BCR borrows 50m euros to spend on foreign currency loans

Banca Comerciala Romana (Romanian Commercial Bank – BCR) is to take a 50 million-euro loan from the European Bank for Reconstruction and Development (EBRD) that it will use to fund housing loans for its customers.

This is the third foreign currency financing BCR has announced since early September, bringing the total amount borrowed to 309 million euros. A further 300 million euros will be raised soon through a eurobond issue.

After the enforcement of the NBR norms that cap foreign currency banking loans to no more than three times the size of a bank”s own funds, BCR now sees itself in an advantageous position, being yet to exceed this ceiling, unlike most players on the market. After all, BCR, which is the market leader, has not rushed to announce interest rate cuts for RON deposits or loans in domestic currency. Neither BRD-SocGen nor Raiffeisen Bank – the number two and number three banks in the system, respectively – have announced rate cuts as of yet.

BCR attracts a significant amount of money in foreign currency and seemingly is therefore determined to take full advantage of its position: it is able to keep developing its foreign currency loan portfolio, while other competitors are forced to shift their focus to funding in local currency. Even with the decline in rates for RON, these are still higher than those for foreign currency, given the cost of attracting RON is higher and with this year”s inflation forecast to exceed 8.5%.

As far as BCR is concerned, the cost of attracting resources from international markets has gone down visibly over the last twelve months, especially since several rating agencies upgraded their ratings for the bank. This all means BCR has enough room to cut its rates on loans in foreign currency. At present, it is offering a rate of around 9% for real estate funding and more than 11% a year for consumer loans. Some of the smaller players even pushed interest rates on RON below this to avoid losing customers, despite running the risk of a drop in profitability.

The EBRD board is set to examine BCR”s funding project in November, with the loan to come in three instalments. This is the second loan the bank will take from the same institution, following a previous loan in 2003.

Less than two weeks ago, the International Finance Corporation (IFC), the World Bank”s investment arm, announced it would be examining a 75 million-euro loan for BCR in October. liviu.chiru@zf.ro