Financial evaluation agency Fitch ratings warned on Thursday that the global recession might lead to the increase in crediting losses and the reduction of Romanian banks' profitability in 2009 and 2010. This could force the mother-banks abroad to inject additional capital to support the activity of their subsidiaries in Romania.
Romanian press agency NewsIn quotes a Fitch report to say that even if the banks in Romania are not exposed when it comes to "risky actives" related to the mortgage subprime credit on the American market, the financial crisis exposed the Romanian banks to liquidity global pressure and a drop in the economic activity at an international level.
Fitch expresses concern regarding the deterioration of the operational environment, the rapid growth of crediting and the high level of foreign currency risky credits lending, should the leu - Romanian national currency - suffer an accentuated depreciation.
Difficult economic perspective, despite the IMF package
The situation on the financial markets remains difficult after Romania's rating was lowered and the current economic situation forced Romania to request help form the International Monetary Fund, the World Bank and from the European Union, Fitch explains.
Despite the fact that IMF's package supports the quality of the state's credits, the rating agency considers the economic perspective to be difficult and says the authorities will need to adopt rigorous policies in order for the awarded international to have the desired effects.
Fitch says that there will be pressures on the increase in incomes due to the increase in risk costs and in the financing costs. According to Fitch, lower efficiency limits the capacity to absorb the costs of inefficient credits. Fitch expects he operational profitability to drop in 2009 and 2010.
The crediting drops. Half of the Romanian banks recorded losses in the first quarter
About half of the Romanian banks recorded lasses during the first 2009 quarter, according to Romanian accounting standards. Most of the losses were because of inefficient credits costs. The banks were affected by the reduced level of crediting, which left a mark on the commissions.
The quality of active depreciated significantly from 2008 to 2009 Q1. The tendency is expected to last, in the face of a severe economic crisis and reduced finance availability.
Mother-banks promise to support Romanian subsidiaries - a shot of comfort
Fitch considers the mother-banks' promise to support their Romanian subsidiaries in the context of the IMF bailing package to be a shot of comfort. The rating of certain Romanian banks owned by foreign groups reflects the support of the major share-holders. But the rating ia slo limited by the country level, settled by Fitch for 'BBB'.
According to Fitch, a better capitalisation of the Romanian banks would offer support in the face of issues relating to the quality of the actives in an economy if full contraction process. The Romanian banking system indicator awarded by Fitch is a 'D', mirroring the banks’ weakness.