Banking 2020 - pandemic, profitable 26.01.2021

InfoMarket Agency’s comment

On a monthly basis, InfoMarket collects activity data from all commercial banks, organizing this information into a single table. Our subscribers are the first to receive this data. This week, it was released the data as of December 31, 2020 compared to data as of November 30, 2020 and, most interestingly is that this information was compared to data as of December 31, 2019.

In order to understand a little better a year’s results achieved by the banking system in general and by the commercial banks in particular, we draw up two derivative tables: 2020 vs 2019 in thousand lei, and in percentage points. The results are interesting.

Let's start with the profit. In the pandemic 2020, almost all commercial banks of Moldova recorded profits. The only exception was Eximbank; however, it suffered losses only in November and December (it had fixed profits up to these months). As of the end of October, Eximbank had a profit of 11 million lei. As of the end of November the profit decreased already by 7.8 million lei, as of the end of the year - by 26.3 million lei. Apparently, in November the bank underwent a revaluation and the profit flowed into the Risk Fund. By the way, Eximbank is the leader in loan portfolio growth - over the year it grew by 38.5%; the “credit impairment” rate also increased by 32%.

Returning to profit - it decreased in respect of every bank except Eurocreditbank. Profit growth of Eurocreditbank in 2020 was 5.2% versus 2019. And this was despite the fact that the bank increased by 59.5% the “credit impairment” indicator, which primarily consists of the Risk Fund. Only Fincombank had a higher “credit impairment” indicator - 63%. At the same time, Eurocreditbank is the only bank on the list that has decreased its own funds - only by 0.1%, but with a minus. 

In terms of assets, our banks can be conditionally divided into three groups: Large (backbone), medium and others. Four backbones account for about 80% of the share in all indicators. Therefore, comparisons across the entire system may not always be correct, nevertheless, an overall picture can be drawn up. 

What attracts attention: against the background of the pandemic, almost all banks had almost all indicators growing. Assets and own funds increased, and the liquidity of assets also increased. And this is against the background of growth in deposits and loans (in the vast majority of banks).

Albeit, the logic of the pandemic crisis does not at all imply an increase in loans since the banks are reluctant to issue them, and customers are reluctant to take them. We did the opposite. Apparently, many have managed to get a refinancing - the interest rates in 2020 were very favorable.

Banks overdid it in strengthening financial stability. The system's assets grew by almost 15%. And while the loan portfolios grew by an average of 10%, the “loan impairment” rate increased by 15%. This suggests that in their financial calculations, banks are over-insuring themselves by filling the Risk Fund at the expense of profits. This means that when the crisis is over, these funds will return to profit, thereby compensating for shareholders’ losses in 2020.

And briefly about the three "leaders" in terms of 2020 to 2019 indicators in percentage points.

Total Assets: BCR Chisinau - 27.7%; Procredit Bank - 24.6%; Mobiasbanca - 17.5%.

Own Funds: Moldindconbank - 39.1%; Procredit Bank - 21.0%; Fincombank - 20.7%.

After-Tax Profit: Eurocreditbank - plus 5.2%; BCR Chisinau - minus 3.9%; Enegrbank - minus 8.0%.

Liquid Assets: Fincombank - 41.9%; Enegrbank - 37.0%; Eurocreditbank - 31.5%.

Total Deposits: BCR Chisinau -35.5%; Procredit Bank - 27.9%; Mobiasbanca - 25.1%.

Deposits of Individuals: BCR Chisinau - 22.9%; Mobiasbanca - 18.8%; Moldindconbank - 14.6%.

Total Credits: Eximbank - 38.5%; BCR Chisinau - 30.3%; Procredit Bank - 29.3%.

Impairment of Credits: Fincombank - 63.0%; Eurocreditbank - 59.5%; Procredit Bank -40.0%.

It is curious that in terms of these 8 indicators, BCR Chisinau and Procredit Bank entered the top-three five times.

Against the backdrop of a decline in profits in 2020, all banks registered decline in return on assets (ROA) and equity (ROE) - the table is presented below.

Concluding the blitz review of the data, let's summarize the results of 2020.

On the whole, the Moldovan banks went well through the pandemic. Profits have declined on average by almost a third, but not even half, given what the year turned to be for everyone (some businesses have not yet opened at all). Against this background, many banks have increased their assets and increased liquidity. By the way, liquidity increased largely due to the fact that the Ministry of Finance placed government securities that added unprecedented 5.89 billion lei into the budget (this amount was used to finance the state budget deficit through the primary placement of government securities). And government securities, as you know, are considered a highly liquid asset. 

It is also interesting that all banks, without exception, registered increasing deposits, while deposits of individuals decreased only slightly at Victoriabank (by 0.7%) and Eximbank (by 0.5%). Only three banks out of 11 registered a decrease in credits. And, finally, the favorite "loan impairment" indicator - where banks have hidden additional liquidity and profits: the crisis is not over yet, clients will still go bankrupt, so it is better to be over-insured in order to ensure financial stability in the future.

Running a little ahead, it seems that banks are unlikely to pay dividends for 2020. Let us recall that last year, the National Bank of Moldova (NBM) recommended the shareholders to refrain from distributing dividends for 2019, the majority obeyed. It is likely that this year even the NBM's recommendations will not be needed. // 22.01.2020 - InfoMarket.

The Calculation Tables are featured below.