CE Banking Outlook 2016

Comunicate de presa

CE banks driving for efficiency

Romania’s banking sector is able to support a growing economy

Despite some one-off measures, 2015 was probably the best year for the CE banking sector since the global financial crisis of 2009, according to Banking Outlook report from Deloitte Central Europe.

Taking a sector-wide perspective, this was the first year in which the differences between the north and south of the region started decreasing, with most of the top 50 banks returning to profitable operation.

Deloitte CE Banking Outlook presents key challenges and individual factors impacting the banking industry in Central Europe. The report covers banking sectors in eight CE countries: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania, Slovakia and Slovenia. 

The report tackles few aspects such as balance sheet, asset quality, profitability, strategy and digital maturity.

The region’s banking performance is better in a number of areas than for Eurozone banks – both ROE and loan growth are stronger in CE. While a slower expansion in the Eurozone is expected in 2016-2018, economic conditions should stay relatively favorable for CE banks. For example, year-on-year lending growth across CE accelerated to 3.4% in 2015, three percentage points ahead of the Eurozone, and is expected to hit 5% in 2018. We are also seeing a very encouraging fall in non-performing loan (NPL) ratios, which declined from 2013’s regional high point of 11% to 8.8% in 2015 and is on target to fall to 7% by 2018.

 “The study reveals significant progress of Romanian banks in solving their balance sheet legacies, thus creating a solid base for the ROE of the Romanian banking sector to normalize and reach levels above CE averages during the next few years,” said Oana Petrescu, Partner-in-charge Deloitte Consultancy and program coordinator in Romania.

Romania is expected to have the fastest growing economy in the CE region in 2016-2018. Following an acceleration to 3.8% in 2015, Romania’s GDP growth is expected to rise again to a minimum of 4.5% in 2016 before moderating to 3.3% in 2017-18.

“Although margin pressures and a series of structural deficiencies still persist and will continue to limit its upward profitability potential and its capacity to finance certain sectors or geographies, based on our study we expect that the Romanian banking sector is well equipped to support the mainstream Romanian economic growth and thus reach levels of 8-9% ROE in 2017-2018, compared with 7.8% the CE average expected for 2018,” Petrescu said. “The Romanian banking sector as a whole is well capitalized and its funding structure has improved, thus being capable to support the demands of a growing economy and become as attractive as its Czech and Polish peers on a longer term.”


Key Highlights Romania

Balance Sheet

  • After years of negative evolution, loan growth turned 2.5% positive in 2015 and should accelerate in 2016-18, as robust economic growth drives a recovery of corporate and consumer lending.
  • The recovery last year was led by housing loans (+16.5% y/y in 2015), supported by government guarantee program First Home.
  • However, housing loans now face a slowdown (2015-18E CAGR of 6%), as Romania’s new law on debt discharge (walk away) has driven banks to increase down payment requirements, while the First Home program may also be redesigned on less favorable terms.
  • Consumer loan growth, impacted by NPL sales, was negative last year (-2.6% y/y in 2015) but should turn positive in 2016 and accelerate to 4-5% in 2017-18, supported by rising household spending.
  • Balance sheet cleaning is particularly weighing on corporate loans (-0.6% y/y in 2015) but a return to positive growth in 2016 and improvement to 2-4% in 2017-18 is expected as low interest rates encourage investment.


Asset Quality

  • After a sharp decline in the total NPL ratio of the banking sector over the past year, further improvement is expected to be gradual
  • The total NPL ratio declined from 20.7% in 2014 to 13.5% in 2015 and further to 11.3% in H1 2016
  • While balance sheet cleaning will continue, an offset is expected over the coming year from increased NPL recognition in preparation for expected AQR, hence the total NPL ratio will likely remain near 11% in 2016-17 and fall to 10% only in 2018.



  • After soaring from -12.9% resulted from aggressive clean-up driven by BNR in 2014 to 11.8% in 2015, the ROE of the Romanian banking sector is expected to normalize at levels above CE averages
  • ROE is expected to be cut to 7% in 2016 by one-off CHF loan conversion losses and limited to 8-9% in 2017-18 by margin pressure
  • Romania’s largest banks, BCR (#1) and BRD (#2) both continued to lose market share in loans oin 2015 in 2015 to mid-tier players
  • Profitability improved on the back of improving loan quality and falling risk costs
  • The biggest market share gainer in the sector last year was local player Banca Transilvania (#3) which acquired Volksbank (previously #8) and improved organically



  • Banks will need to optimize processes and use of client and sectorial data to improve accuracy and timeliness of their decision making process – especially in corporate clients area
  • Efficient underwriting processes will be needed to improve loan quality
  • To improve customer retention/acquisition, banks will need to deliver a better customer experience, while data analytics will be used to better identify and segment customers according to their needs and what they are willing to pay for
  • With margin pressure and growing competition, consolidation in the sector is expected to continue, as the active smaller players will be encouraged to increase scale or exit via M&A One or more Greek-owned banks may also be sold, as their parents re-focus operations on core markets


Digital maturity model

  • Romania ranks 4th in digital banking maturity in CE (based on the overall score of its 5 biggest banks) behind Poland, Slovakia and the Czech Republic 
  • The country ranking is negatively affected mainly by poor digitalization in the internet channel, as mobile banking functionalities are not far behind leading solutions
  • Analysis of the Customer Journey reveals that features responsible for information gathering and customer onboarding are the most digitally mature, while there is a significant gap in the account opening process in comparison to leading markets
  • Term deposits and cash loans are the most digitalized products but there is also a visible focus on car loans, which are more digitalized in Romania than in any other CE country

The report also highlights some increase in M&A activity recently, with a higher number of transactions on southern markets (i.e. Hungary, Slovenia, Romania) and increased buying by private equity firms. 

CE Banking Outlook 2016

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