Monday, February 28, 2011

Erste Romania Unit BCR 2010 Profit Falls 47% on Bad Loans

Banca Comerciala Romana SA, Romania’s largest bank by assets, said its full-year profit fell 47 percent in 2010 on problem loans.

Net income dropped to 465 million lei ($152 million) from 872 million lei in 2009, the Bucharest-based bank said today in an e-mailed statement. Net-interest income, or the difference between money paid on deposits and earnings on loans, fell 2.3 percent in 2010 to 3.75 billion lei from 3.84 billion on lower lending demand and falling interest rates.

Romania’s banking industry, which is about 90 percent controlled by international banks, has been hampered by non- performing loans as a two-year economic contraction left citizens unable to obtain new loans or pay for homes, cars and foreign vacations they bought on credit. The level of bad loans isn’t likely to decrease in the short term, BCR said.

“The results are heavily impacted by the continuing difficult market conditions in Romania,” BCR’s Chief Executive Officer Dominic Bruynseels said in the statement “The economy was subject to a significant austerity program and a value-added tax rise, the effects of which are still being felt.”

Provisions for bad loans fell 14 percent to 2 billion lei from 2.3 billion, as problem loans stopped growing toward the end of the year on lower interest rates, a stable local currency and reduced retail lending provisions, the bank said.

Bad loans rose to 16.8 percent of lending in 2010 from 13.1 percent at the end of 2009. Most problem loans were too small businesses and households hit by a 5 percentage-point increase in the value-added-tax and 25 percent cut in public pay last year, BCR said.

Total assets at the bank, which is majority-owned by Austria’s Erste Group Bank AG, advanced 6 percent to 73.6 billion lei in 2010, accounting for about 22.2 percent of the lending market, from 69.4 billion lei at the end of 2009, helped by improved corporate lending and mortgages, the bank said.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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