The new provision regulations introduced by the National Bank early in the year and the accounting reports in line with the international accounting standards show a different side of the Romanian banks. Which is not that bright. Still, there are some bankers who feel nothing happened this year, but before January 2003, when banks were somewhat more relaxed in their filings.
"It is not fair to say the profits of the banks are poorer in the first half of this year, as the lower figures are primarily due to the enforcement of the new provisioning regulation, which has significant effects on the operating results of a bank," said Patrick Gelin, general director of Banca Rom=na pentru Dezvoltare (Romanian Development Bank - BRD) - Groupe Société Générale. #leadend
He says the results of the Romanian banks must have been overestimated in the previous years. "The market was posting hefty results under the Romanian accounting system, but, under the international accounting standards, the results were somewhat poorer," Gelin explains.
The representatives of Banca Comerciala Rom=na (Romanian Commercial Bank - BCR) and Raiffeisen Bank, two of the most important players on the market would not comment on the BRD official's statements.
The main difference between the two systems lies in provisioning. Most of the few banks to have released more or less detailed financials logged profits up to 20% lower compared with the same time last year.
"Provisions used to be undervalued before. Now we are entering a time of truth, with results closer to the real thing," Patrick Gelin says.
He explains that even with the new regulations in place, BRD had a good first half, with net revenue up about 10% in comparable terms from the first half in 2002. The gross operating revenue was 12% higher.
Out of the market leaders, Raiffeisen Bank is the only bank not to have released full first half financials yet.
Under the circumstances, Gelin points out that not every bank on the market releases detailed financials, so as to allow for comparisons and analyses. "BRD and Banca Transilvania are the only ones that release full results," Gelin says. The two banks are actually bound to do this, in order to comply with the transparency rules deriving from their publicly listed company status.
Patrick Gelin says the effects of the new provision regulation have not fully shown. "The mathematical application of new rules will show at the end of the year, as well. This is not a matter of the bank's portfolio degrading in terms of risk," BRD's general manager says. However, NBR's statistics highlight growing overdue credits.
Gelin admits the fiercer competition also has a say in the banking profit issue, given that the market is too small for such a high number of players (38).
"It is true this increased competition brings a relaxation of the lending terms, of the interests and fees," Gelin says.
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