The decline is alarming because the trend has been going on for months now, despite the very low interest rates. The lines of credit taken from banks are the main stream of funding for companies, because access to the capital market is much more difficult.
Leu loans account for about 80% of the total new corporate loans and went down by 7% in August 2015-August 2016. Banks granted RON2 billion worth of leu loans to companies in August, about RON407 million less than in July.
“Overall, the economic results and the financial health of non-financial companies continued to improve over the last few years, and companies had higher financial resources generated by their own operations, which allowed them to cover the funding needs and resort less often to bank loans,” explains Florian Neagu, deputy director of the financial stability department of Romania’s central bank.
Corporate loans saw a decline regardless of currency, with new loans in dollars taking the worst hit, more than 70% to RON54 million in August 2016 compared with August 2015. Loans in dollars, however, account for the lowest percentage of all loans, merely 2%. Euro loans, on the other hand, which account for more than one fifth of all loans, fell by about 30% to RON605 million.
Florian Neagu says analyzing the monthly lending trends is not very representative, because the development may be caused by a high volatility since a significant part of the corporate loans are lines of credit (36% of total loan stock in August 2016). Analyzing new loan trends over twelve months (which is more indicative than the monthly analysis) shows a 5.4% rise in September 2015 – August 2016, compared with September 2014- August 2015.
Banks granted almost RON22 billion new loans to companies in January-August 2016.
On the other hand, economic analyst Aurelian Dochia says there is no explanation for the decline in corporate due to the low demand, considering interests are at all-time lows and the local economy had the highest growth rate in the entire EU.
“The problem is the lack of confidence companies have in the development prospects of the local economy. On the other hand, companies have their own resources and use them first. This reluctance on their part obviously makes an impact on the economy, because there will be no investments. Banks are not reluctant, however, they really want to provide funding to companies.”
There are no reasons for a decline in new loans to companies over the coming period and foreign investment attracted by the economic growth could lead to Romanian companies making investments, too.
(English version by Loredana Fratila-Cristescu)