Leu-denominated consumer loans fell by 1.2 billion lei in November and December to RON22.6 billion (EUR5 billion), according to Romania’s central bank data. The situation was even worse when it comes to foreign currency loans, a product that is almost non-existent today due to the restrictions of the central bank. Foreign currency consumer loans fell by one billion euros (RON4.5 billion) to EUR5.9 billion last year.
Consumer loans had grown by almost RON800 million in March-October on the back of promotional offers from banks. The lending potential turned out to be limited, with consumers still too heavily in debt after the lending boom years (2005-2008).
“New loans no longer cover repayment,” says Gabriel Cretu, manager of advisory firm Adwisers. “People are now repaying loans granted five to seven years ago, when customer appetite was very high. This appetite is gone.”
Banks have been constantly trying to drive up consumer loan sales with various offers over the last few years. They see consumer loans as a quick way to get some revenue since the margin on such products is among the highest.
Leu-denominated loans sell at more than 10% interest per annum, while banks borrow at 1.5% from the market and reward customers with about 2% to 3% interest per annum for deposits. Few offers come with a single-digit interest rate and only for the customers who have a history with the bank or those who are paid their salary in an account with the bank.
(English version by Loredana Fratila-Cristescu)