In 2011, leu-denominated loans accounted for only 40% of the total loans and the rest were euro loans. This is the first time Romania’s central bank has made such data available.
“It is only natural that foreign currency loans would decline. Leu loan interests are dwindling,” says economic analyst Dragos Cabat.
“Some companies need investments and go for foreign currency loans, but most are choosing leu-denominated ones. The difference between leu and foreign currency lending is best seen on the retail segment (…) there are some signs, lending to individuals will probably improve.”
The central bank started publishing aggregate data about new loans, including historical data that go back to 2007, this year. Anything prior to that is only bits and pieces from individual reports of banks about their loan sales.
The new loan figures are important because the loan volume trend is no longer indicative of the lending activity, given the high volume of repayments and sour loan write-offs.
Leu loans amounted to RON12 billion in the first four months, an increase of almost 15% on the year-ago period.
Foreign currency lending, on the other hand, dropped by more than 12%. Banks started to promote leu loans as their lines of credit from abroad dried out, after having fuelled lending during the boom days until 2008, and they had to rely on the resources attracted from customers, which are mostly lei.
New loan interests currently stand at 6% to 7% on average compared with almost 20% at the onset of the crisis. Leu lending costs have dropped so much that they are similar to euro lending costs on some segments, which means customers have no reason to take foreign exchange risks.
The main reason for consumers and companies to take on so much foreign currency debt in the past was the much lower euro or Swiss franc interest level.
“There’s been a trend favoring leu-denominated loans in the past two years. Low mortgage rates play an important part here,” says Liviu Andrei, chief executive of loan broker Alliance Finance. The events at the beginning of this year such as the surge of the Swiss franc kept Romanians away from foreign currency loans.”
Consumers are the main drivers of the leu lending, where sales are back to boom day levels, while the corporate lending is still hurting, with new loans down to half of those back in 2008.
(English version by Loredana Fratila-Cristescu)