Romanian bank loans down 1.5% y/y to EUR 50.3bn at end-June

By bne IntelliNews July 23, 2013

The stock of non-government bank loans in Romania edged down 1.5% y/y to EUR 50.3bn [RON 224.2bn] at the end of June, the central bank said. The contraction was pretty similar of around 1.5% y/y for retail customers and corporate customers.

Notably, bad loans continue increasing their share in the total stock of loans. Loss plus doubtful loans exceeded already 30.3% of total at end-May 2013, up from 26.1% at mid-2012. The contraction of the healthy loans was consequently steeper than the 1.5% y/y rate for total bank loans announced by the central bank.

Lending to households accounts for some 44.5% of total loans to non-government. Consumer loans further contracted by 4.2% ytd [8.3% y/y] to reach EUR 12.5bn as of end-June, down from a maximum of EUR 19.7bn in October 2008 before the credit crunch. The outlook remains negative for consumer lending. Mortgage loans on the opposite have increased robustly since the outset of the crisis and further expanded by 4.2%b ytd [10.2% y/y] to EUR 8.7bn at the end of June, significantly up from EUR 5.2bn at the end of 2008. The expansion over the past year was driven by the state guarantees provided to young families wanting to buy housing units.

Lending to non-financial corporations has turned to negative dynamics in 2013 when it already contracted by 1.9% ytd at end-Jun, after stagnating in 2012 [0.4% up y/y]. The stock of loans to companies, some 50.2% of total non-government loans, recorded this year the first negative annual performance since 2009. Corporate lending expanded robustly in 2010 and particularly in 2011 after its first contraction episode in the autumn of 2008 and 2009.

The Vienna agreement between foreign financial groups and central banks prevented massive outflows and the lenders had to place somewhere the funds freed from shrinking consumer loans. Households’ increased propensity to save made also available supplementary funds to banks. The government took advantage and financed the deficit at lower costs – but companies also benefitted in a first stage by the banks’ need to place their resources. The industrial expansion and exports' growth in 2010-2011 helped the banks increase their exposure to corporate customers.

However, with the industry driven by several large-sized companies able to get financing from parent groups [notably at lower costs] and investments in general shrinking, bank lending to companies has consequently decreased in 2013. Co-financing of projects developed under EU-funded programmes should in principle revive corporate lending but this is a mere theoretic scenario at this moment.

EUR bn  Household Household:  Household:  Corporations:  Non-govt Govt TOTAL
[eop]   consumer mortgage non-financial      
Dec-08 24.89 18.49 5.24 23.72 49.7 1.57 51.27
Dec-09 23.7 17.22 5.73 22.75 47.27 2.67 49.95
Dec-10 23.83 14.99 6.76 24.42 48.85 2.62 51.47
Dec-11 24.14 14.35 7.73 26.71 51.63 2.24 53.87
Dec-12 23.59 13.1 8.37 26.81 51 2.23 53.24
Jun-13 23.34 12.55 8.72 26.32 50.27 2.15 52.43
% of total 44.5% 23.9% 16.6% 50.2% 95.9% 4.1% 100%
y/y -1.5% -8.3% 10.2% -1.4% -1.5% -1.5% -1.5%
Source: BNR

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