“It’s the right moment for commercial loan insurance businesses to develop. The market will surely increase fast this year. We budgeted growth of about 25% on this segment,” Coman told ZF in an interview.
Coface provided credit rating, receivable management and commercial credit insurance services in Romania.
Commercial credit insurance is insurance companies buy as protection from the risk of non-payment by business partners, and generates about half of Coface’s revenue, which reached EUR8.5 million last year. The company expects growth of 30% of total revenue this year.
Commercial credit insurance market is still underdeveloped and Coman says total sales stood at EUR11 million last year. Coface accounts for 48% of this market.
Coface is also providing debt collection services, but business on this segment is dwindling, and the debt collection industry shrank by 20% to 25% in 2012.
“I expect the debt collection business to be flat in 2013. The market amounted to about EUR1 billion last year,” Coman said.
The receivables portfolio Coface manages mainly comes from banking sector (40%) and utilities (about 50%).
Coman says banks have not started selling non-performing mortgage loans to debt collectors yet and will not do so in 2013, either, because of the wide gap between the asking price and what debt collectors are offering.
“The market is not ready, the banks and buyers are not ready, either. It’s a really wide gap between what banks want and what companies are willing to pay. Banks want something in the neighborhood of 40% of the debt value, while buyers can pay 20% to 25% at most.”
Coman believes local lenders are wrong to insist on such prices because the mortgages or collateral they have are now worth significantly less and no local investor is willing to take such a chance. Non-performing loan rate has been constantly rising to over 18% at the end of last year.
“The peak has not been reached yet. Non-performing [loans] will see double-digit growth this year,” he said. Coface’s country manager is not optimistic about the economy, either, and thinks 2013 will not be any better than 2012.
“The economy is doing bad and 2013 will be worse than 2012. This also shows in our insurance portfolio. The number of notifications in the first two months was much higher than previously. Insolvencies, too, show things are getting worse. The number of insolvent companies rose 10% last year on 2011, to more than 24,000.”
(English version by Loredana Fratila-Cristescu)