Wednesday, April 6, 2011

Volksbank Romania Plans Return to Profit By Selling Bad Loans

Oesterreichische Volksbanken AG (VBPS)’s Romanian unit plans to return to a profit this year, after posting its first-ever loss last year, as its sells bad loans.

Volksbank Romania SA, which posted a loss of 36 million euros ($51 million) last year after doubling bad-loan costs, is aiming for an annual net income of at least 25 million euros, Chief Executive Officer Johann Lurf said in an interview in Bucharest today. The bank plans to clean up its balance sheet by selling 4,000 bad loans worth as much as 10 million euros “rather soon,” he said.

Volksbanken International AG, the eastern European unit of Oesterreichische Volksbanken, posted a loss last year on bad- loan provisions in recession-hit Romania and a write-down in Ukraine. VBI was put up for sale by its parent company in December as the Vienna-based bank was among the hardest hit by the financial crisis, and took 1 billion euros in state aid from the Austrian government.

“I have a profit estimate for this year, but I’ll just say that everything below 25 million euros would disappoint me,” Lurf said. “We don’t plan to sell running portfolios, but distressed portfolios.”

Volksbank Romania, VBI’s biggest unit, will probably lower its market share to as low as 3 percent this year from 5.8 percent in 2010, as it “doesn’t want to be a frontrunner” in the fight for new lending clients once the economy recovers from a two-year recession, according to Lurf.
Credit Portfolio

Volksbank has a credit portfolio of 600 million euros in Romania, 90 percent of which are euro- or Swiss franc- denominated credits, he said.

“My estimate is that the credit growth rate will be around 7 percent to 8 percent, overall in Romania this year,” Lurf said. “Volksbank should have a small increase of 2 percent to 3 percent.”

The bank is seeking to diversify its financing sources by attracting more deposits and possibly issue covered bonds and securing funds from the European Investment Bank or European Bank for Reconstruction and Development for corporate and small and medium-sized enterprises, according to Lurf.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net;

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

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