Banking sector to outstrip Romanian economy

The Romanian banking system is undergoing a time of tremendous changes, with a medium-term explosive potential growth, that is by the end of 2005, says a survey over the banking system in Romania conducted by PricewaterhouseCoopers (PWC) Romania in co-operation with the company’s office in London.

The banking sector assets could grow from some $10bn (220,000bn lei) in 1999 to $18bn (700,000bn lei) in 2005 and there is also an expectation of a slight increase in banking penetration from 28%-30%.

At the same time, PricewaterhouseCoopers specialists feel that given that Italy is Romania’s largest trading partner, it would be no surprise if Italian banks invested in the coming months.

“According to research performed by PricewaterhouseCoopers, the Romanian banking system is at the beginning of a growth curve as total assets as a percentage of GDP are among the lowest in the region (…) The growth in banking assets will outstrip GDP growth in the next 5 years,” the PWC report shows.

The PWC report also shows that achieving growth level forecast will be critically dependent on a number of factors, including continuation of macroeconomic reform, rising incomes commensurate with increasing GDP per capita, and last but not least, improved macroeconomic environment, further privatisation and foreign investment.

“It’s all up to macroeconomic trends. I still find this report a little too optimistic, somehow, but if economic reform continues and economic growth is sustained to over 4% over the next five years, the above-mentioned figures can actually be attained,” Dan Pascariu, first vice-president of the Romanian Association of Banks and Bank Austria Creditanstalt Romania president, told Ziarul Financiar.

According to the above-mentioned report, the banks will need to position themselves to take advantage of the growth opportunities for the next five years and beyond, with the key battlegrounds being the personal financial services sector and small and medium sized enterprises.

“Banks will need to adopt a more aggressive strategy with an increasingly focus on lending to retail customers and SMEs…Banks will need to improve their ability to cross-sell to customers in the short-term by focusing on key-growth areas of the mortgage market, credit cards, asset management, pension products and other consumer credit,” the report mentions.

At the same time PWC’s report highlights the fact that improving standards of customer service to retain customers will be critical, as customers will be increasingly courted by other banks.

“There is a risk that the most profitable customers will be cherry picked by competitors unless they are actively targeted and “tied in” through the cross selling of other products and services,” the PWC survey shows.