The banks are keeping the pressure on customers with their eight-percent interest margins, which are very high considering inflation is at an all-time low, 0.7% at the end of June. This makes real interests, indicative of the customers’ repayment efforts, very high, too.
“Monetary policy transmission is very weak. Leu loan interest rates have only marginally declined since February. Therefore total lending remains in the red because sales of leu loans are not rising fast enough to offset the decline of the foreign currency component,” says Dumitru Dulgheru, senior analyst of BCR.
Romania’s central bank cut the key rate for lei by 1.75% in July 2013-February 2014, which drove down the three-month Robor rate that banks use as reference for the leu retail loan cost, from 6% to about 2% per annum.
Average leu consumer loan rate fell from 15% per annum in May last year to about 12% per annum in the same month of 2014, according to the latest central bank data, which means banks chose to preserve their interest margins and even raise them in some cases.
Bankers hope that the very high profit margins of consumer loans will offset some of the decline of the interest revenue of the last few years.
The high interests are an obstacle for resuming lending, as proven by the mortgage loans, as well. Sales of leu mortgage loans picked up visibly in recent months, after rates fell to the level of those of the euro loans, about 5% to 6% a year.
The cheapest leu consumer loans start from more than 10% per annum and most banks are willing to give a discount (usually 0.5%) to the customers who also open a salary account once they take out the loan. Having the customers’ monthly income run through an account opened with them gives banks additional peace of mind, since such loans are not secured by real estate collateral.
Banks had a stock of 23.4 billion lei (EUR5.3 billion) consumer loans in mid this year, lower than the in the corresponding period of last year. Still, consumer loans did increase from month to month in March-June, but not enough to offset the decline in foreign currency lending.
Consumer loans account for about 80% of the total loans granted by banks to individual customers.
(English version by Loredana Fratila-Cristescu)