1. Banking in Romania is favoured by unprecedented conditions of low interests. How are these conditions reflecting in the credit market?
The average interest rate on new RON loans granted by credit institutions to non-government sector declined by 1.3pp between July 2014 and July 2015, following closely the decline in the monetary policy interest by 1.5pp in the same period. Thus, the interest rate reduction judged suitable by the Central Bank for the current economic conditions was transmitted in the economy.
2. Is the credit market still constrained by the non-performing loans? Please detail the current market conditions.
The non-performing loans ratio was 12.82% in July 2015, down by 4.9pp compared to July last year. It is a considerable improvement and it is reflected in the rising amount of the new loans, but not yet in the amount of the stock of loans, which remained flat.
3. Which economic sectors are very attractive for banking in 2015-2016?
Any project deemed profitable and acceptable from the risk point of view is attractive for banking. For more specifics, the changes in the structure of loans granted and commitments assumed by credit institution are a good source of information. According to this indicator, it appears that the shares of industry and of financial intermediation and insurance are higher now compared to one year ago.
4. What makes Alpha Bank unique on the Romanian banking market in terms of customer relations or other aspects?
Our more than 20 years of experience on the Romanian market gives us a valuable comparative advantage in terms of knowing the customers and their needs in different economic circumstances.
5. As a banker, how do you see the normal path: first you have to see the economic growth gathering steam and then the credit market amplifies the tendency or vice-versa?
The history of financial intermediation shows that the financial business cycle is longer than the real business cycle. Therefore, the credit is extended after the economy enters into recession and amplifies after the economy starts its cyclical expansion.
6. A major problem of Romania has been the euroization of bank portfolios. Do you see the risk of foreign currency portfolios amplifying again in the future? Please detail.
The euroization of loans was needed in order to be affordable, given the large interest rate differential between the rates in euro loans and RON loans. The interest rate differential disappeared and it is likely not to return. The driving force for euroisation of loans is gone.
7. Do you see a consolidation tendency of the banking sector in 2015-2016 (less banks, mergers and acquisitions, etc.)? What is your view on the consolidation and what will this represent for the Romanian market?
The banking sector will consolidate further for the benefit of the Romanian economy, since stronger banks mean more financial resources for the real sector.
8. Is the banking system prepared for Romania joining the eurozone? Do you think that the euro adoption should happen rather sooner or later? Please detail.
Banking means financial intermediation which does not depend on the type of the currency. If Romania adopts the euro, the Romanian banking system will be part of the Banking Union, coordinated by the European Central Bank. Of course, joining the Banking Union is possible prior to the euro adoption. The results of the asset review and stress test, when concluded, will show how prepared the Romanian banking system is for this step. A sustainable convergence towards higher living standard should be the concern for now, rather than the adoption of euro. It turns out that convergence towards higher living standard occurs faster outside the euro zone than within.
9. The credit/ deposit ratio is under 100% after a long time. How has the deleveraging process developed? What are the consequences?
Deleveraging was gradual. The loan/ deposits ratio declined from the highest value reached in the beginning of 2009 (1.34) to 1 in December 2013 and 0.9 in December 2014, the value around which the ratio fluctuated up to July this year. The main consequence of deleveraging is that the dynamics of loans is more correlated with the dynamics of domestic savings. Therefore, stimulating domestic savings means stimulating lending.
10. What constitutes ‘a good year’ for Alpha Bank?
A good year for Alpha Bank means satisfied stakeholders: clients, employees and shareholders.