For those with steady nerves, there is an advantage to being a first mover.
Greece’s Alpha Bank knows this well. In 1994, it was the first foreign bank to enter Romania’s fledgling savings market, with an initial investment of about $5m.
Over the 14 years since, according to Sergiu Oprescu, the bank’s chief executive in Romania, the company’s total investment has reached €230m ($362m), while the bank has total assets exceed €4bn.
Getting in early may look like a cheaper option, but first movers can be in for a bumpy ride.
“In 1999, Alpha was part of the syndicate of local banks that put together a $108m loan to help out the National Bank of Romania,” Mr Oprescu remembers. “Romania was very close to defaulting on its foreign debts back then. We have been through it all.”
With hindsight, it is clear that Alpha’s punt on Romanian banking was successful, but things were less clear at the start.
“Back then, lending was a fraction of GDP,” he says. “Even in 1999 – when the country came close to defaulting – the EU anchor was not yet in place.”
Following Romania’s accession to the EU at the start of 2007, things are clearer.
A host of international players have strategic toeholds in the growing market including Portugal’s Millennium which has spent €300m ($470m) to build a branch network and a full-service banking operation from scratch.
With 41 banks operating and new applications pending with the central bank, some say that the market is getting crowded.
But the total number of banks in the country is the same today as in 1999 even though asset volumes have grown seven-fold to €70bn.
Romania is underbanked in aggregate terms. According to the International Monetary Fund, Romania’s financial intermediation ratio – a measure of banking assets as a percentage of nominal GDP – is, at 30 per cent, low by regional standards.
The comparable figure in Poland is 70 per cent, while for the UK, it is 120 per cent.
There is, in principle, plenty of room for growth. Mihai Bogza, chairman of the board at Bancpost, which is owned by Greece’s Eurobank EFG, argues that there is room for more concentration at the top end of the market but points out that scope for acting as a universal bank is limited for most.
“Many of the existing 41 are niche banks,” he says. “Not all of them will act as universal banks in the long run.”
It would take a bold bank to repeat Millennium’s approach, says Gerald Schreiner, president of the Romanian subsidiary of Austria’s Volksbank.
“There might be new entrants focusing on niches, and other banks might buy into the market. But there won’t be any more greenfield investments,” he says.
Libra Bank, for example, has carved itself a niche catering to professional lone practitioners, such as doctors and their surgeries.
Israel’s Leumi Bank has a substantial presence in the country. It offers a full palette of banking services to individuals and small companies, but it also maintains a business division with Hebrew-speaking staff to cater to Israeli investors who are very active in Romania, particularly in the property development market.
What is clear is that any new entrants looking to ride Romania’s growth wave will have to pay a high price. Wages in the banking sector are outpacing wage growth in the broader economy and are increasingly outstripping those found in the other countries of central and eastern Europe.
“We are paying more than in Austria for top managers,” says Mr Schreiner.
But this is unlikely to deter investors enviously eyeing a country that has recorded eight years of continuous economic growth – with growth above 5 per cent expected for at least the next two years.
