"Banks - much better prepared for the crisis than 13 years ago"

The Romanian banking sector is among the best capitalized banking systems in Europe, Bogdan Neacşu, General Manager, and President of the CEC Bank's steering committee, told us in an interview. According to him, there is liquidity on the market, and the evolution of non-performing loans was not concerning, as the banks were certainly better prepared for a crisis than they were 13 years ago.

Reporter: What is the feeling of the banking system as it faces the Covid-19 pandemic?

Bogdan Neacşu: Most certainly, 2020 will remain in history as the year of the pandemic, a year in which, at a global level, unprecedented measures have been enacted to limit the spread of the new coronavirus, including restrictions that have affected entire economic sectors. For the banking system, 2020 was a year when we passed through every state: from slowdown and stagnation - especially in the first months of the pandemic, to times of adaptation and resumption of growth. In the beginning of the pandemic, we witnessed a contraction of the demand for loans, which also correlated with the way the GDP evolved, but later things began to recover, so at the end of 2020, the banking system ended the year with an increase in the loan portfolio of nearly 7% - a good level, given the circumstances. It is important to emphasize that the banking system has remained profitable, although additional provisions have been set up, to the tune of hundreds of millions of euros, that the non-performing loans ratio remains good and we are very far from the levels of the previous financial crisis of 2008-2010 and, most importantly - that there is liquidity and that banks are continuing to finance the economy. At CEC Bank, we managed to mobilize very quickly and did not stop lending for a second. We finished 2020 with a record increase in assets - over 25% - up to 41.2 billion lei, and we managed to increase our market share with over one percentage point. I think the most important pandemic lesson is that we have learned to avoid falling into a pattern and to adapt much faster.

Reporter: What are the prospects for 2021?

Bogdan Neacşu: We continue to operate in a volatile and unpredictable environment, but with more confidence, because we have learned from the difficult moments we have gone through so far that we can adapt. The economy has begun to come back since the second half of last year. In the first few months of 2021, we witnessed a robust increase in demand for loans and that somewhat gives us reasons for optimism. Last year we saw an unprecedented increase in savings and deposits, which shows us there are reserves in the economy and that people continue to trust the banking system. We are now seeing some of that money returning to the economy - as investments, as asset purchases, and we are also seeing that appetite in the number of loan applications. Access to lending is also encouraged by the low interest rate policy. To conclude, in 2021 we expect a robust and healthy growth of the banking system at an annual rate of around 10%.

Reporter: How have the interest rates at CEC Bank evolved?

Bogdan Neacşu: Last year, we witnessed a downward trend for the interest rates, after the central bank gave the signal by cutting the policy rates, so that the interbank interest rates - I am speaking about 3-month Robor - decreased by about 25% in 2020 compared to 2019, from a median of 3.13% in 2019, to a median of 2.38% in 2020. That decrease was also reflected in the financing costs - given that at least on the corporate segment companies are tied to the interbank indices. In terms of the interest on deposits, I can speak on behalf of CEC Bank. We rely exclusively on the resources raised from the market, from customers, we do not have access to foreign funding lines from parent banks. And that is why we have maintained interest rates on deposits at a level that further stimulates customers to deposit their money with us. On 12-month deposits, we currently pay over 3% a year.

Reporter: How has the pandemic influenced the activity of CEC Bank?

Bogdan Neacşu: Analyzing last year's developments, I would say that we went through four phases: the first phase was prevention and protection, the second - adaptation, third - training, and the fourth - relaunch.

It was not an easy year, but despite this context we managed not only to quickly adapt to the new business operating conditions, but we launched new services, including products that can be accessed 100% online, and we have continued to support the Romanian economy. More than 8,000 companies have been supported in the first 11 months through new loans, loans granted under the SME Invest program or through extensions of CEC Bank credit lines. We have also intensified activity on the government securities market, where we reached 12 billion lei in financing.

Reporter: How fast did you adapt to the forced computerization process?

Bogdan Neacşu: Aside from the medical problems, the pandemic has had a positive impact on the local market, from the point of view of computerization, which has picked up speed. I would have liked to be talking about the computerization of the Romanian business sector as well as of the public administration under different circumstances than the current ones. However, we can not ignore the fact that important steps have been taken in this direction in a very short time.

For us, investments in modernization, in IT and computerization were part of the CEC Bank strategy approved since back in 2019. However, the pandemic accelerated the process. Over the past year, we have launched the opening of online accounts, online loans for individuals and we are currently working to bring in the e-commerce and SME products.

Reporter: How many requests for the postponement of loan repayments have you received so far?

Bogdan Neacşu: Most of the funding for which repayment postponements have been granted came from companies (about 90%), while on the individual borrower segment we are seeing a much lower volume. That moratorium was extended in the beginning of 2020, but the volume of requests was low - about a tenth compared to last year's moratorium. And the vast majority of customers who have benefited from that deferral have resumed their payments, and exceptions come mainly from the HORECA sector, where there are still restriction measures that affect businesses.

Last year, about 10% of the loans in the portfolio of CEC Bank were granted repayment deferrals, both on the basis of the public moratorium, passed via an emergency ordinance and on the basis of the bank's own solutions. CEC Bank tried to come up with proactive, flexible solutions, so that about one third of the payment facilities were based on the bank's own solutions. Most of the loans that were granted postponements had been granted to companies' requests (about 90%), while on the segment of individuals we are talking about a much lower volume. This moratorium was prolonged at the beginning of 2020, but the volume of requests was marginal - about a tenth compared to last year's moratorium. And the vast majority of customers who have benefited from the postponement of rates have resumed their payments, and exceptions come mainly from the Horeca sector, where there are still restriction measures that affect businesses.

Reporter: What was the evolution of the lending segment, and the evolution of deposits in the last year, respectively and what is your take on how this segment will evolve in 2021?

Bogdan Neacşu: We did not stop lending at all. And we have made efforts to be there for our customers, as well as the Romanian companies affected by the pandemic. And so, we have succeeded in closing the year with a very good growth of the loan portfolio, - over 10%, while the median growth rate at the market level was 6.67%. Loans granted to companies represent over two thirds of the total of the new loans granted by CEC Bank to the real economy. The areas with the highest increases have been agriculture, industry and construction. As for deposits, CEC Bank has the advantage of being a Romanian bank with a long history that enjoys Romanians' trust. In 2020, the savings we managed to attract from customers increased by more than 24% - a growth rate almost double the average of the banking system.

Reporter: What is your take on the IMM Invest as a measure to support the economy?

Bogdan Neacşu: IMM Invest was a very good initiative for the economy. Aside from the context of the pandemic, in Romania, we have a structural characteristic: a young SME sector, which did not have enough time to capitalize, and many companies are experiencing difficulties in accessing the funding because they have difficulties in coming up with sufficient collateral. That is why guarantee programs such as IMM Invest, as well as initiatives that exist at the European level such as the SMEI, COSME programs which are also available in Romania, including through CEC Bank, can be a solution to this problem - combining a state aid measure with an assessment under market conditions by the bank. Last year, loans granted through IMM nvest accounted for about 25% of the total volume of new CEC Bank loans, and over 80% of IMM Invest volumes were loans for investments.

Reporter: How much has the "Noua Casă" program contributed to the growth of the lending segment?

Bogdan Neacşu: The mortgage market for has also worked well this year, despite the pandemic. We have had an increase of over 30%, above the market's median growth rate, which was about 10%. I think that the fact that at CEC Bank interest rates on mortgage loans are among the lowest on the market, as well as the fact that we cover all of Romania explains why we have been able to perform better on this segment. In addition, at the market level we are talking about a low interest rate context, which increases the attractiveness and accessibility of mortgage loans. Regarding the " Noua Casă" program, it supports the mortgage segment, but I do not think it plays an essential role in the market anymore.

Last year, for example, the program began operating in September and had a share of less than one third of the total loans. And it is not an isolated situation: in 2019, for example, we have granted more loans for homes through CEC Bank's own products than as part of the Prima Casă program. So the market has potential and banks can come up with competitive offers, that provide terms that are similar to those that enjoy government support.

Reporter: How prepared is the banking sector for a new economic crisis?

Bogdan Neacşu: The banking system is well capitalized, among the best capitalized banking systems in Europe, there is liquidity in the market, the evolution of non-performing loans was not concerning (we are at about 5%, relatively stable compared to 2019, when remembering ratios of over 20% during the economic crisis of 2008-2010). We certainly are better prepared and prudent than we were 13 years ago.

Reporter: Thank you!

Recorded by Emilia Olescu