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ING head doubts speedy economic recovery

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Victoria Donos
Romanias much-heralded economic recovery in the fourth quarter of 2009 will only be relevant for the statistics, Misu Negritoiu, general manager of ING Bank Romania, told Business Arena Magazine. As the economic decline became apparent in the fourth quarter of last year, the general hope is that the economy will slow down its decline in the last three months of the year, he said.
 “The fourth quarter of 2009 may signal a return to economic growth, a stop to the decline, and from that perspective it seems brighter. However, nothing is changing. Companies will continue to be extremely cautious about costs and are unlikely to launch new projects in the fourth quarter.” The ING Bank official estimated that a true recovery cannot be expected before 2010. “We will only be able to talk about economic recovery next year, most likely in the fourth quarter.”
Meanwhile, the economy will come out of recession on its own, possibly helped by the same macroeconomic conditions that actually pushed it into recession, namely the excessive budget spending and budget deficit, he said. Other than that, Negritoiu expects the economy to emerge stronger and healthier, even though it remains fragile at its core.
Inadequate anti-crisis measures
Referring to the official anti-crisis measures, Negritoiu said the authorities had had a poor start, acknowledging the onset of the crisis with a six-month delay. “Those six months of inaction actually made things even more difficult. Timely measures should have addressed aspects such as the monetary policy, liquidity and the key interest-rate level, which should have been relaxed a year ago. Now it is too late and the patient is almost dead,” said Negritoiu. He also specified that the government’s measures were largely inefficient. “The authorities kept a high key interest rate as they aimed to rein in inflation and reduce liquidity to protect the exchange rate. In the end, the pressure of the economic crisis made the authorities relax their orthodox measures, but in effect the relaxation only came in the third quarter, posting a six- to nine-month delay.” The ING Bank Romania general manager also said that the anti-crisis measures in the real economy were little more than statements, expressing doubt that anyone had actually seen any effects. “In my view, the economy has not seen anti-crisis measures,” he said.             
Speaking about the effects that the current political crisis could induce in the business environment, Negritoiu was not worried. He said that while there might be some effects in certain business areas, generally the business community treated such events with a lot of tolerance and with a certain lack of interest. “I think many companies, domestic and foreign, have become used to factoring in the political risk in their operations, so the current political crisis will have a more visible impact on those companies doing business with the state. Even so, he expects the upcoming presidential elections to bring some stability. “We should be happy that there are no other elections scheduled in the next three years, which should allow us to have some stability and coherence.”

ING focuses on organic growth
After 15 years of operations in Romania, ING will continue its organic growth strategy. “ING now has a market penetration of ten per cent, with a 40 to 50 per cent market penetration in the corporate segment. It also takes a ten per cent slice of the volume of payments and a similar percentage of the capital market operations,” said Negritoiu.
With a network of 220 branches, ING Bank Romania will neither lay off staff nor close down branches this year, as the costs related to operating the network are low. “We will also continue developing a different distribution channel, which will be launched next year,” he added.
In spite of the difficult economic conditions, ING Bank Romania reported a gross profit of 114 million lei in the first half of the year, posting a 101 per cent increase from the same period of last year. “In the last three years we have focused on developing our retail segment and distribution, which involved relatively large expenses. This year, our entire network has become operational and is generating revenues, so revenues will continue to grow,” the banker said. He also estimates a ten to 15 per cent increase in the bank’s assets by the end of the year.
The economic downturn has brought about a decline in the volume of loans granted by banks. At the same time it has triggered a hike in non-performing loans. Even though the number of non-performing loans has increased at ING Bank, Misu Negritoiu is not worried. “Until recently, we have had no non-performing loans. Now if we have a few, one can say there has been a one hundred per cent increase.”   
Overall, the head of ING Bank Romania does not expect major new developments in the domestic banking segment. Seen as a good time for consolidation, the upcoming period does not expect to see any transactions that could have a dramatic impact on the market. “Most likely banks will focus on cleaning up their own doorstep, putting order in their distribution, costs, products and loan portfolios. On the other hand, I do not expect major regional moves,” he added.
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