the banking barometer arb & ey 2014
Post on 21-Sep-2014
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EY Romania conducted this survey in partnership with the Romanian Banking Association. Banks participating in the survey have an assets markets share of 85%.TRANSCRIPT
Banking BarometerARB&EY
Page 2
Banking Barometer, an initiative intended toprovide to the bankers relevant information
EY Romania conducted in a partnership with the Romanian Banking Association(ARB) “The Banking Barometer ARB & EY“ a survey of the management of theARB member Banks. Banks participating in the survey have an assets marketshare of more than 85%.
The Banking Barometer ARB & EY will be conducted twice a year with themembers of the Romanian Banking Association and is designed as an informationtool for the bankers, regarding the way the management/leaders of the RomanianBanking system view the evolution of the economic, business and legalenvironments as well as the implications on their organizations.The results are presented as well on segments based on market share on assets:Banks with a market share > 5%, Banks with a market share between 1% -5%,Banks with a market share <1%.The Barometer also allows comparing the Romanian survey’s results with those ofa similar survey conducted by EY with 200 bankers from 11 other Europeanmarkets (Austria, Belgium, Switzerland, France, Germany, Italy, UK, Netherlands,Poland, Spain and Nordics).
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Economic environment
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1. How do you expect the general economic outlook in Romania to change over the next 6 months?
76% 24%
Improve significantly Improve slightly Remain at today’s levelsWorsen slightly Worsen significantly Don’t know/depends
Banks <1%
Banks 1%-5%
Banks >5%
Most banks expect the economic outlook toimprove slightly
TOTAL
71%
78%
80%
29%
22%
20%
Starting next run there will be a comparison to the previous estimates, making apparent thetrend of the expectations. This is valid for all questions included.
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2. How do you expect the general outlook for employment in the market to change over the next 6months?
33% 62% 5%
Improve significantly Improve slightly Remain at today’s levelsWorsen slightly Worsen significantly Don’t know/depends
Banks <1%
Banks 1%-5%
Banks >5%
Bankers expect that the employment prospectsnot to change significantly in Romanian economy
TOTAL
29%
44%
20%
71%
44%
80%
12%
However the proportion of those expecting an improvement is higher than for thoseexpecting an worsening.
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3. What (INDIRECT) impact do you think the Eurozone sovereign debt crisis will have on the bankingsector in Romania over the next 6 months, in comparison to the previous 6 months?
9% 67% 24%
Significantly increased impact Slightly increased impact About the sameSlightly decreased impact Significantly decreased impact Don’t know/ depends
Banks <1%
Banks 1%-5%
Banks >5%
The (indirect) impact of the sovereign debt crisis,is expected to remain unchanged
TOTAL
14%
20%
29%
89%
80%
57%
11%
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A large scale consolidation of the banking industryis not expected on medium term
Page 8
4. Please indicate the extent to which you anticipate consolidation of the banking industry will occur inRomania over the 12 months. By consolidation we mean, among other, the sale of portfolios.
76% 24%
I do not anticipate any consolidation Small scale consolidationMedium scale consolidation Large scale consolidation
Banks <1%
Banks 1%-5%
Banks >5%
Although considered unavoidable, bankers anticipatea small scale consolidation over the next 12 months
TOTAL
71%
89%
60%
29%
11%
40%
Page 9
5. And again using the scale below, please indicate the extent to which you anticipate consolidation ofthe banking industry will occur in Romania within the next 3 years?
15% 71% 14%
I do not anticipate any consolidation Small scale consolidationMedium scale consolidation Large scale consolidation
Banks <1%
Banks 1%-5%
Banks >5%
On a 3 year time horizon, bankers do not expect alarge scale consolidation
TOTAL
28%
20%
43%
89%
80%
29%
11%
Page 10
Business Outlook
Page 11
6. Compared to today, to what extent do you expect that banks in Romania are likely to be engaged in thefollowing activities over the next 6 months?
Over 80% of banks expect the industry to engageto a greater extent in lending
5%
10%
15%
5%
14%
5%
15%
25%
40%
52%
40%
50%
67%
55%
45%
55%
50%
23%
35%
45%
19%
25%
30%
15%
5%
14%
10%
15%
10%
5%
Accessing central bank funding
Introducing or increasing incentives to increase…
Reducing the size of the balance sheet
Seeking funding from wholesale capital markets
Reducing loan-to-deposit ratios
Initiatives to promote growth
Selling assets
Lending to customers
Significantly more More Stay the same Less Significantly less
TOTAL
Over 45% of banks anticipate launching specific initiatives to promote growth.Although 55% anticipate an increase in sale of assets, many banks rather referred to NPL.
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6. Compared to today, to what extent do you expect that banks in Romania are likely to be engaged in thefollowing activities over the next 6 months?
Over 80% of banks expect the industry to engageto a greater extent in lending
Banks >5%
14%
17%
29%
17%
17%
43%
67%
33%
57%
17%
17%
50%
67%
14%
17%
67%
14%
66%
67%
33%
16%
28%
17%
16%
Accessing central bank funding
Introducing or increasing incentives to increase customer deposits
Reducing the size of the balance sheet
Seeking funding from wholesale capital markets
Reducing loan-to-deposit ratios
Initiatives to promote growth
Selling assets
Lending to customers
Significantly more More Stay the same Less Significantly less
On an average, Banks >5% are even more confident: approximately 30% expect asignificant increase in the engagement of the industry to lending activities.
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6. Compared to today, to what extent do you expect that banks in Romania are likely to be engaged in thefollowing activities over the next 6 months?
Over 80% of banks expect the industry to engageto a greater extent in lending
Banks 1%-5%
11%
11%
22%
56%
56%
44%
56%
78%
78%
67%
67%
44%
33%
33%
44%
22%
11%
11%
11%
11%
23%
11%
Accessing central bank funding
Introducing or increasing incentives to increase customer deposits
Reducing the size of the balance sheet
Seeking funding from wholesale capital markets
Reducing loan-to-deposit ratios
Initiatives to promote growth
Selling assets
Lending to customers
Significantly more More Stay the same Less Significantly less
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6. Compared to today, to what extent do you expect that banks in Romania are likely to be engaged in thefollowing activities over the next 6 months?
Over 80% of banks expect the industry to engageto a greater extent in lending
Banks <1%
20%
20%
40%
20%
20%
40%
40%
40%
60%
60%
60%
60%
40%
40%
40%
20%
60%
20%
20%
20%
40%
20%
Accessing central bank funding
Introducing or increasing incentives to increase customer deposits
Reducing the size of the balance sheet
Seeking funding from wholesale capital markets
Reducing loan-to-deposit ratios
Initiatives to promote growth
Selling assets
Lending to customers
Significantly more More Stay the same Less Significantly less
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7. Which, if any, of the following activities is your bank likely to consider over the next 6 months?
29%43%
10%19%
Sell assets Buy assets Partnerships and jointventures
Don't know
* Banks could choose more than one response
Banks are rather interested in buying assets. Many of thebanks considering selling assets referred rather to thealready regular NPL sales.
TOTAL
43%57%
0% 0%
22%33%
11%
33%
20%
40%
20% 20%
Sell assets Buy assets Partnerships and jointventures
Don't know
Banks >5% Banks 1% - 5% Banks <1%
Page 16
8. How do you rate the outlook for your bank over the next 6 months in each of the following businesslines?
Banks anticipate an improved outlook for mainbusiness lines
TOTAL
14%
8%
22%
6%
5%
43%
40%
34%
22%
61%
65%
15%
60%
50%
44%
33%
30%
14%
8%
12%
14%Securities services (e.g., custody, fund administration, collateralmanagement etc.)
Debt and equity issuance (for the clients), if applicable
Private banking si wealth management
Asset management
Retail banking
Corporate banking
Very good Fairly good Neither good, nor poor Fairly poor Very poor
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8. How do you rate the outlook for your bank over the next 6 months in each of the following businesslines?
Banks anticipate an improved outlook for mainbusiness lines
Banks >5%
25%
16%
17%
50%
50%
17%
33%
57%
57%
25%
50%
67%
50%
43%
43%
Securities services (e.g., custody, fund administration, collateralmanagement etc.)
Debt and equity issuance (for the clients), if applicable
Private banking si wealth management
Asset management
Retail banking
Corporate banking
Very good Fairly good Neither good, nor poor Fairly poor Very poor
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8. How do you rate the outlook for your bank over the next 6 months in each of the following businesslines?
Banks anticipate an improved outlook for mainbusiness lines
Banks 1%-5%
71%
78%
29%
22%
Retail banking
Corporate banking
25%
25%
50%
50%
25%
25%
Retail banking
Corporate banking
Very good Fairly good Neither good, nor poor Fairly poor Very poor
Banks <1%
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9. How do you expect customer demand for the following retail products at your bank to change over thenext 6 months?
Banks predict an increase in demand for credit cards andconsumer loans
TOTAL
16%
16%
11%
5%
41%
38%
50%
61%
71%
47%
46%
28%
22%
24%
12%
6%
6%
Personal real-estate loans
Personal investment products
Personal loans
Personal savings and deposit products
Credit cards
Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly
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9. How do you expect customer demand for the following retail products at your bank to change over thenext 6 months?
Banks predict an increase in demand for credit cardsand consumer loans
Banks >5%
14%
29%
67%
57%
71%
86%
57%
33%
29%
29%
14%
14%Personal real-estate loans
Personal investment products
Personal loans
Personal savings and deposit products
Credit cards
Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly
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9. How do you expect customer demand for the following retail products at your bank to change over thenext 6 months?
Banks predict an increase in demand for credit cardsand consumer loans
Banks 1%-5%
40%
15%
14%
57%
20%
57%
57%
57%
43%
40%
29%
14%
29%
14%
14%
Personal real-estate loans
Personal investment products
Personal loans
Personal savings and deposit products
Credit cards
Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly
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9. How do you expect customer demand for the following retail products at your bank to change over thenext 6 months?
A significant percentage of banks anticipate an increasein demand for both consumer and business lending
Banks <1%
50%
25%
34%
25%
50%
67%
33%
100%
25%
25%
33%
33%Personal real-estate loans
Personal investment products
Personal loans
Personal savings and deposit products
Credit cards
Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly
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10. How do you expect customer demand for the following corporate products at your bank to changeover the next 6 months?
The banks expect an increase in the demand for corporate/business loans and, to a certain extent, for hedging products
TOTAL
6%
12%
20%
44%
38%
50%
60%
56%
56%
38%
20%
M&A Advisory
Hedging products (e.g., FX rates (also known as Forex) or interest rates)
Debt issuance (for the clients)
Corporate loans
Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly
Page 24
10. How do you expect customer demand for the following corporate products at your bank to changeover the next 6 months?
The banks expect an increase in the demand for corporate/business loans and, to a certain extent, for hedging products
Banks >5%
14%
17%
57%
83%
29%
Hedging products (e.g., FX rates (also known as Forex) or interest rates)
Corporate loans
Increase significantly Increase slightly Stay the same Decrease slightly Decrease significantly
Banks 1%-5%
11%
57%
78%
43%
11%
Hedging products (e.g., FX rates (also known as Forex) or interest rates)
Corporate loans
34%
50%
33%
25%
33%
25%
Hedging products (e.g., FX rates (also known as Forex) or interest rates)
Corporate loans
Banks <1%
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Operational efficiency
Page 26
11. Over the next 6 months, do you expect the headcount of your bank to… :
5% 14% 52% 29%
Significant increase Slight increase Stay the sameSlight decrease Significant decrease Does not apply
Banks <1%
Banks 1%-5%
Banks >5%
The restructuring in the industry is close to an end:70% of Banks will not cut down the no. of employees
TOTAL
20%
22%
20%
71%
44%
40%
29%
33%
20%
The decrease could continue in the support functions but some expect an increase incommercial/ business lines.
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Business priorities
Page 28
Streamlining processes, risk management and preparingfor Basel III/CRD IV are at the top of banks’ agenda
12. Score the importance of some specific activities for you organization.
0%6%6%6%7%
18%21%
25%29%29%31%
38%38%
45%50%
53%59%61%
65%75%
80%80%
85%
0% 20% 40% 60% 80% 100%
Reducing the number of productsDisposing of assets or businesses
Off-shoringOutsourcing
New foreign markets/internationalizationAcquiring new assets or businesses
Restructuring the business operations or legal entities to comply with…New remuneration systems (including emerging legislation)
Developing partnerships with non-banksRestructuring the business operations or legal entities to cut costs
Establishing new business segmentsDeveloping Recovery and Resolution Plans
Compliance with capital markets regulations (i.e., MiFID II/EMIR)Cutting costs
Developing/introducing new productsCurrent changes in financial reporting/harmonization with IFRSsComplying with consumer regulation issues and/or dealing with…
Investing in new customer-facing technology e.g. mobile solutionsMinimizing all non-essential expenditure
Reputational risk (including tax transparency)Preparing for Basel III/CRD IV
Risk managementStreamlining processes / Further automation
Respondents were asked to rank the importance of the above points on a scale from 0-10, where 0 means “Not at all important" and10 “Very important". Percentages represent the number of respondents have been classified in points 8, 9 or 10.
TOTAL
Page 29
13. How do you expect your lending policies for corporates to change in each of the following sectorsover the next 6 months?
TOTAL
5%
5%
5%
5%
11%
13%
11%
11%
6%
17%
6%
5%
11%
16%
21%
53%
58%
47%
40%
53%
58%
69%
72%
89%
74%
73%
79%
74%
37%
37%
31%
47%
31%
26%
25%
5%
5%
16%
11%
10%
5%
11%
5%
5%
6%
Information technology
Manufacturing & industrials (including chemicals, engineering,…
SMEs (small-medium size enterprises)
Agriculture
Media and telecommunications
Health care (including pharmaceuticals, biotechnology and life sciences)
Professionl services
Retail & consumer products
Energy, mining & minerals
Financial services
Transport
Commercial real estate
Construction
Significant more restrictive More restrictive Stay the same Less restrictive Significant less restrictive
Lending policies are expected to loosen in Manufacturing,Information Technology, Agriculture, Telecom, Healthcareand the SME segment
Page 30
13. How do you expect your lending policies for corporates to change in each of the following sectorsover the next 6 months?
Banks >5%
14%
15%
15%
14%
14%
71%
71%
43%
67%
71%
71%
86%
86%
100%
100%
100%
86%
100%
29%
29%
29%
33%
14%
14%
14%
14%
Information technology
Manufacturing & industrials (including chemicals, engineering,…
SMEs (small-medium size enterprises)
Agriculture
Media and telecommunications
Health care (including pharmaceuticals, biotechnology and life sciences)
Professionl services
Retail & consumer products
Energy, mining & minerals
Financial services
Transport
Commercial real estate
Construction
Significant more restrictive More restrictive Stay the same Less restrictive Significant less restrictive
Lending policies are expected to loosen in Manufacturing,Information Technology, Agriculture, Telecom, Healthcareand the SME segment
Page 31
13. How do you expect your lending policies for corporates to change in each of the following sectorsover the next 6 months
Banks 1%-5%
12%
12%
12%
12%
12%
33%
12%
12%
17%
15%
14%
13%
25%
25%
50%
50%
37%
37%
38%
50%
71%
86%
50%
50%
63%
38%
50%
50%
38%
67%
50%
38%
33%
14%
25%
13%
13%
13%
Information technology
Manufacturing & industrials (including chemicals, engineering,…
SMEs (small-medium size enterprises)
Agriculture
Media and telecommunications
Health care (including pharmaceuticals, biotechnology and life sciences)
Professionl services
Retail & consumer products
Energy, mining & minerals
Financial services
Transport
Commercial real estate
Construction
Significant more restrictive More restrictive Stay the same Less restrictive Significant less restrictive
Lending policies are expected to loosen in Manufacturing,Information Technology, Agriculture, Telecom, Healthcareand the SME segment
Page 32
13. How do you expect your lending policies for corporates to change in each of the following sectorsover the next 6 months?
Banks <1%
25%
25%
75%
75%
67%
50%
50%
67%
50%
75%
75%
67%
100%
100%
25%
25%
25%
33%
25%
50%
33%
25%
25%
33%
50%
25%
25%
Information technology
Manufacturing & industrials (including chemicals, engineering,…
SMEs (small-medium size enterprises)
Agriculture
Media and telecommunications
Health care (including pharmaceuticals, biotechnology and life sciences)
Professionl services
Retail & consumer products
Energy, mining & minerals
Financial services
Transport
Commercial real estate
Construction
Significant more restrictive More restrictive Stay the same Less restrictive Significant less restrictive
Lending policies are expected to loosen in Manufacturing,Information Technology, Agriculture, Telecom, Healthcareand the SME segment
Page 33
14. Over the next 6 months, do you expect your bank’s total provisions against loan losses to…?
15% 50% 30% 5%
Increase significantly Increase slightly Remain at current levelsDecrease slightly Decrease significantly
Banks <1%
Banks 1%-5%
Banks >5% 17%
11%
20%
50%
56%
40%
33%
22%
40%
11%
TOTAL
Over 80% of banks expect the expenses with credit riskprovisions not to increase or even decrease (35%)
Page 34
15. How do you expect your bank’s overall performance to change over the next 6 months?
25% 55% 20%
Strengthen significantly Strengthen slightly Stay the sameWeaken slightly Weaken significantly
Banks <1%
Banks 1%-5%
Banks >5%
The improvement of financial results will not come strictly from the decrease inexpenses with provisions
TOTAL
17%
22%
40%
50%
56%
60%
33%
22%
About 75% of banks expect financial results to improve.Significantly more than the banks expecting the expenseswith risk provisions to decline.
Page 35
Local aspects
Page 36
16. What are the main issues specific to the local market (to Romania) that negatively affect the lendingappetite, cost or your capacity / ability of lendingTOTAL
15%
11%
21%
28%
33%
48%
21%
42%
37%
44%
38%
38%
53%
42%
37%
28%
29%
14%
11%
5%
5%
The administrative restrictions on lending
The state’s payment behavior
The way European consumer related regulations have been transposed inthe Romanian legislation
The local legislative initiatives referring to consumers
The economic prospects over the next 12 months
The current legislative framework on insolvency
Very great extent Great extent Small extent Not at all
The legislative framework on insolvency (and the way itis enforced) deters lending, as per 85% of banks
The confidence in the economic prospects and the legislative initiatives on consumertopics are the next two issues deterring lending.
Page 37
16. What are the main issues specific to the local market (to Romania) that negatively affect the lendingappetite, cost or your capacity / ability of lending
Banks >5%
17%
17%
33%
33%
29%
29%
17%
17%
33%
33%
29%
57%
66%
66%
34%
34%
42%
14%
The administrative restrictions on lending
The state’s payment behavior
The way European consumer related regulations have been transposed inthe Romanian legislation
The local legislative initiatives referring to consumers
The economic prospects over the next 12 months
The current legislative framework on insolvency
Very great extent Great extent Small extent Not at all
The legislative framework on insolvency (and the wayit is enforced) deters lending, as per 85% of banks
Page 38
16. What are the main issues specific to the local market (to Romania) that negatively affect the lendingappetite, cost or your capacity / ability of lending
Banks 1%-5%
12%
12%
12%
25%
23%
34%
33%
44%
33%
50%
44%
44%
33%
33%
44%
25%
33%
22%
22%
11%
11%
The administrative restrictions on lending
The state’s payment behavior
The way European consumer related regulations have been transposed inthe Romanian legislation
The local legislative initiatives referring to consumers
The economic prospects over the next 12 months
The current legislative framework on insolvency
Very great extent Great extent Small extent Not at all
The legislative framework on insolvency (and the way itis enforced) deters lending, as per 85% of banks
Page 39
16. What are the main issues specific to the local market (to Romania) that negatively affect the lendingappetite, cost or your capacity / ability of lending
Banks <1%
25%
25%
25%
60%
100%
75%
50%
50%
40%
75%
25%
25%
25%
The administrative restrictions on lending
The state’s payment behavior
The way European consumer related regulations have been transposed inthe Romanian legislation
The local legislative initiatives referring to consumers
The economic prospects over the next 12 months
The current legislative framework on insolvency
Very great extent Great extent Small extent Not at all
The legislative framework on insolvency (and the way itis enforced) deters lending, as per 85% of banks
The Banks < 1% seems to be affected to a greater extent, than first two segments, by the insolvencylegislation.
Page 40
17. What do you consider to be the main implications of local initiatives on the consumer topic?
TOTAL
53%
61%
15%
23%
24%
8%
8%
8%
It affects the trust in/image of the banking system
Induce moral hazard/ affets negatively the paymentbehavior
Very great extent Great extent Small extent Not at all
Certain legislative initiatives on consumer topics and theway are advertised can induce moral hazard and sendmisleading messages regarding banks’ practices
About ARB
Romanian Association of Banks concentrates entirebanking industry in Romania, being the voice of thebanking sector in relation with the Romanianauthorities, the International Monetary Fund,European Commission, World Bank and othernational and international bodies.Its main objective is to represent and protect therights and interests of the members, especially nowwhen the well-normed European regulation system,may exert additional pressure on banks' role asfinancer of the economy.The Romanian banking sector largely finances theRomanian economy, providing about 92% of totalfunding on the Romanian financial system.The Romanian Banking System, serving millions ofcustomers proved to be resilient during the crisis, noneed of support from public funds.
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