Fitch: Romanian banks pressured

Fitch Ratings said in a special report that rapid loan growth continues at Romanian banks.

However, profitability is under pressure from margin compression and higher expenses related to branch network expansion, the agency said.

"The strong growth of the economy, together with the increased availability of banking products and higher disposable income, has stimulated significant loan growth, mainly in long-term retail loans," said Gulcin Orgun, director at Fitch's bank team.

"However, banking assets still remained at a low 50% of GDP, reflecting low penetration. This, coupled with expected continued economic development, suggests the potential for further growth.

"The Romanian banking sector's performance has been negatively affected by margin compression from falling interest rates in a lower-inflation environment and increased competition, as well as from high costs related to the expansion of the branch networks," added Orgun.

"Efficiency is expected to gradually benefit from greater economies of scale, which should compensate for the expected fall in profitability to some extent together with improving non-interest income."

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