Competition and high costs eat into bank profits

Significant competition, costly restrictions set by the NBR and a lack of efficiency across the system have resulted in modest profit growth or even declines in the first quarter of 2006, in comparison to the same period in 2005.

At the same time, some big banks registered adjustments in their net assets.

Many bankers had anticipated at the end of 2005, that the time when hefty profits were made relatively easily was coming to an end.

Out of the top ten banks to have revealed their financial data, Bancpost and HVB-Tiriac witnessed profit declines, with the former achieving only one third of the profit figures posted in the first quarter of 2005, due to the continuation of a restructuring and modernisation process, while the merger costs have probably started to burden HVB-Tiriac”s profits.

BRD-SocGen, the second largest bank on the market, witnessed a net profit increase by only 7.5%, even though it had managed to achieve a solid position on the retail market by expanding its network of branches quickly last year.

The investments in expansion continued in the first three months of the year, yet the larger volume of retail operations does not prove sufficient enough to visibly offset the pressure of overall expenditures. BRD now has a 360-branch network, servicing over 1.8 million individual and corporate customers.

Banca Transilvania, in turn engaged in a constant expansion process by investments, managed to post a 37% increase in profits compared with the first quarter of 2005, yet it is in a lower league in terms of profit amount.

Over the first four months of the year, Banca Comerciala Romana posted a net profit increase rate of 20%, to 90 million euros, while its assets outran 11 billion euros. The largest bank on the market continued to invest in developing its network in the first few months of the year, reaching nearly 400 branches, which allows it to take advantage of the growth potential of the retail market, including the towns with fewer inhabitants and lower incomes.