Fitch: BCR needs strategic investor

The ability of Banca Comerciala Romana (Romanian Commercial Bank – BCR) to compete in the long-term against banks with strong strategic foreign shareholders, and thus greater access to capital, advanced risk management systems, products and other areas of expertise remains a reason for concern for financial rating agency Fitch.
According to the latest Romanian banking system update issued by the agency, the delayed privatisation of BCR by sale to a strong strategic investor may force it to restrict long-term investments and focus on shorter-term objectives instead.
“The sale of BCR to a strong strategic investor is crucial to the modernisation of the Romanian banking system,” Fitch analysts feel.
Although the IFC and EBRD will take stakes (25% together) in 2003 to aid the process, Fitch believes it is unlikely that suitable bidders will be found until the global economic environment improves.
EBRD and IFC experts entered BCR’s data room at the end of last week to assess the financial situation of the bank in view of buying the stakes in question.
Finance minister Mihai Tanasescu on Saturday in Washington met with Peter Woicke, International Finance Corporation vice-president to discuss the institution’s involvement in BCR’s privatisation. The deal is supposed to be over by the end of July.
BCR at the end of last year accounted for 31.5% of the banking assets in Romania, that is 4.3bn euros. BCR operates on a market where inflation is headed towards single figures and competition intensifies, putting pressure on profitability. “The banks will need to increase both the tenure and size of their loan books without compromising asset quality to maintain net interest income,” Fitch says.
The agency’s update adds that many of the locally-owned banks might be faced with insufficient internal capital generation, compared with the requirements of ambitious growth plans. As a result, the banks with strong strategic shareholders willing to inject capital will be at a considerable advantage in executing their growth strategies.