The National Bank of Romania (NBR) released the aggregate data for the performance of the domestic banking sector in 2024. According to the statistics, the total assets of the Romanian banking sector continued to increase in Q4 2024, by 4.6% Q/Q and 9.8% Y/Y, to RON 881.7bn (EUR 177.3bn), a record high level. In terms of annual average, this indicator advanced for the fifth year in a row by a double-digit annual pace, accelerating to 12.3% in 2024, to RON 845.5bn (EUR 170bn). This evolution was mainly influenced by the strong increase of the holdings of debt issued by the General government (the holdings by financial institutions of the debt securities issued by the General government grew by 24% Y/Y on average, to EUR 65bn, according to NBR), given the high level of the financing needs of the Government, in the context of the widening budget deficit (to 8.65% of GDP). The net aggregate financial result of the Romanian banking sector increased for the fourth year in a row in 2024, but by a slowing down Y/Y pace to 2.4%, to RON 14.8bn (EUR 3.0bn), also a record high level, an evolution supported by the increase of the net interest margin on the RON component. ROA and ROE stood at 1.68% and 18.38% in 2024, the lowest levels since 2022, down from 1.80% and 20.13% in 2023. The strong stance of the domestic banking sector is also confirmed by the high level of the Capital Adequacy Ratio (23.66% at the end of 2024) and the low level of the NPL ratio (2.46% in Q4 2024, close to the historical minimum).
Our view: The strong financial performance of the domestic banking sector would continue in 2025, supported by the prospects for the acceleration of the growth pace of the real economy, the high level of the net interest margins and the expectations for the decline of the financing costs of the Government in the second half of the year (with positive impact for the value of the holdings of Treasury Bonds). The high level of liquidity, the focus on digitalisation and the readiness to grasp the opportunities across the economy in the convergence process towards the EU average are factors supporting the positive outlook for this cyclical sector of the economy | POSITIVE
