Volksbank intends to up its equity capital by 50 million euros in order to be able to resume lending in foreign currency under the new regulations from the National Bank of Romania that came into force yesterday.
In the meantime, the bank operated its second cut this month to long-term interest rates on loans in RON – a 0.5% cut to 8.5% a year.
“We have put funding in foreign currency on hold for a while because we need to prepare the capital increase. We already have shareholder approval for an increase in our own funds by 50 million euros, but this will take some time,” Gerarld Schreiner, vice-president of Volksbank Romania, told Ziarul Financiar. The capital increase will be registered in RON to enable the bank to secure long-term resources in domestic currency. They should provide funding in RON for the next twelve months. The operation will not be completed any sooner than two or three months.
Schreiner says the bank will resume lending in foreign currency as soon as possible, because customers still want these loans, which they consider to be cheaper.
Volksbank adjusted its interest rates on RON loans, pushing long-term mortgage and personal loan rates down to 8.5% a year, in line with its policy to become market leader by price. The cut will affect the bank”s profits, however, says the bank”s vice-president, who expects this year”s profits not to exceed the level seen in June of 3 million euros.
Schreiner says he does not believe interest rates for RON will be able to fall lower than this level in light of the current inflation figures. Banks with foreign shareholders have access to much cheaper funding in foreign currency from the financial groups they belong to, while RON resources can only be attracted from deposits made by customers. Moreover, most resources in domestic currency are only attracted for the short term, while loans are taken out for the long term.
“Only share capital can provide long-term financing in RON. In these circumstances, we should actually stop granting credits for the long term. However, you cannot force your clients to repay their loans in a very short time,” Schreiner says.
He believes that once the NBR norms come into force, the competition on the foreign currency-lending segment will decrease, without being compensated for by a significant rise in the RON funding segment. “People will still seek to take out loans in foreign currency, and they will turn to those banks that can still provide them.” liviu.chiru@zf.ro