The stock of non-government bank loans increased by 7.3% y/y to RON233bn (€50.6bn) at the end of September, after having gradually accelerated from a sluggish 1.2% y/y growth in 2016, according to data from the central bank.

The stock of loans has particularly increased since April, at an annualised rate of over 10% during April-September according to bne IntelliNews calculations. The rise might have been helped by the non-performing loans having dropped into single-digits (hence the volume of bad loans written off the balance sheet, with an impact on the stock of loans, is smaller). Separately, local currency lending remained particularly active (in contrast to foreign currency lending).

The credit expansion is visibly supported by the mortgage segment: the stock of retail mortgage loans increased by 12.7% y/y to RON64bn as of the end of September (or by an annualised 16.8% since April). Corporate lending gained momentum, yet at a slower rate: the stock of bank loans to non-financial corporations expanded by 6.4% y/y to RON106bn at the end of September.

In terms of currency, local currency lending is by far more active, as it has been for the past couple of years. However, the increase in the benchmark money-market interest rates and hence the cost of new and outstanding loans (indexed to such benchmarks) is likely to slow down the rise in lending.

For both the retail and the corporate segment, the dynamics of local currency lending exceeded that of foreign currency lending. Thus, the stock of loans to households denominated in local currency soared by 21.5% y/y (versus a 10.6% y/y contraction in the foreign currency loans). A similar decrease in currency substitution was seen in the corporate segment where the forex loans edged up by a mere 0.1% y/y, versus 12.3% y/y rise in local currency loans. Overall, the stock of local currency loans expanded by 17.1% y/y to RON143bn.