Monday, March 2, 2009

Banca Transilvaniacalled for government guarantees of its funding needs in euros

* Banca Transilvania wants state guarantees for euro funding
* Says does not have cash problems, but competition unfair
* Not concerned about recent leu fall

By Marius Zaharia
BUCHAREST, March 2 (Reuters) - Banca Transilvania, Romania's top locally-owned lender, called on Monday for government guarantees of its funding needs in euros to help it compete with foreign-held banks that have benefitted from state aid.

Several foreign banks with subsidiaries in Romania have been given state aid, through direct capital injection or through guarantees for issued paper, to better fight the global cash squeeze.
The latest example is Erste Bank -- which owns Romania's largest bank BCR -- which signed a long-expected deal with the Austrian government on Friday to raise up to 2.7 billion euros ($3.40 billion) in capital.

"This is unfair competition, when banks from Austria, Netherlands or Greece get some sort of a state aid," Banca Transilvania's CEO Robert Rekkers told Reuters in an interview.

"It is clear to me that if they didn't, they would reduce activity in Romania or they could even cease business here. A state guarantee for funding in euros would be a good idea, because otherwise we are disadvantaged."

Rekkers said Banca Transilvania, with a solvency rate of about 15 percent, does not have liquidity problems and it does not need an infusion of state money.

He added that while the state does not support Romanian-owned banks, it has agreed within the 2009 budget bill to increase the share capital of state-owned CEC Bank and Eximbank, saying this was "another example of an unfair situation."

Analysts increasingly warn that central and eastern European banks may need billions of euros in additional cash to avoid a crisis, because of heavy external borrowing and dependence on outside credit lines.

But Rekkers said he was not concerned about the recent leu depreciation because most of Banca Transilvania loan portfolio was in the local currency.

"About 70 percent of loans are denominated in lei, so any major damage from the rise of the euro/leu exchange rate is out of the question," Rekkers said.

He said the bank will try to stay prudent, eyeing some cost-cutting measures, while scrapping plans to expand its 500-unit network of branches. He did not give further details.

Banca Transilvania has total assets of 17 billion lei ($5 billion) and posted net profit of 398 million lei last year, some 17 percent higher than a year before.

Its shares hit a five-year low of 0.6350 lei on Monday as Romanian shares held near their lowest level since September 2003, recorded last month amid worries over Romania's economic stability and global turmoil.

Rekkers said he expects the Romanian economy to grow just over 0 percent as he prices in lending growth of 10-15 percent on the back of some improvement in the global financial turmoil in the second half of this year.

He declined to comment on 2009 performance. (Editing by Rupert winchester)

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