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CEC makes headway through tough times

4234 afisari
Victoria Donos
With a total loan volume that exceeds three times the average in the domestic banking market, CEC Bank defies the economic recession. The bank presses ahead, with its growth and progress among the top banks in Romania, according to its President, Radu Gratian Ghetea.
The bank’s last three quarters showed an 11.2 per cent increase in its volume of loans, totaling 9.1 billion lei, and a 16 per cent rise in deposits, amounting to 13.1 billion lei. As well, CEC Bank saw a 73.4 per cent boost in loan volumes month-on-month in August, beating the market average of 39.5 per cent. “When I took over this job in 2007, one of my main objectives was to achieve a faster growth rate than the market,” Ghetea told Business Arena. “Coming from behind, we reached that target for the first time in March 2008.”
With 15.9 billion lei in assets and a market share of 5.51 per cent at the end of July, CEC Bank climbed from ninth to seventh in the bank rankings of the Romanian Central Bank. “That leap allowed us to enter the elite group, the so-called tier one,” said Ghetea. “We now measure ourselves against the large banks in the system, which is an honor for us, but at the same time it is also a great responsibility.”   
With 15.9 billion lei in assets and a market share of 5.51 per cent at the end of July, CEC Bank climbed from ninth to seventh in the bank rankings of the Romanian Central Bank. “That leap allowed us to enter the elite group, the so-called tier one,” said Ghetea. “We now measure ourselves against the large banks in the system, which is an honor for us, but at the same time it is also a great responsibility.”   
After its long decline in the years that followed the dramatic changes of 1989, CEC Bank began a process to reinvent itself in 2007, designing a new visual identity and a new policy allowing it to join the ranks of commercial banks. “The rebranding process not only involved a change of image, but it also involved an internal restructuring,” said Ghetea, who is also head of the Romanian Banking Association (ARB). “Among other things, the internal restructuring involved changing mentalities and boosting professional skills,” he added, specifying that there is still work to be done at all levels. 

Economic slowdown cuts costs 
The bank’s restructuring process was initially estimated at 135 million Euro, excluding advertising costs. However, that estimate now seems to have been somewhat exaggerated, according to Ghetea. As part of its renewal efforts, the bank has completed renovation works at 700 of its 1,380 branches, and is considering closing down the unprofitable ones. “Considering the new market conditions, we will have to decide whether we should invest more money or else just close down some of the branches. However, we do not want to do something that might create social problems. We can relocate our people, but at least we stop paying rent for those branches.”    

Capital dispute
Money inflows are a key element for surviving the crisis, and most banks operating in Romania have access to such funds from their parent banks. With CEC Bank, however, things are somewhat different, as it is a state-owned bank. Under the circumstances, financial contributions from its shareholder can be considered as state aid by the European Commission and the bank wants to avoid such labels. Ghetea explained that his initial plan was to boost the bank’s market share from four to six per cent, focusing on improving efficiency and turning CEC into a commercial bank. “To reach such goals we need the support of our shareholders. At the time, I said we needed the shareholders to contribute 2.4 billion lei to our share capital during 2007 – 2011. We need capital if we want to grow. We have asked for 2.4 billion lei, of which 900 million lei was scheduled to come in 2008 – 2009. The shareholders have been in contact with the Commission, trying to obtain its approval for a capital increase at CEC Bank. Unfortunately, there has been no positive answer yet.”

Need for new market niches
The Romanian Central Bank’s prudential policy has allowed banks in Romania to avoid major hurdles resulting from the financial crisis. However, Ghetea believes that all banks must identify new market niches if they are to survive in this market. “It is clear that banks’ appetite for risk is different from what it used to be two years ago. It will continue to decline. Naturally, we no longer have the same type of products and services that used to sell well two years ago, while growth will be much slimmer. My expectation is that when the market offers profitable businesses, the Romanian banking system will seize the opportunities right away,” he added.
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