Falling provisions drive banking system back into the black

The slight drop in provisions for bad loans allowed banks to end the first half with a modest income of 90m RON, but the rising unemployment rate outlook, meaning more people will be unable to pay their instalments, forebodes another half-year at least as difficult. “At this moment, for a bank, its short and medium-term viability is more important than generating profit. The number of persons behind on payments is expected to rise as the unemployment rate is on an upward trend,” commented Laurian Lungu, a managing partner with Macroanalitica research firm. At the same time, the steep economic decline and the ongoing financial crunch are pushing an ever soaring number of firms into insolvency, thus creating problems for banks. Lungu specified pressures on banking system profit margins would maintain. The gain banks generated in mid-year is over 21 times smaller than the H1, 2008 figure. In mid-2008, the banking system reported a 1.9bn RON net income.