Banks pressured by profit decline

The more inflation spirals down towards a one-digit figure and competition increases, the more the banks’ capacity to gain from margins decreases, which pressures profitability, financial rating agency Fitch analysts feel.The Romanian banks have no other way but to improve efficiency and even contemplate mergers if they plan to survive on a market that is too small for so many players. They cannot afford to engage in severe cost-cutting, because they need to spend on upgrading their IT systems and improving procedures in general. Large commissions are not an option, either, if they want to gain more clients, Fitch says. Only a higher banking operations volume could save the profits of the banks given that inflation will keep going down year by year so that they will be forced to cut their margins, Mihai Bogza, National Bank of Romania (NBR) vice-governor told the “International Banking &Finance” seminar organised by Bucharest Business Week. ZF