The individual customers who took out loans from banks pay about EUR6 billion in installments a year or one quarter of the total income Romania’s people make from wages and pensions, according to calculations by ZF.
The debt service or the total installments paid by consumers on the loans taken amounted to 22% of the disposable income in mid 2010, according to the latest central bank data. As wage and pension income amounts to almost EUR28 billion a year, loan installments therefore amount to some EUR6 billion.
The repayment effort has increased lately, especially for foreign currency loan holders, considering the leu has lost 2% in the past month alone while the depreciation since the beginning of the year has reached 3.5%.
The pressure the consumers with loans in foreign currency are subjected to is huge, as almost EUR3.5 billion euros of the EUR6 billion installments are paid on euro, dollar or Swiss franc loans.
Loans in euros account for more than 80% of the foreign currency loans granted to individual customers and the 3.5% depreciation of the leu since the beginning of the year added more than EUR100 million to the annual bill the customers who took out such loans have to pay. The installments paid in a year went up by the equivalent of EUR70 million (about RON300 million).
The more than 220,000 people with foreign currency real estate loans feel every single move of the leu. For instance, whereas they would pay RON1,295 for a EUR300 installment, now they have to pay RON1,340 to the bank.
Customers with mortgage loans pay installments and interests of about half a billion euros a year, according to the latest reports of the central bank, which show debt service accounts for 2% in the total income of the households. Most of the euro loans, however, are home equity loans for which Romanians pay several hundred euros in installments.
“The depreciation of the leu is yet another example that loans have to be granted in the currency in which the customers earn their incomes. Non-performing loans will continue to put pressure on the portfolios and profitability of banks this year, too, and the exchange rate only increases anxiety,” says Radu Gratian Ghetea, chairman of the Romanian Banking Association.
The rise in the installments that customers have to pay also subjects banks to pressure, because a higher installment does not necessarily mean higher revenue for the lender, it means fewer and fewer clients can afford to pay on time every month. The number of customers falling behind with their repayment has been constantly increasing over the past year.
(English version by Loredana Fratila-Cristescu)