NPL ratio poised to climb until mid 2010

NPL ratio poised to climb until mid 2010Romanian 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.

10. Teleorman 4.07%

In Teleorman, the total value of retail and business loan delinquencies reached 47.58 million lei, namely 4.07% share in total number of loans taken out by natural persons and companies in the county. Loans given in the county totaled 1.16 bln lei.

Leu-denominated loans registered the highest delinquency volume -45.6 mln lei when compared to 1.98mln lei volume for Fx-denominated credits.

9. Neamt 4.25%

Delinquency volume in Neamt totals 105.7 mln lei, of a total bank lending in the area of 2.48 bln lei, at a delinquency rate of 4.25%.

Leu-denominated loans sector led delinquencies, at 75.88mln lei, versus 29.82 million lei for Fx-denominated loans.

8. Hunedoara 4.44%

Hunedoara county appeared in National Bank of Romania’s September records as a problem area, with 115.18 mln lei delinquencies, i.e 4.44% of total bank lending in the county. Total value of loans is 2.58 billion lei.

In Hunedoara, leu-denominated loans sector led delinquencies once again, with 96.2 million lei, versus 18.98 million lei for fx-denominated loans.

7. Alba 4.53%

In Alba, the volume of delinquencies rose to 124.2 million lei, at a total bank lending of 2.74 bln lei in the area. Delinquency rate was thus at 4.53% in the period under review.

The highest delinquencies recorded in Alba was still for leu-denominated loans – 65.67 million lei, compared to 58.53 mln lei for loans in a foreign currency.

6. Calarasi 4.67%

Inhabitants and companies in Calarasi county who fell behind on their loan payments, still have to return a total of 59.02 mln lei to the banks. Total bank lending in the area was around 1.26 bln lei.

Delinquency volume for leu-denominated loans came to 46.54 million lei, while delinquent loans in foreign currency stood at 12.47 mln lei in Calarasi.

5. Olt 5.06%

Delinquency volume in Olt county stood at 102.37 mln lei, of a total bank lending in the area of 2.02 bln lei, which pushed the rate at which debt holders defaulted on their loans to 5.06%.

Leu-denominated delinquent loans totaled 94.23 million lei, versus 8.13 mln lei for loans in foreign currency.

4. Arad 5.22%

Borrowers in Arad county had to repay a total outstanding debt of 157.47 million lei to lenders in September. The total bank lending in the area stood at 3 bln lei. The delinquency rate in Arad has thus climbed to 5.22%, according to data provided by the National Bank of Romania.

In Arad, leu-denominated loans sector continued to lead delinquencies, with 80.12 mln lei volume versus 77.34 mln lei for credits in foreign currency.

3. Salaj 5.24%

Salaj county takes up the third spot in the Top 10 areas with the highest delinquency rates, where total volume of outstanding loans reached 114.53 million lei, at a total bank lending in the area of 2.18 bln lei (5.25% default rate).

In contrast with other counties listed by Wall-Street as problem areas, in Salaj, the leu value of Fx-denominated delinquent loans outpaced the value of leu-denominated loans – with 81.19 mln lei and 33.34 mln lei respectively.

2. Suceava 5.69%

On the second position is Suceava with total delinquency volume of 190.02 mln lei. Total bank lending in the area stood at 3.34 bln lei, and delinquency rate is hence around 5.69%.

Leu-denominated delinquent loans totaled 148.9 mln lei, while delinquent fx loans amounted 41.11 mln lei.

1. Bistrita-Nasaud 8.73%

Bistrita-Nasaud county rounds up the top ten areas with the highest the delinquency rates in September when the area’s total delinquency rate came to 8.73%, at a wide margin from the second position.

In Bistrita-Nasaud, the total value of outstanding loans amounted to 203.71 million lei, while total bank lending in the area wasn 2.33 bln lei.

Leu-denominated delinquent loans totaled 132.35 mln lei, versus 71.36 million lei outstanding debt for Fx-denominated loans.