The slump in profit margins prompted by fiercer competition, higher expenses on provisions for the default risk from borrowers and larger investments. All these have led to a serious drop in the profit of the largest bank in Romania, Banca Comerciala Romana (Romanian Commercial Bank – BCR). It posted $75 million in H1 net profit, down nearly 23% from the year-ago period. The bank had logged $97 million net profit in the first half last year.
Had the results been calculated in euros, the decline would have been even sharper, as the ROL depreciation against the European currency surpasses its decline against the dollar by far.
Still, the BCR officials say their results are on schedule as they had seen the decline coming.
“All the results of the bank, including the profit, are in line with the projections and targets in our financial plans, which verifies the accuracy of the economic forecasts. It was anticipated that the market would push for a decrease in the interests on credits and for maintaining the rates for the attracted resources to protect our clients, which resulted in an approximately 25% interest margin cut. At the same time, the enforcement of the new credit ranking regulations has induced – as expected after all, a 1.5% increase in the provisioning level. The influence of our investment programme, which has amounted to some $50 million over the last four years (2003 inclusive), upon the spending chapter was also taken into account,” BCR spokesperson Cornel Cojocaru commented for Ziarul Financiar.
He says, “the previous years and the first half this year reassure us that the second half and full-year results will be in line with the targets we set for 2003.” The bank is expected to post about $170 million net profit for this year.
The decline in the first-half profits compared to the same time last year is something almost every bank is experiencing, whether it has unveiled results or not. Actually, the drop in profitability across the entire banking system had been anticipated since early this year. oana.nuta@zf.ro