Banking Barometer ARB & EY 2015

Transcription

1 Banking Barometer ARB & EY 2015

2 Banking Barometer, an initiative intended to provide bankers relevant information EY Romania conducted in a partnership with the Romanian Banking Association (ARB) the banking industry index called The Banking Barometer ARB & EY, through a survey of the top management of the ARB s member banks. The banks participating in the survey have an assets market share of approximately 90%. The Banking Barometer ARB & EY will be conducted annually with the members of the Romanian Banking Association and is intended to be an information tool for the bankers, regarding the way the top management of the Romanian banking system anticipate the evolution of the economic, business and legal environment as well as the implications on their organizations. The Barometer also allows comparing the Romanian survey s results with those of a similar survey conducted by EY with over 200 bankers from 11 other European markets (Austria, Belgium, Switzerland, France, Germany, Italy, UK, Netherlands, Poland, Spain and Nordics). Page 2

3 Economic environment Page 3

4 Most banks expect the economic environment to improve slightly 1. How do you expect the general economic outlook in Romania to change over the next 12 months? % 59% 23% % 24% Improve significantly Improve slightly Remain at today s levels Worsen slightly Worsen significantly Page 4

5 46% of banks expect an improvement of the general outlook for employment in the economy 2. How do you expect to evolve the general outlook for employment in the economy over the next 12 months? % 4 9% % 62% Improve significantly Improve slightly Remain at today s levels Worsen slightly Worsen significantly Bankers are more optimistic than in 2014 when only 33% were expecting an improvement. Page 5

6 Expectations ref. consolidation of the banking industry are growing Page 6

7 50% of bankers expect a medium scale consolidation over the next 12 months, compared to 24% in Please indicate the extent to which you anticipate that the consolidation of the banking industry will occur in Romania over the next 12 months. By consolidation we also mean sale of portfolios % 50% % 24% I do not anticipate any consolidation Medium scale consolidation Small scale consolidation Large scale consolidation Page 7

8 Over 40% of bankers expect a large scale consolidation over the next 3 years compared to only in Please indicate the extent to which you anticipate that the consolidation of the banking industry will occur in Romania over the next 3 years. By consolidation we also mean sale of portfolios % % I do not anticipate any consolidation Medium scale consolidation Small scale consolidation Large scale consolidation Page 8

9 Business outlook Page 9

10 8 of banks expect to engage more than in the past in initiatives to promote growth (5 in 2014) 5. To what extend do you expect banks from Romania to engage in the following initiatives over the next 12 months? Initiatives to promote growth 2 60% 1 40% 3 Lending to customers 29% 48% 24% 67% 19% Selling assets % 4 Reducing loan-to-deposit ratios 60% 52% 23% Reducing the size of the balance sheet 19% 33% 24% 19% Seeking funding from wholesale capital markets 40% 30% 1 40% 50% Introducing or increasing incentives to increase customer deposits 11% 47% 37% % Accessing central bank funding 11% 26% 37% 26% Significantly more More Stay the same Less Significantly less 77% of banks anticipate to engage more in lending related initiatives, slightly less than in 2014 (80%). However the number of bankers anticipating significantly more engagement in such activities doubled from 2014 survey. Page 10

11 Banks are more interested in selling assets than in 2014 but in most of the cases it is about NPLs. 6. Which, if any, of the following activities is your bank likely to consider over the next 12 months? 59% 43% 29% 32% 19% 0% Sell assets Buy assets Partnerships and joint ventures Nu stiu *Multiple answers question Page 11

12 Banks anticipate an improved outlook for main business lines, in line with How do you think will your bank evolve over the next 12 months in each of the following business lines? Retail banking 19% 62% 6% 61% 33% Corporate banking 52% 38% 6 30% Private banking and wealth management 20% 20% 40% 13% 8% 34% 50% 8% Asset management 1 38% % 22% 44% 12% Transaction advisory (e.g., M&A), if applicable 40% 57% 29% Debt and equity issuance (for the clients), if applicable 4 18% 18% 40% 60% Securities trading 33% 27% 13% 13% 57% 29% Securities services (e.g., custody, fund administration, collateral management etc.) 9% 18% 27% 9% 18% 43% 1 Very good Fairly good Neither good, or poor Fairly poor Very poor Bankers are more optimistic as regards Retail banking, slight more than in 2014 survey. Page 12

13 90% of banks predict an increase in demand for mortgage loans and 80% for consumer loans 8. How do you expect customer demand to evolve for the following retail products at your bank and how does it to change over the next 12 months? Personal real-estate loans 24% 67% 0% 41% 47% 12% Credit cards 21% 42% 37% 71% 24% Personal loans 71% 19% 16% 50% 28% 6% Personal savings and deposit products 20% 3 11% 61% 22% 6% Personal investment products 22% 28% 28% 0% 17% 16% 38% 46% Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly The number of banks predicting an increase in the demand of mortgage loans doubled from 2014 survey. Furthermore, 24 pp of the 90% expect a significant increase in demand. Page 13

14 Banks expect a slight increase in demand for corporate/business loans as well as in demand for hedging products 9. How do you expect customer demand to evolve for the following corporate products at your bank over the next 12 months? Corporate loans 60% 2 20% 60% 20% Hedging products (e.g., FX rates (also known as Forex) or interest rates) 17% 44% 33% 6% 6% 38% 56% Debt issuance (for the clients) 2 42% 17% 12% 50% 38% M&A Advisory 2 33% 2 44% 56% Equity issuance / IPOs (for the clients) 20% 40% 20% 100% Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly Although a large share of bankers (70%) expect an increase in the demand for business loans, the share is less than in 2014 survey. As regards the hedging products, the share of those expecting an increase is 61% vs 44% in Page 14

15 Operational efficiency Page 15

16 5 of banks expect the number of staff to slightly decline, vs. 29% in Over the next 12 months, you expect the number of employees in your bank to have a: % 27% % 29% Significant increase Slight increase Stay the same Slight decrease Significant decrease Page 16

17 However, the remuneration expenses will not decrease in over 80% of banks (in 32% will increase) 11. Compared to last year (2014), how do you expect the the level wage bill to change in your organization in 2015? TOTAL 32% 50% 18% Increase Stay the same Decrease Page 17

18 Business priorities Page 18

19 Risk management, especially reputational risk, rank the first on the bankers agenda 12. Please rank the importance of the following aspects for your organization. The respondents have been asked to rank the importance of the above mentioned aspects on a scale from 0 to 10, where 0 represents Not at all important, and 10 Very important. The percentages represent the number of respondents who scored 8, 9 or 10 points on this scale. Page 19 Reputational risk (including tax transparency) Risk management Complying with consumer regulation issues and/or dealing with Streamlining processes / Further automation Data security Developing/introducing new products Minimizing all non-essential expenditure Restructuring the business operations or legal entities to comply Compliance with capital markets regulations (i.e., MiFID II/EMIR) Investing in new customer-facing technology e.g. mobile solutions Diversity of Basel III/CRD IV Restructuring the business operations or legal entities to cut costs Developing partnerships with non-banks Current changes in financial reporting/harmonization with IFRSs Developing Recovery and Resolution Plans Cutting costs Acquiring new assets or businesses New remuneration systems (including emerging legislation) Establishing new business segments Reducing the number of products Disposing of assets or businesses 0% 6% 11% 18% 19% 18% 21% 24% 2 27% 29% 29% 33% 38% 31% 38% 40% 38% % 50% 50% 50% 5 53% 53% 59% 59% 62% 62% 61% 6 68% 71% 7 80% 80% 86% 8 91%

20 Lending policies are expected to be less restrictive in Agriculture, Manufacturing, IT, Healthcare and for SMEs 13. How do you expect your lending policies for corporates to change in each of the following sectors over the next 12 months? Construction % Commercial real estate 19% 57% Media and telecommunications 7 Transport 71% Financial services 1 70% Energy, mining & minerals 11% 63% Professionl services 0% 7 Retail & consumer products 62% Information technology 50% Health care (including pharmaceuticals, 60% Agriculture 36% Manufacturing & industrials (including chemicals, 5 SMEs (small-medium size enterprises) 48% % 19% 6% 19% % 29% 24% 21% 16% 11% 11% 6% 6% 17% 11% 13% 11% 74% 79% 53% 73% 74% 89% 69% 72% 53% 58% 40% 58% 47% 31% 11% 16% 2 37% 26% 47% 37% 31% 6% 11% Significant more restrictive More restrictive Stay the same Less restrictive Significant less restrictive The same industries and segment resulted from 2014 survey, the only exception being Telecom. Page 20

21 Over 80% of banks expect their expenses with credit risk provisions not to increase, or even to decrease (40%) 14. Over the next 12 months, do you expect your bank s total provisions against loan losses to % 41% 27% % 30% Increase significantly Increase slightly Remain at current levels Decrease slightly Decrease significantly The percentage of the banks expecting a significant decline of their cost of risk has increased to 27% (from in 2014 survey). Page 21

22 Over 90% of banks expect improved financial performance, compared to 80% in How do you expect your bank s overall performance (i.e. financial results) to change over the next 12 months? % % Strengthen significantly Strengthen slightly Stay the same Weaken slightly Weaken significantly Page 22

23 Local aspects Page 23

24 The legislative framework on insolvency (including enforcement thereof) continues to be the main aspect that deters lending for 9 of banks, 10 pp more than in What are the main issues specific to the local market (to Romania) that negatively affect the lending appetite, cost or your capacity / ability of lending? The current legislative framework on insolvency and the envisaged changes 50% 41% 9% 48% 38% The local legislative initiatives referring to consumers 53% 32% 16% 28% 44% 28% The way European consumer related regulations have been transposed in the Romanian legislation 24% 43% 29% 21% 37% 37% The state s payment behavior 19% 38% 38% 11% 42% 42% The economic prospects over the next 12 months 41% 27% 18% 33% 38% 29% The administrative restrictions on lending % 53% 11% Very great extent Great extent Small extent Not at all The local legislative initiatives regarding consumers as well as The way the European regulations on the same topic are being transposed into the Romanian legislation are the next two reasons which deter lending. Page 24

25 Certain legislative initiatives on consumer topics and the way are advertised can induce moral hazard and send misleading messages regarding banks practices 17. What do you consider to be the main implications of local initiatives on the consumer topic? 2015 TOTAL It affects the trust in the banking system 33% 44% 11% 11% It negatively affects financial discipline/ payment behavior of the debtors 67% 22% 11% Very great extent Great extent Small extent Not at all Page 25

26 The majority of banks consider beneficial the continuation of the agreement with IMF 18. Do you consider beneficial the continuation of the agreement with IMF EC WB from a financial stability perspective? TOTAL Yes, 68% No, 32% Page 26

27 The recent modification of write-off practices will not really change the pace of NPLs sale 19. How do you expect that the recent modification of the write-off practices will affect the activity of NPLs sale to third parties (i.e. outside of the Group) TOTAL 23% 27% 4 Significant increase Slight increase No effect Slight decrease Significant decrease Page 27

28 Contact Gelu Gherghescu Page 28

29 About ARB Romanian Association of Banks concentrates entire banking industry in Romania, being the voice of the banking sector in relation with the Romanian authorities, the International Monetary Fund, European Commission, World Bank and other national and international bodies. Its main objective is to represent and protect the rights and interests of the members, especially now when the well-normed European regulation system, may exert additional pressure on banks' role as financer of the economy. The Romanian banking sector largely finances the Romanian economy, providing about 92% of total funding on the Romanian financial system. The Romanian Banking System, serving millions of customers proved to be resilient during the crisis, no need of support from public funds. About EY România EY is one of the world's leading professional services firms with approximately 190,000 employees in 728 offices across 150 countries, and revenues of approximately $27.4 billion in the fiscal year that ended on 30 June Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in Our over 500 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. In 2014, EY Romania has affiliated to the only global competition dedicated to entrepreneurship, EY Entrepreneur Of The Year. The winner of the local edition represents Romania in the international finale that takes place every year in June in Monte Carlo. The World Entrepreneur Of The Year title is awarded at the international finale. For more information, please visit