UniCredit: fast-paced deterioration of credit portfolio

Romanian banks saw their credit portfolio quality worsen at the fastest pace in the region, with past due loans (with a delay of more than 30 days) accounting for almost 18% of the total in April, which is three times more than in Poland, reveals a regional report of the UniCredit Group.

“At this point, the loan portfolio quality and credit risks are the constraints for the CEE banking sector. 2009 and 2010 will remain challenging, but the long term prospects of the region remain untouched,” says Debora Revoltella, strategic analysis manager for Central and Eastern Europe (CEE) within UniCredit Group.

Past due loans (rated as “substandard”, “doubtful” and “loss”, which were past 30, 60 and 90 days overdue respectively), accounted for 10.8% of Romanian banks’ portfolios in September last year, the highest level out of all 13 countries included by UniCredit in the “CEE – challenging times but recovery on the horizon” regional study. High percentages were also recorded by Russia, with 8.9% and Kazakhstan, with 7.5%. Between September last year and May this year, the worst deterioration was recorded by Kazakhstan, with the share of problematic credits climbing to a 26% regional high.

Credit quality was more stable in Central Europe – Poland, Hungary, the Czech Republic and Slovakia. For instance, in the Czech Republic and in Slovakia, past due loans accounted for just 4% of the overall portfolio in May, a moderate rise from 3% last autumn. Depreciation was somewhat faster in Hungary, where their share climbed from 4.1% in September last year to 5.3% in March (the report does not include data for May).

On the Romanian market, past due loans were primarily accounted for by unsecured small-value loans granted to the population. With loans in foreign currency accounting for over 50% of the overall portfolio, the RON’s depreciation, by 16% on average in the first half of this year against the year-ago period, affected many clients’ ability to pay their instalments.