Romanian banks’ profit reaches €160mln, bad loan ratio jumps to 8.5%

“The fact that banks’ profitability is positive at September 30, 2009 is good news. It was negative in March but now it is back on track. However, compared to last year, the profit is five times lower”, said Florin Georgescu (photo).

Romanian banking industry earned 3.632 billion lei profit in January-September 2008 period, 5.34-fold more than this year. At the end of 2008, banks reported a collective income of 4.4 billion lei.

However, the loss loans in the total banking system lending jumped to 8.5% in September 2009, 4.9% more than 3.6% a year earlier. At the end of third quarter this year banks’ impaired assets were: 2.8% of total loans were doubtful, 7.4% were substandard, and 60.6% were standard.

“The banks’ asset quality has been impaired compared to last year. Overdue loan and doubtful loan ratio increased 4-fold over the past 12 months. But as long as the capital adequacy ratio is in good health and is growing, this asset quality impairment is offset by new capital hikes, as lending slowed down and lenders shifted focus to loan book restructuring”, said the first deputy governor of NBR at a conference organized by Finnmedia.

The share of overdue and doubtful loans reached 10.5% of own capital in September 2009, four times more than a year ago, while the ratio of the same type of loans climbed to 0.92% in banks’ total assets, four times more than September 2008.