Despite the challenging global landscape, Romania’s banking sector continues to show resilience – with M&A activity in line with the second half of 2022 – according to Filip & Company Partner Alexandra Manciulea.
"In the banking and finance sector, the major talking points are the fall of Silicon Valley Bank and the takeover of Credit Suisse," Manciulea begins. "These developments raised questions on their further impact on the European and the Romanian banking market. In addition to these global events, the Romanian market is also grappling with its own issues, such as the withdrawal – by the Romanian Financial Supervisory Authority – of the functioning license and the envisaged bankruptcy of Romania’s market leader in third-party liability car insurance – Euroins."
Despite these challenges, Manciulea says the banking sector in Romania remains resilient. "In March, Romania experienced a 14.53% inflation rate, which is comparable to other CEE countries, and there are hopes for stabilization in the second half of the year, which, however, depend to a great extent on the evolution of the global economic context," she notes. "Additionally, non-performing loans in the Romanian banking market are currently manageable, with a low rate of 2.65% recorded at the end of last year. This represents a 0.7% decrease compared to the end of the previous year," she says.
"The era of cheap money has come to an end, as financing conditions have tightened and the banking sector is adopting a more prudent and risk-averse approach," Manciulea continues. "However, there is a growing interest in green financing, with banks keen to finance environmentally sustainable projects. Some banks have recently also issued their own sustainable bonds in the market." And, according to her, "in the realm of project finance, there is a notable interest in energy projects, particularly those involving solar and wind energy, indicating a positive outlook for renewable energy projects."
As for M&A in the first quarter of 2023, Manciulea points to "the takeover of ENEL group operations in Romania by the Public Power Corporation – the main electric power company from Greece – announced in March and amounting to over EUR 1 billion." She says the first quarter of 2023 is comparable to the third and fourth quarters of the previous year: "Romania’s market has been busy with interesting deals, including overseas investments on which our team has advised, such as the acquisition by Banca Comerciala VictoriaBank in Moldova of BCR Chisinau and an investment agreement between DIGI Spain and a fund managed by Abrdn for the development of a fiber optic communications network in Southern Spain."
"Deals of such magnitude contribute to a solid year in terms of market activity," Manciulea says. "Despite concerns about market conditions, there is still liquidity in the market and an intention to continue with transactions. However, since money is more expensive, it is important to note that transaction values may be under pressure, particularly for those with a leverage component."
In terms of general trends in banking, Manciulea says that fintech and digital finance have become a significant focus for law firms: "there has been a lot of regulatory activity in this space, with both fintech and banks developing digital solutions," she notes. "Moreover, consumers are increasingly seeking easy one-click access to financial services, solutions, and products. To that end, we expect the collaboration between banks and fintech players will continue."