Business Review

The International Monetary Fund (IMF) is planning to lend Romania EUR 12.95 billion to balance the effects of the sharp drop in capital inflows, with additional funding reaching EUR 20 billion in total from several financial institutions. The yet to be signed stand-by agreement comes with strings attached: the social and fiscal measures the Romanian government needs to take.

In the current economic situation, minority shareholders still have the chance to recover their million-euro investments in the stock exchange. A CNVM draft law could make all companies that have owned a 33 percent stake in a firm since January 2007 initiate compulsory public offerings at the share price at the time of takeover. Affected companies include KazMunaiGaz, majority shareholder at Rompetrol, Generali and Sanofi-Aventis.

With EUR 1.27 billion in total profits in the banking system in Romania in 2008, up 67 percent on 2007, locally active banks had a good year. Those banks which have already made their financial data public have reported historic increases in profits and bigger than ever incomes in terms of volumes. It was the peak - lenders are now preparing to go downhill.

The main international financial institutions, the EBRD, EIB and World Bank, have joined forces in consistently increasing the financial resources to boost lending to private companies, especially SMEs. Since the beginning of the year, only BCR and Petrom have requested financing from the EBRD, while Immorent, Ford Europe and Bancpost have knocked at the EIB's door. Will Romanian companies be able to access these consistent funds, as some World Bank loans are restructured due to implementation issues?

Since the beginning of this month, locally active banks have started to lure companies and individuals with 14 percent or even 15.5 percent interest rates for savings, in order to solve their liquidity issues. Financial specialists says this policy is feasible only for the short term, as the market needs more solid intervention from the Romanian Central Bank (BNR), such as a 1.75 percent drop in the reference interest rate and the slashing of the the minimum mandatory reserves.

Amidst the financial crisis, bonds have become an investment opportunity for companies, but one not without risk. The issuer and the currency of the bond issuance are the two main aspects to look at when investing in bonds. Economists are talking about the current World Bank and BCR bond issuance opportunities. The problem is that they will reach maturity this autumn and there are not yet any international financial intuitions on the waiting list.

The government is currently under pressure to reach a financial agreement to cover the current account deficit. While it says there's no need for a deal with the International Monetary Fund and is looking at the World Bank or at the European Investment Bank instead, the private sector is calling for an immediate deal with the IMF.

Like other stock markets around the world, the Bucharest Stock Exchange saw plunging prices and fewer transactions last year, owing to the effects of the financial crisis. Foreign investors squeezed on multiple fronts saw the value of their Romanian portfolios shrinking, while the BSE's indices have reached historic lows. Local investors were similarly affected in the year the local stock market went back five years and fell to historic index lows.

The banking and finance market has been less of a target for mergers and acquisitions this year than it was in 2007, but several deals were still sealed earlier this year.

A new entry in Business Review's Top 100 list is Groupama, the French group which ranks 43rd. The insurer has bought three Romanian companies, Asiban, BT Asigurari and OTP Garancia Asigurari, for which it paid more than EUR 400 million. The insurer is now working on grouping the three firms under the Groupama Asigurari umbrella, a re-branding process estimated to end in fall next year.