Bank lending may pick up in second half this year

Lending will pick up gradually

The National Bank of Romania cut the main lending rate last week by another 50 basis points to 7% in a bid to stimulate national currency lending, as last year the non-governmental credit fell 3.6%.

“Lending will pick up gradually but it won’t be across-the-board. We can already see banks taking different approach to lending”, said Mugur Isarescu (photo), adding, that “banks are still reluctant to loosen credit-quality standards”.

But the central bank will not encourage fx lending, notwithstanding the positive outlook for the leu.

On the other hand, banks say credit risk is still high, which doesn’t allow them to soften lending rates by as much as the central bank or borrowers would like. Banks’ no1 threat is the NPL ratio in their loan books, coupled with the growing unemployment rates.

“We don’t have a detailed picture of how the economy would perform when we will emerge from recession. We might follow the same pattern as the other countries”, said Isarescu.

The economy shows signs of recovery

“Lending will get back on a more sustainable course to recovery as late as second half of 2010 and early 2011,” said Cristian Popa (photo), deputy governor of the National Bank of Romania, who sees Romania emerging from recession in the first quarter 2010.

Economic data point to a recovery, but lending to homes and businesses will pick up later, on rising unemployment rates.

“We will most likely see the first quarter-on-quarter growth in the first half of 2010. We do have positive signals for the fourth quarter 2009, but weak”, said Cristian Popa.

Which banks cut their lending rates?

Banca Comerciala Romana cut interest rates on lending by 2.5% for new loans.

Interest rates for fixed-rate personal loans Divers Extra BCR in lei range between 9.9% and 11.75% for borrowers with good credit history. For clients with no credit history at BCR, interest rates reach 13.25%.

Banca Romaneasca, the local subsidiary of the Greek-based National Bank of Greece has cut interest rates on secured and unsecured consumer credit by 0.5% - 2%, depending on the currency.

Interest rates for loans in lei at Piraeus Bank fell 3.41% in January while the nominal interest for personal loans dropped from 18.65% to 15.24%. As for secured personal loan, the nominal interest was cut from 16.4% to 12.99%. Interest rates on mortgage loans range between 11.75% and 12.24%.

Garanti Bank Romania lowered interest rates on its entire credit lineup for natural persons by 1.08%, with effect from February 1.