The volume of new loans extended by Romanian banks last year increased by 4.1% y/y to RON68.8bn (€15.1bn) despite the 1.8% y/y decline in Q4, according to calculations based on central bank data. The loans extended in local currency accounted for 81% of the total and they expanded by 13.5% y/y.
During the final quarter of 2016, corporate lending rose while retail lending shrank, revealing its vulnerability to the state subsidies given to households under the state-backed Prima Casa home loans scheme.
Corporate lending gained momentum in Q4, when banks extended RON12.5bn (€2.76bn) new loans to companies, the highest quarterly value in past years. Corporate lending increased by 10.1% y/y in the quarter, versus a modest 1.6% y/y performance for the whole year. When it comes to currency, corporate loans denominated in the local currency expanded by 34.5% y/y in the quarter and 9.6% y/y for the full year and accounted for 74% of total (81% in full year).
Retail lending (to households) increased by only 7.5% y/y to RON30.21bn (€6.65bn) in 2016. It decelerated sharply in Q4 when banks extended 18.2% fewer loans than in the same quarter of the previous year. The volume of retail mortgage loans plunged by 38.7% y/y while consumer loans remained at same level as one year earlier.
The Romanian government plans to decrease the guarantees offered for the Prima Casa scheme by 15%, according to a draft government decision quoted by local media on January 27.
The Prima Casa programme was introduced in 2009 as a means of helping first-time buyers to purchase a flat on favourable terms. Under the programme, people can take out mortgage loans under favourable terms due to state guarantees for 50% of the loan. Retail mortgage lending has been driven during the past years by the programme, which at same time supported home sales.
According to the draft decision put up for debate, the guarantees offered by the state would be cut to RON2.5bn (€554.7mn) in 2017 from RON2.94bn in 2016, digi24 reported. This would result in loans amounting to around RON5bn.