Frenetic non-government lending stems more overdue payments

How are your loan payments coming along? If you counted on a salary raise, you may be in trouble. The average net salaries in euros dropped more than 9 euros in May, a casualty of the accelerated ROL depreciation against the single European currency.

If the domestic currency is considered, wages practically froze in nominal terms as compared to the early-year levels, but their real value has been in fact eroded by the 4.8% five-month inflation.

This could explain why the loan payments due by natural persons doubled in May as compared to April, up to 120.8 billion ROL. The amount is not exceedingly high. However, it may be cause for concern, since overdue payments went up 5.5 times in only one year. Although the natural persons were always on time with loan payments, the lack of a lending culture (which comes with minimal revenue and spending planning) is beginning to show.

“We have not faced such situations yet, but I must admit we thought they might occur. It is obvious that, should the lending criteria become even laxer, such as dropping guarantors or the compulsory insurance policies (in order to gain a bigger market share), the non-payment risk will certainly increase,” Ionut Patrahau, vice-president of Banca Transilvania told Ziarul Financiar.

Once lending conditions become less rigid (no more guarantors, smaller down payments), increasingly more people could be tempted to apply for a credit they cannot pay back. Despite significant drops, the rates for ROL credits are still high and engulf a big chunk of family incomes. This way, the risk of losing the car or the house is looming closer, especially since no more rate cuts are envisioned for the near future. On the contrary, the IMF would like to see rate hikes, to put a damper on the frenetic lending.

Banks are not worried, though, as they are very happy with the soaring business levels. The biggest retail market players claim they have absolutely no problem with overdue payments for credits. Still, the figures released by the National Bank of Romania go up every month.

“Statistically speaking, irrespective of how performing a risk assessment system may be, there is always a number of overdue loans. They should only be contained within reasonable and predictable limits, that’s all. The increased number or volume of overdue loans should be related to the bigger credit portfolio and to the total credit volume in a bank’s portfolio, for a certain segment. In our case, this indicator is significantly below 1%,” says Rasvan Radu, vice-president of Raiffeisen Bank, one of the retail market’s most aggressive banks.
razvan.voican@zf.ro ; oana.nuta@zf.ro