The overdue loans of individual customers in other currencies than the leu, euro or US dollars, a category where the Swiss franc dominates, went up by almost 10% in lei in May, overshooting the 1 billion lei (EUR238 million) mark for the first time. This spectacular growth was partly due to the appreciation of the franc in May. Even when calculated in francs, the overdue loans took a visible leap of 4% to CHF315 million.
Things have been constantly deteriorating, though. After a slight correction in spring, the franc reached fresh all-time highs against the leu in June, going up to RON3.55, compared to RON2.1 in 2008.
Gabriel Cretu, OTP Bank’s network and sales manager, says the customers probably have some resources left and are making efforts to pay higher installments. “The moment of truth will come in a few months, when people will seriously think whether they can live with a CHF rate of RON3.6,” Cretu said.
Many people have already stopped making payments, so that the overdue Swiss franc-denominated loans as a share of the total loans that individual customers have to repay reached 7.4% in May, compared to 3.1% a year ago. The situation looks much worse than in the case of euro loans, where overdue loans account for only 4.5%. Only the leu loan portfolio quality is worse, with overdue loans amounting to 8.5% of the total, yet the growth over the past year has been much slower.
Those with Swiss franc loans are facing a painful dilemma now. Such loans used to be chosen for buying a home, so those thinking of stopping repayment should also be prepared to give up their homes. On the other hand, those who can still afford to pay are currently thinking whether they should do it or not, considering their debt calculated in euros is higher than at the time of purchase and the value of the home went down. Bankers say it is only a matter of time before the franc grows weaker again, but the question is how long before that happens and how long can customers survive.
Bankers are preparing solutions for their customers, but can only partly offset the rise in the exchange rate.
The first to offer loans in Swiss francs, which seemed a better option because of lower interest rates, were the Hungarians at OTP in 2005, who used them as a marketing tool when they launched their retail offer. Volksbank, Raiffeisen, Bancpost, Piraeus and Banca Romaneasca followed suit. (EUR1=RON4.2037)