SEE banking sector profit hits 8-year high, Romania’s BCR returns to top

by Siana Mishkova

Surging profits, declining non-performing loan (NPL) ratios, and accelerating assets growth amid improving macroeconomic environment and generally upbeat sentiment – those were the key facets, depicting the performance of Southeast Europe’s banking industry in 2016 and still this year. At the same time, the tight regulations, the strict capital requirements and the low interest rate environment remained in place, forming the “new normal” that sector players have to live with.

The combined net profit of the Top 100 SEE banks more than doubled in 2016 to 3.03 billion euro, reaching its highest value since 2008, the year before the global financial crisis hit the local industry. Remarkably, all of the 10 biggest lenders made profits last year.

Besides the upsurge in profitability, demonstrated also by a smaller number of loss-making banks and a higher number of lenders with better bottom-line results, the strengthening of the SEE banking sector is also evidenced by improvement of assets, both in terms of quality and quantity. Bad loans, which have been burdening the industry over the last several years, are now falling across the region, helped by both the stabilising operating environment and regulatory interference, as well as by sales of toxic assets portfolios by a large number of lenders that are cleaning up their balance sheets in an effort to bolster lending.

The total assets of SEE’s 100 biggest banks rose 3.7% in 2016 to 260.7 billion euro, with the growth rate nearly tripling from 1.3% in 2015. A total of 72 lenders reported growth, significantly up from 62 last year. Romania’s biggest lender, Banca Comerciala Romana (BCR), majority-owned by Austria’s Erste Group, recorded a solid 7.8% rise in assets, more than enough to regain the first place after ceding it to Croatia’s leader Zagrebacka Banka (Zaba) for two years. Zaba, which is part of Italy’s UniCredit group, managed to return to profit last year, but saw its assets shrink 0.8%.

Looking at the wider top 100 ranking, Romania’s Libra Internet Bank, owned by closed-end American investment fund New Century Holdings, was the best performer, advancing by 18 spots to number 78 with a 39% increase in assets. Last year, the small lender, which focuses on the use of online applications and new technologies, entered our list with an impressive 45% growth. Its continuous organic expansion – a 22% rise in assets over the first half of 2017 and crossing the 1.0% market share threshold with only 50 physical branches in a country of nearly 20 million – underlines the huge opportunities that digital banking offers to traditional players. On the negative side, the assets of Romania’s Banca Comerciala Carpatica (BCC) shrank 15%, dragging it 15 positions down to the bottom of the table. In May 2017, Bucharest-listed Patria Bank, formerly known as Nextebank, completed the acquisition of a 55% stake in BCC.

In terms of profit, Banca Transilvania remained the leader with earnings of 270.5 million euro in 2016, although halving it from a record high of 534 million euro in 2015. On the other pole, the Romanian unit of bankrupt Italian bank Veneto Banca (which was acquired by Italy’s Intesa Sanpaolo in mid-2017) posted the biggest loss of 68 million euro. Out of the total Top 100, only 12 banks made losses in 2016, amounting to a combined 304 million euro, while 88 made profits of an aggregate 3.3 billion euro. As much as 14 lenders swung to profit last year, while just four turned to loss.

The region’s most populated country Romania was best represented in the Top 100 ranking with 21 banks. Romania was also a leader in terms of assets with an 83.2 billion euro aggregate balance sheet of its Top 100 SEE representatives, up 4.0% on the year, equal to almost a third of the region’s total.