Greek banks could see “significant” withdrawals and an increase in non-performing loans because of a prolonged, strong depreciation of the Romanian currency, if Greece pulls out of the eurozone, according to a Fitch analyst quoted by Mediafax.

While declining market share of Greek banks in Romania is still substantial, the National Bank of Romania (BNR) will probably support credit institutions if there are liquidity difficulties, while a direct injection of capital from the state is uncertain, said Fitch analyst Keranka Dimitrova. So far, deposit withdrawal from Greek banks in Romania has been moderate and Romania has a system in place to ensure deposits.

“Fitch believes that there are many uncertainties regarding a direct capital injection from the state to Greek subsidiaries, given the political difficulties and commitment to fiscal consolidation. Even if the banks get capital, it should be considered only a temporary solution,” said Keranka Dimitrova.

The Romanian banking system has a large capacity to ensure liquidity in RON and also considerable foreign reserves; it does not seem to be exposed to direct public Greek debt and the banks are well capitalized. However, the bad loans are running at a high level (about 16 percent at the end of the first quarter) and haven't yet reached their peak. Reserves for bad loans are at a reasonable level, while most foreign banking groups are maintaining their commitments on the market in the region, according to the ratings agency.

“However, increasing reluctance of investors could put pressure on the RON, which has been depreciating since December. A strong and extended further depreciation of the RON against the EUR could have an impact on asset quality, as the weight of foreign currency loans is high,” said the analyst.

The banks from Russia and Turkey would be the most likely candidates for acquisition if Greece pulls out of the eurozone and this would lead to cheap banking assets in the region.

Romania could be strongly affected by a worsening crisis in declining Greek exports to the eurozone, a consequence of deepening debt crisis in the monetary union, said the analyst. This year, Fitch expects a slowdown in exports compared with the previous year. Meanwhile, the foreign direct investment links are weaker than in other countries such as Bulgaria, Serbia and Macedonia.

Ioana Toader, ioana.toader@romania-insider.com

(photo source: Sxc.hu)