Month-on-month, loans contracted by Romanians have been subject to the sharpest decline ever, at 2.6 percent in real terms, due to fewer foreign currency-denominated loans.
The data significantly contrasts with last year’s figures, when annual lending growth amounted to as much as 60 percent. “An easing in lending will be registered once the money from the International Monetary Fund (IMF) arrive in May. By that time, any shrinkage in the loan balance is possible,” according to National Bank of Romania (BNR) Chief Economist, Valentin Lazea. Romania recently agreed to a financial aid package totaling €20 billion, of which €12.95 billion will come from IMF. “BNR revised this year’s forecast. It will be good if we register a 10 percent increase in lending this year,” Lazea added. Market experts were previously estimating a 25 percent advance in lending. However, the reluctance on the part of banks to grant further loans, given the increase in non-performing credits, and the people’s fear of losing their jobs have led to shrinkage of the loan balance by 2.1 percent in nominal terms (2.6 percent in real terms), to €47.8 billion. The sharpest decline was registered for foreign currency-denominated loans, given the major depreciation of the national currency against the euro.
As far as companies are concerned, the loan balance dropped 3.6 percent month-on-month in March, since companies have significantly reduced their operations. However, the coming month could bring an improvement on the lending market, given that some €800 million are to be released onto the market, following a BNR decision to cut the cash reserve ratio (CRR) to zero for currency liabilities with less than two year maturity.
Banks that saw their business affected by the increase in non-performing loans and those with a solvency level close to the minimum threshold will prefer to focus on attracting deposits, as was the case in recent months, but lenders with liquidities will increase the ratio of loans, although more carefully than last year. Meanwhile, the loan portfolios of banks are contracting. Only 59 percent of total loans can be considered “clean” in February, compared to 60 percent in January. Furthermore, some 8.43 percent of total loans are considered losses or poor performance, compared to 7.61 percent month-on-month.
