Romanian banks face EUR 722mn loan loss provision costs in Q1.

By bne IntelliNews June 28, 2012
The stock of provisions held by the Romanian banks increased by RON 3,161mn (EUR 722mn*, or some 0.9% of their assets) in the first quarter of 2012, according to IntelliNews calculations based on the central bank data. The loan loss provision cost thus neared the record level of EUR 747mn registered back in the second quarter of 2010, marking a visible deterioration from the moderate EUR 171mn provision cost in Q4/2011 or the average quarterly provision cost of EUR 416mn last year. Notably, the data is still reported under the national methodology [RAS, as opposed to IFRS]. An adjustment for impairment under IFRS is also reported starting as of January 2012, but no backward data is provided for a direct comparison. The adjustment for impairment under IFRS was RON 23.4bn (EUR 5.34bn) at the end of Q1, compared to RON 33.9bn (EUR 7.74bn) worth of provisions calculated under RAS. This confirms earlier information regarding some EUR 2bn made available to banks by the effect of the shift to IFRS from RAS. This one-off income to banks pushed the banking system in the profit area in Q1 [under IFRS] despite the additional deterioration of asset quality. The high provision cost under RAS was prompted by the further steep deterioration of the credit quality. The share of loans under the category of loss and doubtful (defined as loans with overdue payments of more than 90 days and 60 days, respectively) increased to 25.6% of total banks' exposure, up from 23.3% at the end of 2011. Loss loans were 20.5% of total exposure, up from 18.6% at the end of 2011. In nominal terms, the banks held RON 55bn (EUR 12.56bn) of loss and doubtful loans in their portfolios (out of a total loans of EUR 51.24bn) at the end of March. Some 80% of them were loss-type loans. *at the end of period's exchange rate Quality of the stock of bank loans (eop, RON mn unless otherwise indicated)
total exposure* L+D-type loans % of exposure total provisions total provisions**, % of exposure provision cost*** RON mn provisions**, EUR mn provision cost*** EUR mn
Dec-06 89,337 2,517 2.8% 1,293 1.4% 544 382 161
Dec-07 145,105 5,810 4.0% 3,579 2.5% 2,286 991 633
Dec-08 192,471 12,574 6.5% 7,587 3.9% 4,008 1,904 1,006
Dec-09 192,790 29,476 15.3% 14,966 7.8% 7,379 3,540 1,745
Dec-10 205,659 42,804 20.8% 23,559 11.5% 8,593 5,498 2,005
Dec-11 219,452 51,094 23.3% 30,741 14.0% 7,183 7,117 1,663
Q1-11 200,467 44,109 22.0% 24,479 12.2% 920 5,950 224
Q2-11 210,706 46,115 21.9% 27,021 12.8% 2,542 6,410 603
Q3-11 217,697 50,129 23.0% 30,004 13.8% 2,983 6,892 685
Q4-11 219,452 51,094 23.3% 30,741 14.0% 738 7,117 171
Q1-12 215,260 55,011 25.6% 33,902 15.7% 3,161 7,742 722
Source: BNR
*exposure includes mainly bank loans and interest, but also other banks' commitments ** eop, converted at eop XR, *** of period (year, quarter; converted at eop XR - also for the stock of provisions - may be different from sum of quarterly values, converted at each quarter's end XR)

Romanian banks face EUR 722mn loan loss provision costs in Q1.

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