after the €498mn performance in Q4 2015, according to bne IntelliNews calculations based on central bank data.  

In January-September this year, the aggregate profit rose by 41.3% y/y to RON5.73bn. The profit in the first three quarters of the year already surpassed that accumulated in the whole of 2017. The six (out of a total of 35) largest banks accounted for 80% of the total aggregated profit.

The profitability ratios improved in Q2 close to the levels those seen in Q3 2008 before the credit crunch in October and the economic recession that followed in 2009. The return on assets (ROA) ratio hit 1.76% in Q3 versus 1.77% in Q3 of 2008 while return on equity (ROE) still legged behind pre-crisis record, at 16.35% versus 19.41%.

Although decreasing from the record 20.1% level hit in Q2, the average capital adequacy ratio remained close to 20% in Q3, versus only 11.8% in Q3 2018.

Capital adequacy ratios well above the optimum levels in recent years indicate sub-optimal use of capital and robust potential for credit expansion with no further capitalisation needed. But this has so far not prevented Romanian banks’ profitability that is driven by widening net interest, a moderate rise in the stock of loans and the decreasing bad loan impairment cost.

The non-performing loan ratio (NPL) under the EBA definition, dropped to 5.6% at the end of Q3 from 8.0% one year earlier. The ratio was 21.5% when first calculated at the end of Q3 2014 and it might have been a couple of percentage points earlier in 2014 when it peaked.

Assets quality, Risk and Profit for Banking System          
(eop by default)   4Q 17 1Q 18 2Q 18 3Q 18
Assets (RON bn, eop)   427.8 431.7 434.6 445.2
Assets (EUR bn, eop, calculated)   91.8 92.7 93.2 95.5
Assets (RON bn, avg. ytd, estimat.)   402.4 429.8 431.5 434.3
Capital adequacy   20.0% 19.8% 20.1% 20.0%
ROA (annualised net profits per ytd avg. assets)   1.3% 1.6% 1.7% 1.8%
ROE (annualised net profit per ytd avg. equity)   12.5% 15.4% 15.7% 16.4%
Operating incomes/op. expenditures   1.82 1.79 1.79 1.88
Loans (gross) to deposit ratio   75% 75% 75% 76%
Non-performing Loans Ratio (EBA)   6.4% 6.2% 5.7% 5.6%
Impaired claims / Total loan portfolio   3.0% 2.4% 2.4% 2.3%
Impaired claims / Total assets   1.6% 1.3% 1.3% 1.3%
Impaired claims / Total liabilities   1.8% 1.5% 1.5% 1.4%
Net Profit[1] (ytd, RON mn)   5,231 1,762 3,581 5,732
Net Profit[2] (quarterly, RON mn)   1,177 1,762 1,819 2,151
Net Profit (annuall, EUR mn)   1,140      
Net Profit[3] (quarterly, EUR mn)   253 378 390 461
RON to EUR1 [eop]   4.66 4.658 4.661 4.664
Source: BNR, IntelliNews        
[1] Calculated as [Average Assets]x[annualised ROA, adjusted to reflect ytd period]        
[2] Calculated as the differential of net profit          
[3] Converted quarterly at the eop exchange rate        
           

Data

Dismiss