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20.01.2012

Financial situation of the banking system in 2011



The banking system of the Republic of Moldova recorded positive development trends in 2011.

Tier I capital increased by 12.4 percent, constituting 7557.8 million lei at the end of December 2011. The increase of this financial indicator shows the consolidation of the banking system and an increasing resistance to a possible financial situation generating loss contingencies.

The share of foreign investment in banks capital constituted 74 percent, by 3.3 percentage points lower compared to the end of 2010, as a result of the increase in share capital, at the expense of domestic shareholders investment.

The average risk-weighted capital adequacy on the system is still at a high level - 30.4 percent (minimum required level is 12 percent). The increase of this indicator with 0.4 percentage points, as compared to the end of 2010, indicates a potential recovery with minimal risks for the available liquidity.

Total assets on the system constituted 47707.9 million lei as of December 31, 2011 increasing by 12.9 percent as compared to the end of last year, at the expense of increase of liabilities and equity capital. The increase of this indicator shows an expansion of the banks activity and it is higher as compared to the value of 5.8 percent recorded on December 31, 2011.

Within the structure of assets the following elements have increased: net financial leasing and loans - by 19 percent, up to 27747.6 million lei, funds owed by the NBM - by 84.1 percent, up to 4390.3 million lei. At the same time, the following elements have decreased: funds due from banks and net overnight funds – by 17.2 percent, up to 3442.3 million lei, net securities - by 3.5 percent or up to 6416.9 million lei, other net assets – by 1.2 percent, up to 3719.9 million lei and cash – by 0.2 percent, up to 1990.9 million lei.

Thus, the assets increase has been determined mainly by the increase of credits. At the same time, a better quality of loans portfolio has influenced the quality of assets. At the end of 2011, the bad loans (substandard, doubtful, and compromised) in absolute value have decreased by 6.5 percent at the end of 2010, their share in total loans decreasing by 2.6 percentage points, up to the level of 10.7 percent. The share of bad loans in the total regulatory capital decreased by 7.9 percentage points at the end of 2010 constituting 41.8 percent on December 31, 2011. The quality of loans portfolio has improved due to the cancellation of overdue loans, to the more favorable classification of granted loans and due to a higher level of reimbursement.

Banks have diversified the risks as follows: the loans granted to industry and trade held the largest share in total loans portfolio as of December 31, 2011 followed by the loans granted to agriculture and food industry – by 13.5 percent, loans granted to real estate and contractions – by 12.2 percent and consumer loans – by 6.7 percent.

The volume of new loans granted in 2011 constituted 29608.2 million lei, increasing by 26.4 percent compared to 2010. The volume of new term deposits, attracted by banks in 2011, constituted 40450.2 million lei, increasing by 10.8 percent.

The net income in the banking system amounted to 879.7 million lei in 2011, or by 4.7 times more as compared to the last year. Return on assets and on equity capital constituted 2.0 percent and 11.5 percent respectively on December 31, 2011 increasing by 1.5 percentage points and 8.9 percentage points respectively as compared to the end of the previous year.

Long-term liquidity ratio of the banking system (assets with terms more than two years / financial resources with potential withdrawal term of over two years ≤ 1) recorded a level of 0.7. Current liquidity within the system (liquid assets, denominated in cash, deposits with the NBM, state securities, and net interbank credits with maturity up to one month / total assets × 100% ≥ 20 percent) accounted for 33.2 percent. The respective values of liquidity indicators show the existence of adequate sources to support the payments related to liabilities and to determine the durability of banks to possible external shocks. The dynamics of deposits recorded in the last year reflects the creditability of the banking system.

On December 31, 2011 this indicator constituted 32632.1 million lei, increasing by 13.6 percent as compared to the end of the previous year. In particular, the deposits of individuals increased by 13.8 percent, up to the level of 20675.4 million lei and deposits of legal entities by 7.8 percent, up to the level of 10512.0 million lei. At the end of 2011, there were 15 banks on the territory of the Republic of Moldova. One of the 15 banks recorded negative financial results in 2011.

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