EY and ARB’s Banking Barometer reveals optimism in the banking sector, especially in lending

The banking sector shows increasing optimism with regard to the coming period given that a major part of banks forecasts a growing demand for loans in both natural persons and businesses segments, while more than 80 percent of financial institutions anticipate an increase in lending activity as per the “Romanian Banking Barometer” conducted by EY Romania and the Romanian Banking Association (ARB). The market research which was carried out based on a survey taken by banks with a total market share of 85 percent is designed to inform bankers and public opinion on how leaders in the financial sector perceive the economic, legislative and business evolutions, as well as the related implications on the institutions they coordinate, announces a press release.

“Credit institutions are interested in supporting the economy by lending. Banks expect a slight increase in demand for loans in several sectors and market segments by customers and, at the same time, foresee a partial relaxation of lending policies in sectors such as industry, information technology, agriculture, telecommunications, health and SMEs (Small and Medium Enterprizes)”, said Radu Gratian Ghetea, Chairman of the Board at ARB, according to the same informing.

In the retail area, over 65 percent of banks estimate that demand for consumer credits will increase, whereas a larger proportion of 75 percent predicts a growing demand in terms of credit cards. Also, about 70 percent of banks expect a similar improving trend in loans for businesses.

Yet, according to the aforementioned research, the insolvency regulations have a negative impact on lending, 85 percent of banks believing that the corresponding legislative framework and its enforcement is discouraging lending.

“The recent changes to the Insolvency Code have improved the legislative framework, but we consider that there are still several things to be done with respect to law enforcement in order to convince banks that the situation has changed and therefore, they may relax lending policies”, Ghetea stated, as per the named source.

As for loan loss provisions, more than 80 percent of banks anticipate that the related expenditures will not increase, while 35 percent of them expect even a drop in these expenditures. In addition, three quarters of banks are positive that there will be an improvement in their financial results.

On the other hand, a large-scale consolidation in the banking sector is little likely to happen in the coming three years, according to the said research which also reveals that financial institutions are seeking to take over loans rather than sell their loan portfolios. About 43 percent of banks consider acquiring loan portfolios, while only 29 percent think about selling assets.

The overall positive evolution foreseen by the Romanian banking sector is completed by the outcome expected in the restructuring area, as its reorganization is almost completed. Thus, based on the fact that 70 percent of banks will not reduce the number of their employees in the near terms and some 20 percent considers hiring so as to expand the employees’ base.