Romania’s central bank revised the aggregated 2012 ROA for the banking system to minus 0.64% from previous 0.58%, data published by the monetary authority indicated. Based on this revision, we also adjusted the estimate for the 2012 net aggregated loss of the banking system to RON 2.35bn [EUR 530mn at eop exchange rate] from an earlier estimated RON 2.13bn [EUR 455mn].
The system’s loss in Q4 alone was RON 2.24bn [EUR 505mn]. The central bank does not disclose directly the aggregated profit/loss of the banking system, but leaked data confirmed our estimates* with a margin of a couple of percentage points.
ROA for the banking system, however, returned in the positive territory to plus 0.55% in Q1 – in annualised terms, the central bank also announced. Based on this, we have estimated an aggregated profit of RON 505mn [EUR 114mn] in the quarter. Earlier in May, leaked reports from the central bank indicated a RON 520mn [EUR 118mn] aggregated profit for Jan-Mar.
The capital adequacy of the banking system increased to 15% at the end of March this year from 14.6% at the end of 2012, the central bank said. The ratio stands well above the 10% level recommended by the central bank. Excessive solvency ratios tend to indicate inefficient use of resources and this is consistent with the local banks avoiding extending loans.
Largest lender BCR-Erste Group reported a 13% solvency ratio at the end of March 2013. The second largest bank, BRD-Societe Generale, reported a 14.6% ratio at end-Feb [as a proxy for end-Q1] and the ratio of the third largest lender - Banca Transilvania, was 12.2% at end-March.
* The main source of error in our estimates is the approximation of average assets with the average of assets at the beginning and at the end of the quarter.
|Banking system ratios||2008||2009||2010||2011||2012||Q4 12||Q1 13|
|Assets (RON bn, eop,)||314.4||330.2||341.9||353.9||365.9||365.9||356.2|
|Credit Risk Ratio  (%, eop)||6.5%||15.3%||20.8%||23.3%||29.9%||29.9%||30.0%|
|Non-performing Loans Ratio||n.a.||7.9%||11.9%||14.1%||18.2%||18.2%||19.1|
|Loan to deposit ratio ||131%||119%||118%||119%||114%||114%||112%|
|RAS provisions (EUR mn)||1,904||3,540||5,498||7,117||8,848||8,848||9,281|
|RAS Provision cost (EUR mn) ||1,006||1,745||2,005||1,663||1,907||565||406|
|IFRS Provision cost (EUR mn) ||n.a.||n.a.||n.a.||n.a.||n.a.||650||391|
|Aggr. Profit (EUR mn) ||1,107||193||-121||-181||-530||-505||114|
 (eop, annualised net profits per ytd/avg. assets)  (eop, annualised net profit per ytd/avg. equity)  Gross exposure of loans to non-bank clients and interest classified as doubtful and loss / Total classified loans to non-bank clients and related interest, excluding off-balance sheet items  loans/deposits to/of private sector alone  of period (year, quarter) converted at eop XR – also for the stock of provisions; for years may be different from the sum of quarterly values, which are converted at each quarter’s end-XR.
NOTE: We have simplified for better understanding the national accounting RAS and the international IFRS provisioning denominations. In fact, we are speaking about Prudential value adjustments under RAS [used until Jan 2012 for provisioning but still calculated afterwards] and Adjustments for impairment under IFRS [used after Jan 2012 for provisioning for fiscal purposes]. We recall that Romania's banking system shifted to IFRS since 2012 but is currently under a transition period when RAS reporting is still used for precautionary policies, while IFRS is used for taxation. Supplementary revenues resulting from the migration to IFRS have a special regime.
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