Dramatic situation for NBFIs: One in three loans is loss making

Non-performing loans ended up amounting to one third of the portfolio of non-bank financial institutions (NBFIs) double as much as in the summer of last year, and almost five times more than two years ago. This progression is another blow dealt to financing companies, after the 72% decline of the leasing market in 2009, which followed increases of over 40% a year.

Therefore, according to Adriana Ahciarliu, secretary general of the Association of Financial Companies (ALB), which includes 98% of leasing companies and the largest players on the consumer loan market, non-performing loans accounted for 33% of the NBFIs’ portfolio. Last summer, they made up 15% of the overall portfolio, from 7% two years ago. In the banking system, non-performing loans currently account for 15% of all loans.

“This is a very high level. The main problem is that compulsory execution of bad payers takes very long, months even, which leads to an increase in the loan-loss provisions allocated by NBFIs. That is why shareholders need to come up with fresh money, which will lead to a rise in financing costs for new clients,” Ahciarliu explains.