Top 10 counties with the highest delinquency rates

Ana Sabiescu, 28 Oct 2009

Romanian version

The total value of retail and business loan delinquencies rose to 6.51bln lei (€1.55 bln) in September this year, up 4.27% from a month earlier, and 302% more than a year-ago period, according to data provided by the National Bank of Romania. The delinquency rate in total bank lending climbed to 3.25%, and analysts say visibility remains low for the coming period.

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NPL ratio poised to climb until mid 2010

Romanian banks may see non-performing loan ratio rising until mid next year, in light of worsening unemployment scenario and economic contraction, Ionut Dumitru (photo), senior economist of Raiffeisen Bank Romania said.

“It is clearly that the number of outstanding loans tripled, but increased from a low level. The current NPL ratio is bad news to banks, as it generates high provisioning costs, but the situation is manageable today, and is not at risk of escalating up to a point where it turns into a system-wide problem”, Ionut Dumitru told Wall-Street.

In the coming period, NPL ratio is expected to climb further, both for retail and small business loans.

What drives borrowers default on their loans?

- Unemployment risk – “We expect the jobless rate to trend upwards until mid next year and this is one of the main reasons behind the growing credit card default and delinquency rates”, Raiffeisen Bank’s senior economist pointed out.
- Falling incomes resulted from pay cuts
- Exchange rates. “As for the exchange rates, it is vital for the leu to stop from falling. Higher exchange rates entails higher delinquency rates”, Ionut Dumitru.

What drives companies default on their loans?

- Precarious finances. “Companies’ financial situation is not expected to improve, but rather worsen, should the economy doesn’t pick up soon”, said the economist.
- Taxes
- Country’s economic performance
- Exchange rates.

Read more on the country’s delinquency rates in September broken down by counties.

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