Page 105 - SE Outlook Regions 2023

3.6.2 Banks

After the reform of the banking sector in 2016-2017, the financial
intermediation in Moldova (rather modest, by general standards) has
increased constantly during 2018-2021 with the loans-to-GDP ratio
advancing from 16.9% in December 2017 to 22.6% four years later. The
process however reversed in 2022 amid high (nominal) interest rates
and economic crisis: the ratio dropped to 22% at the end of September.

On the upside, the banking system’s financial health looks robust and
its profitability is significant. Not surprisingly, the country’s largest bank,
maib, seeks to list its shares on the Bucharest Stock Exchange – where
the parent company of another Moldova bank (Victoriabank, controlled
by Banca Transilvania) is listed.

The profitability of Moldovan banks returned, in 2022, to pre-crisis
levels, and the share of non-performing loans (NPLs) – although it
increased after the war began in Ukraine – remains at manageable
levels (6.5% at the end of September 2022). The NPL ratio surged by
1pp during Q1 2022, to 7.1% at the end of March to reflect the impact of
the war, but it eased afterwards as the banks are reconsidering their
loan portfolios. While the overall stock of loans increased only
marginally, the NPL ratio decreased – furthermore with no significant
negative impact on the banking system’s profitability.

Moldova’s banks already accumulated MDL2.85bn (€140mn) of profits
in the first nine months of 2022, 5.1% of the average stock of loans (at
amortised cost) for the three-quarter period. The ratio is significantly
higher than the 4.6% performance of 2021 and the modest 3.5% figure
in 2020. The banks have thus recovered for the second year in a row, in
terms of profitability, after their earnings came under pressure in 2019
amid Covid-19 crisis that impacted the economy.

105 SE Outlook 2023 www.intellinews.com