It is difficult for the banking industry to understand why it is constantly circulating in the public domain as a “high-profit” sector when the profitability of the banking industry has remained below that of non-financial companies for the past decade.

The banking industry ranks 20th out of 24 in the best sectors of the economy in terms of return on capital. The return on capital of non-financial companies (average ROE of economic sectors) in 2022 was 24%, while the return on capital of banks was 16.4%. The return on assets (ROA) of the banking system was 1.5%, which is almost 5 times lower than the average indicator for sectors of the economy, which is 7.1%, in 2022. Regarding the positioning of sectors in the upper part of the economy in terms of return on assets, the banking sector ranks last, i.e. 24th out of 24 sectors of the economy.

Last year, the banking system achieved better results in terms of profitability, but this is due to increased lending volumes, improved efficiency, especially thanks to digitalization, the cancellation of some reserves established during the pandemic years, and lower interest rates. This cycle of high inflation, which has also led to higher interest rates, will soon end.

About 60% of the profits received by banks were capitalized. In recent years, I expect this percentage to have increased, which means that the banks’ profits, obviously after all taxes and fees, go mostly to additional capitalization and thus increase the banks’ ability to finance companies, the population and the Romanian state.

The introduction of a tax in the amount of 2% of the turnover will negatively affect the capital of banks and, of course, they will not be able to be as competitive in relation to other credit institutions of the European Union. This additional capitalization capacity will suffer with a direct impact on creditworthiness.

Banks contribute to economic development and increase economic well-being by financing billions of euros in infrastructure, education, health care and other projects that have a positive impact on society. Banks facilitate business financing, including through the government’s IMM Invest programs, investment projects and housing for 2.3 million borrower clients, contributing to the growth of Romania’s economy. We proposed a better implementation of the role of the banking system in PNRR. In addition, during the pandemic, the banking system supported almost a third of debtor clients. Credit institutions are investing billions of lei in technology and innovation, and the offer of online products and services has grown significantly since the beginning of the pandemic.

N. Ed: Florin Danescu is the executive president of the Association of Romanian Banks