Romania Business News, 11.2009

Romania Business News, 11.2009 INFLATION RATE • • • •

Ţinta 2011: 3,0% Ţinta 2010: 3.5% Ţinta 2009: 3.5% (interval de variaţie: +/- 1pp) Valoarea actuală: 4,94% (sep.2009 / sep.2008)

NBR INTEREST RATES • • •

Rata dobânzii la facilitatea de depozit: 4% Rata dobânzii de politică monetară: 8% Rata dobânzii la facilitatea de creditare: 12%

Exchange Rates Leu (RON)

2 noi.2009 3 noi.2009 4 noi.2009 5 noi.2009 6 noi.2009 Dolarul australian Leva bulgărească Dolarul canadian Francul elveţian Coroana cehă Coroana daneză Lira egipteană Euro Lira sterlină 100 Forinţi maghiari 100 Yeni japonezi Leul moldovenesc Coroana norvegiană Zlotul polonez Rubla rusească Coroana suedeză Lira turcească

AUD

2,6370

2,6248

2,6433

2,6281

2,6440

BGN

2,2010

2,1995

2,1988

2,1984

2,1980

CAD

2,6968

2,7128

2,7467

2,7201

2,7147

CHF

2,8521

2,8449

2,8458

2,8457

2,8435

CZK

0,1627

0,1627

0,1650

0,1650

0,1672

DKK

0,5784

0,5780

0,5779

0,5778

0,5776

EGP

0,5323

0,5368

0,5326

0,5296

0,5278

EUR

4,3047

4,3017

4,3005

4,2995

4,2988

GBP

4,7756

4,7916

4,8163

4,7820

4,7919

HUF

1,5657

1,5403

1,5533

1,5523

1,5647

JPY

3,2341

3,2597

3,2051

3,2085

3,1865

MDL 0,2613

0,2631

0,2632

0,2632

0,2632

NOK

0,5111

0,5029

0,5095

0,5079

0,5104

PLN

1,0129

0,9980

1,0077

1,0061

1,0116

RUB

0,0999

0,1001

0,0995

0,0993

0,0997

SEK

0,4138

0,4091

0,4130

0,4103

0,4141

TRY

1,9434

1,9410

1,9459

1,9398

1,9473

Dolarul american Randul sud-african Realul brazilian Renminbi-ul chinezesc Rupia indiană 100 Woni sud-coreeni Peso-ul mexican Dolarul neo-zeelandez Dinarul sârbesc Hryvna ucraineană Dirhamul Emiratelor Arabe Gramul de aur DST

USD

2,9152

2,9376

2,9130

2,8961

2,8862

ZAR

0,3700

0,3700

0,3762

0,3784

0,3817

BRL

1,6530

1,6637

1,6694

1,6823

1,6827

CNY

0,4269

0,4302

0,4267

0,4242

0,4227

INR

0,0621

0,0621

0,0620

0,0616

0,0617

KRW 0,2458

0,2479

0,2472

0,2454

0,2476

MXN 0,2202

0,2205

0,2200

0,2179

0,2174

NZD

2,0989

2,0899

2,1117

2,0836

2,0920

RSD

0,0459

0,0456

0,0455

0,0457

0,0458

UAH

0,3572

0,3567

0,3529

0,3543

0,3537

AED

0,7936

0,7997

0,7931

0,7885

0,7857

XAU 98,5755

99,7983 102,2558 101,2771 101,5905

XDR

4,6315

Market Indices 0.61% BET-C 2,608.76 -17.09 0.65% 20,032.2 BET-FI 7 1,031.48 4.90% ROTX 9,443.90 -48.91 0.52% BET-XT 423.59 -7.31 1.70% BET-NG 578.63 -4.75 0.81% Values as of: 11/6/2009 BET

4,474.64 -27.60

Market Capitalization Exchange segment: BSE - 76,595,707,420 LEI - 17,817,927,659 EUR - 26,538,600,035 USD Exchange segment: RASDAQ

4,6243

4,6455

4,6284

4,6078

- 12,753,704,895 LEI - 2,966,805,828 EUR - 4,418,856,938 USD

Exchange Total BSE Statistics Last Update 11/6/2009 4:30:18 PM Shares Bonds Rights Fund Units Futures Total Shares Bonds Rights Fund Units Futures Total

Trades 5,350 3 0 8 2 5,363 Trades 4,865 3 0 8 2 4,878

Volume 48,499,087 957 0 246 30 48,500,320 Volume 40,878,916 957 0 246 30 40,880,149

Value (LEI) 29,719,268.59 33,522.54 0.00 10,424.20 130,972.50 29,894,187.83 Value (LEI) 28,718,064.74 33,522.54 0.00 10,424.20 130,972.50 28,892,983.98

Value (EUR) 6,913,387.13 7,798.12 0.00 2,424.91 30,467.22 6,954,077.38 Value (EUR) 6,680,484.03 7,798.12 0.00 2,424.91 30,467.22 6,721,174.28

RASDAQ Statistics Last Update 11/6/2009 4:30:18 PM Shares Bonds Rights Fund Units Futures Total

Trades 485 0 0 0 0 485

Volume 7,620,171 0 0 0 0 7,620,171

Value (LEI) 1,001,203.85 0.00 0.00 0.00 0.00 1,001,203.85

Value (EUR) 232,903.10 0.00 0.00 0.00 0.00 232,903.10

ERDB, EIB and WB to invest over 24 billion Euros in Central and Eastern Europe The European Reconstruction and Development Bank (ERDB), the European Investments Bank (EIB) and the World Bank (WB) decided to invest some 24.5 billion Euros in the Central and Eastern Europe zone, an ERDB press release informs. The plan will be applied between 2009 and 2010. "We believe firmly that with the significant and coordinated support by (international financial institutions), bank groups, governments across Europe and European institutions, financial sectors in Central, Eastern and Southeastern Europe will pass the test of the global financial crisis and emerge from it healthier and stronger," the release reads.

Romania Business News 05.11.2009 Companies and people alike will stand to suffer and unemployment will rise even further as a result of NBR's decision to halt the reduction of the key rate, because this way loans will no longer get

cheaper, and the final impact will be a slowdown of the economy over the span of several quarters, ING Bank Romania says At the same time, a banker that spoke under condition of anonymity says he is "very confused" by "NBR's disproportionately restrictive" policy for an economy in recession "One year from the onset of the crisis you keep an additional cost (via minimum mandatory reserves i.e.) of 1.5%. The problem is that we would stimulate domestic demand? We are afraid of a 0.5% added to inflation and we are not looking at unemployment? I am very confused." He believes that with this approach, the NBR is only driving clients to loans in foreign currency, which remain much cheaper. "This decision will lead to a rise in interests on the interbank market, especially of the long-term rates, which were taking into account a relaxation of the monetary policy - which means interests on loans for clients will no longer go down and that will slow down the economy for several quarters if high interests remain in place. Therefore, companies and people alike will stand to suffer, and unemployment will increase more than anticipated," says Nicolaie Alexandru-Chidesciuc, ING Bank's chief economist. He explains that the NBR maintains a restrictive monetary policy, although Romania is experiencing a much more profound decline compared with other countries in the region which have a flexible exchange rate system in place. Radu Ghetea, CEC Bank and Romanian Banking Association chairman says that interests on deposits in RON should remain in the one-digit bracket, so as to avoid making loans more expensive. "I still believe that interest on deposits needs to stay one-digit if we are to actually achieve something. This will be our policy. There can also be immediate reactions. A year ago some banks were quick to react and drove the interest to 28% a year. Some banks will be very quick to react the treasury banks, which are not interested in lending but in making profit," Ghetea says. NBR's is still the highest interest in the region, with the real interest rate of the market standing at 6-7%.

Cheapest new studios and apartments finished in Bucharest 05.11.2009 Several years ago, when apartments under construction now were just scale models, developers and consultants said prices would rise as the delivery date drew near. However, the crisis came with finished apartments at lower prices, BUSINESS Magazin says. Finished studios at 40,000 euros and apartments fit even for the "First Home" programme that set a loan cap of 60,000 euros. Two years ago, such prices seemed almost impossible, especially in complexes with several hundreds of housing units generally including facilities such as retail space. The only options were homes at the outskirts of the city, which is valid now, too, but current offers include finished homes, or homes that will be finalised this year. "It's very difficult to find such offers in semi-central areas or that are not at the outskirts of Bucharest. Land acquisition costs were higher when projects were started, construction costs were higher and the developers of projects in better areas are not yet willing to cut prices, either," comments Valentin Ilie, CEO of Coldwell Banker Affiliates of Romania, a real estate company brokering the biggest portfolio of both new and old apartments. The cheapest studio and two-room apartment offers are indeed for housing projects located in the outskirts such as Prelungirea Ghencea, the exit to Autostrada Soarelui or Titan. The cheapest studio for instance is in Rasarit de Soare project developed by Conarg in Titan district. The studio has a 47 square metre built area and a price of 40,900 euros, followed in BUSINESS Magazin's ranking by a studio in Confort City project at a price of 41,475 euros. The situation is similar in the case of tworoom apartments. Can a two-room apartment be built in a better area and sold for 60,000 euros? Valentin Ilie makes some calculations. "Yes, this is possible, but works should start now, when construction costs are lower and one stands the chance of finding a plot of land at the price of a distressed asset".

Misu Negritoiu, ING Romania's CEO: We will continue to grow organically 18.09.2009

The Dutch at ING, the first foreign bank to have entered the local market fifteen years ago, will finally start making profit from all their lines of business in 2010, after having embarked upon a process of transformation into a universal bank three years ago. "In rethinking the group as a European institution, Romania is an important market. We will continue to grow organically, and all divisions will start making profit next year," stated Misu Negritoiu, ING Romania's CEO. In 2006, ING started a project to reposition itself as a universal player, after having created an image of financial boutique with exclusive and expensive products, targeted for multinationals, major state-run companies and wealthy people. The plan includes retail expansion to one million clients, served by a network of about 250 offices. Albert Roggemans, head of the retail division says that this year the bank will go beyond the 900,000-client milestone and have a 200-strong office network, and the operations that started five years ago will finally begin contributing to the bank's profit. Over the last few years, ING has expanded its offer with products aimed at medium-sized companies and even small firms.

Negritoiu, ING Romania's CEO: The economy recovering in Q4 is mere statistical speculation 16.09.2009 Unless it adopts the euro, Romania has no solutions for the problems of an economy that already operates with the European currency, while we are arguing over a RON-denominated interest, which now only has an impact on a marginal market, says Misu Negritoiu, general manager of ING Bank. "Hungary can afford the luxury of not thinking about the euro, because it has markets that operate in forints, Poland has markets that use zlotys, but we don't have markets that work with RON. I think it is feasible for us to make the most important corrections in 2010-2012 because we primarily need economy's basic balances to be re-established, not actual convergence, which we will never achieve.

Unemployment hurting industrialised areas and Romanian companies 03.08.2009 More than 1,800 employees of companies in Prahova county will be made redundant in the third quarter of this year, with constructions, transports and the food industry as the main fields that are targeted, in line with County Employment Agency data quoted by Mediafax. Prahova is one of the most industrialised areas in the country, with large companies such as Petrom, Lukoil, Unilever and Coca-Cola, as well as many Romanian manufacturing firms located there. A similar number of layoffs have been announced in recent days in food and fashion retail, other fields hurt by the worsening economic conditions. Thus, Romanian networks PIC and Leonardo have given up almost 2,000 employees in a bid to make up for declining consumption. "Many have rushed to generate very high sales volumes to accumulate turnover and make profit and this is why they have thrown themselves upon the first mall they set their eyes on," Maria Grapini, manager of textile producer Pasmatex, which closed down two of its stores of Baia Mare and Timisoara, said about local fashion retailers. Domestic networks or those operated by Romanian companies have been the first to take tougher measures.

Diosi, OTP: Rise in unemployment is a time bomb for banks 28.07.2009 Small and medium-sized enterprises are the worst hit by the arrearage, because they have no reserves to help them through this difficult time. Personnel redundancies are creating another problem for banks, because people lose their incomes and as such are rendered unable to repay their loans. The number of overdue retail loans has stabilised since the beginning of the year, but the autumn could bring a new surge, as a result of the increase in the number of people who will lose their jobs, says Laszlo Diosi, chief executive of OTP Bank.

"Individual clients have adjusted to the harsher conditions, we do not see a worse situation than at the beginning of the year. It is a time bomb, though. There will be many people in trouble this autumn and a vicious circle will be created," Diosi says. The share of loans rated as "doubtful" and "loss" (loans overdue by at least 60 days) in the total portfolio exceeded 11% in May across the entire system, compared with 6.5% in December last year, according to the NBR data. OTP’s boss says that he budgeted a higher risk cost for the second half (calculated as a ratio of the provisions set up and the total volume of loans i.e.) than in the first half. Under the circumstances, Diosi says the state should come up with a programme to help people rendered unable to repay their loans to the bank, as it did with the programme to drive sales of new credits. The Hungarian government has recently secured approval from the European Commission for such a programme. Diosi also sees a "slow but constant" deterioration of the loan portfolio of the small and mediumsized enterprises, which are experiencing arrearage, given that the state reimburses VAT late and many companies are also late in paying their suppliers. "It’s not a disaster, but it is a constant worsening. We, however, hired people specialised in debt collection and bailiffs to take care of these loans." OTP is actually in the process of subjecting a number of assets pledged as collateral to compulsory execution to collect its debt from SMEs. On the other hand, Diosi is more relaxed when it comes to the loans granted to large companies, who have more options of cutting costs to survive the difficult period.

High interest rates are unable to stimulate economy 27.03.2009 The individual clients' appetite for saving is increasingly weak, with the annualised rise of deposits slowing down significantly over the last year, despite the high interest rates offered by banks. At the end of February, the population's RON deposits were up 17% in real terms (eliminating the effect of inflation) on February of last year, according to data from the NBR (National Bank of Romania). In comparison, the annual growth rate amounted to almost 31% then, and came in the wake of rates of as much as 45% reached in the summer of 2007. At the end of February, the population's RON deposits had reached 56 billion RON (equivalent to 13 billion euros). For deposits in foreign currency, the slowdown was even more significant. The annualised growth rate (calculated in euros) fell to 7.7% in February, down from 43% in February 2008. The overall volume reached almost 7.8 billion euros in February. Analysts say now clients have less and less money to set aside. "I expect a major slowdown in the annual growth rates for the population's deposits, despite the interests offered by the banks, which can be considered attractive. The slowdown will be triggered by a wage decline in real terms, which, coupled with a rise in unemployment, will lead to a decline in the population's saving capacity," says Nicolaie AlexandruChidesciuc, senior economist of ING Bank. *

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