The stock of loans that banks granted to households and companies stood at 215 billion lei (EUR48.5 billion) at the end of June, RON1.5 billion below the May level, according to the central bank data. The year-on-year decline is almost RON9 billion.
“The decline of total lending in June suggests the lending market has not thawed yet. Banks remain selective and prefer to stimulate leu lending. On the other hand, both consumers and companies remain cautious, as shown by the significant increase in domestic currency deposits of both of them,” says Radu Craciun, chief economist of Romania’s largest bank, BCR.
Leu lending rose 7% on the year in June to RON90.4 billion, progressing at same pace as in May. It increased by 0.7% compared with May, after a 1.2% growth in the previous month . The leu lending was unable to offset the 12% decline in the stock of foreign currency loans to EUR28.5 billion. Foreign currency loan volume shrank by EUR400 million equivalent in June alone.
Corporate foreign currency loans saw the steepest decline. The volume dropped by about 14% compared with mid last year to less than EUR14 billion. Corporate leu lending rose by a mere 6% to RON53.5 billion, without offsetting the drop in foreign currency lending.
“Corporate lending visibly slowed down in June, due to the decline of the foreign currency loan stock. The corporate foreign currency lending had been dwindling before that, but had been largely offset by the rise in leu lending,” says Mihai Patrulescu, senior economist of UniCredit Tiriac Bank.
He expects private lending to gradually rebound, but says the latest figures cast a doubt about the short-term prospects.
Retail leu lending saw the highest increase last month, 9% year-on-year. The total stock of retail leu loans reached almost RON37 billion, but is far from matching the foreign currency loan stock, EUR13 billion.
Leu retail lending has picked up the pace visibly in the last few months, following the rate cut and the restrictions on the sale of foreign currency loans. Consumer loan interests are now close to 10%, after mortgage loan rates fell to single-digit values.
The main driver of the retail lending is the “First Home” mortgage loan scheme, but leu consumer lending showed the first signs of a resurgence in the spring. The “First Home” scheme, which helped sell most mortgage loans during the crisis, moved to leu-only loans in August 2013.
On the other hand, bankers are complaining about not finding any really big corporate projects to fund and about companies not having the courage to borrow for investments despite the economic recovery.
The volume of bank deposits made by consumers and companies rose by 6% in June compared with the same time last year to RON214 billion. However, it went down by one billion lei equivalent on the previous month solely due to the decline in foreign currency savings. Leu deposits continued to go up year-on-year and month-to-month to RON140 billion.
“This (the rise in leu savings i.e.) suggests a change of attitude towards consumer spending, investment, it might first lead to using the existing cash and then loans. Which is why we will likely see aggregate lending flat at best this year, while the increase in leu lending will try to offset the decline in foreign currency lending,” Radu Craciun says.
(English version by Loredana Fratila-Cristescu)