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���������ֳ�-Warsaw/Stockholm-21 November 2024: Romania’s major banks should sustain healthy asset quality and solid profitability as the improved operating environment remains favourable for business generation, ���������ֳ� says. Strong GDP growth, supporting Romania’s income fast-approaching EU averages, labour market resilience, and improved banking sector fundamentals have led ���������ֳ� to revise its assessment of Romania’s operating environment for banks to ‘bbb-‘ from ‘bb+’.

This revision, combined with the extended record of solid financial metrics, has resulted in the upgrade of three major banks’ Viability Ratings (VRs): Banca Transilvania S.A. (BT) and Banca Comerciala Romana S.A. (BCR) to ‘bbb-‘ from ‘bb+’, and UniCredit Bank S.A. (UCBRO) to ‘bb+’ from ‘bb’. UCBRO's VR upgrade also reflected its organically strengthened credit profile, driven by balance-sheet de-risking and improved profitability.

The VR upgrade for BT has translated into the upgrade of its Long-Term Issuer Default Rating (IDR) to ‘BBB-‘/Stable. The VR upgrades did not affect the support-driven IDRs of BCR and UCBRO (both: BBB+/Stable).

Romania’s operating environment improvement is underpinned by its solid economic growth, which ���������ֳ� expects will continue to outpace the eurozone average. Romania’s income has advanced towards EU averages quickest out of the CEE countries in recent years, with GDP per capita (expressed in purchasing power parity) reaching nearly 80% of the EU average, a level comparable to Poland (operating environment: bbb), Croatia (bbb), and Hungary (bbb-). Solid economic growth has allowed the country to become the second-largest CEE economy in nominal terms, surpassing the Czech Republic in 2023. ���������ֳ� projects Romania's economy to grow by about 2% in both 2025 and 2026, compared to eurozone growth forecasts of 1.5% in 2025 and 1.4% in 2026.

The Romanian banking sector’s credit profile is closely linked to the Romanian sovereign (BBB-/Stable) due to its high direct exposure to the government and government-related entities (estimated at about 24% of assets at end-2023), extensive use of state-guarantee schemes in SME lending, and the banks’ predominantly domestic focus. This strong interlinkage means that the equally-scored operating environment, and consequently the banks’ VRs, are capped by Romania’s sovereign rating, reflecting ���������ֳ�'s view that the banks would be highly sensitive to the adverse effects of a potential sovereign downgrade.

The Romanian banking sector has evolved significantly over the past decade. Asset quality has greatly improved, with the European Banking Authority (EBA) non-performing loan ratio dropping to 2.5% at end-1H24 from its peak of 21% in 2013 and 2014. The ongoing consolidation process has also strengthened the sector, with larger entities acquiring smaller, less profitable banks with weaker capital positions. High capital requirements in the CEE and a prudent regulatory stance translate into sound capital and MREL (minimum requirements for own funds and eligible liabilities) buffers. Wholesale funding needs for MREL purposes have therefore been substantial; however, the banks have proved their access to both the domestic and international markets. Despite the need to tap the wholesale funding market for regulatory purposes, the share of customer deposits in total funding is higher than a decade ago, underpinning the stability of the banks’ funding profiles.

We expect business prospects for banks to remain positive, supported by a likely higher-for-longer policy rate, gradually moderating inflation, and contained loan impairment charges given the already-high coverage of impaired loans by loan loss allowances. We also expect the firm labour market and tight underwriting standards to support asset quality in retail lending. The medium-term prospects for banks' lending and deposit growth also appear solid, supported by the low saturation of the economy with banking services in Romania and the private sector's low debt (28% of GDP at end-2023).

For more on Romanian banks, please see ���������ֳ�’s below rating action commentaries, all published on 19 November 2024:

���������ֳ� Upgrades Banca Transilvania to 'BBB-'; Outlook Stable
���������ֳ� Affirms BCR's IDR at 'BBB+'/Stable; Upgrades VR to 'bbb-'
���������ֳ� Affirms Romanian UniCredit's IDR at 'BBB+'; Upgrades VR to 'bb+'





Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@thefitchgroup.com

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