Private lending remained frozen last year. Bankers ask for infrastructure projects

Bankers kept private lending “frozen” last year and, in the absence of funding, the Romanian economy ended up being the only country in negative territory apart from Greece, more than two years after the 2008 financial crisis.

Private sector lending fell by 3% in real terms last year (eliminating the impact of inflation), similarly to what happened in 2009. The scenario of the past two years is radically different from the up to 50% growth rates recorded in the booming years of the economy. At the end of last year the volume of private lending was 49 billion euros, compared with nearly 50 billion euros in December 2008.
In the absence of money for new acquisitions, domestic consumption collapsed and exporters did not manage to drag the rest of the economy along, despite the return of demand on foreign markets. Despite exports climbing 30%, the economy fell by nearly 2% last year, according to estimates.
The bankers have yet to notice a rebound of consumer lending. They would rather finance companies, but here investment projects are lacking, because entrepreneurs do not see demand on the horizon. How can one break this vicious circle?
“I hope the infrastructure projects will be launched and start absorbing increasingly more money,” says Lucian Anghel, chief economist of the BCR, the biggest bank on the Romanian market by assets. Similarly to last year, he sees prospects of lending growth on the corporate segment. Indeed, in 2010 companies were able to absorb more money from banks, but their demand focused on foreign currency-denominated loans, which continue to be much cheaper. On the retail segment, demand was similar, being only tentatively supported by the “First Home” scheme for mortgage loans.
Bankers only found demand for foreign currency-denominated loans last year, with the high interests keeping customers away from borrowing in RON.
The volume of foreign-currency loans granted to individuals and to companies climbed by 9.8% last year, to nearly 132 billion RON (31 billion euros), managing to raise the overall volume of private funding to 209.3 billion RON, 4.7% more than at the end of 2009. However, eliminating the impact of inflation, private lending fell by 3% in real terms.
Companies attracted the bulk of financing granted by banks last year, with the volume of loans up by 7.4 billion RON (the equivalent of 1.75 billion euros), and demand being mainly for foreign-currency loans. Companies had loans worth 65.8 billion RON (15.4 billion euros) in December 2010, 11.9% more than in the similar period of the previous year.