EnglishBanks will no longer be as restrictive as they were in their lending to the public and private sector, in the coming period, even though the professional associations have announced that they are expecting bankruptcies and contraction of businesses, after the raise of the VAT and of the layoffs, the representatives of lenders told us.
Last week, representatives of "Coface România" were saying that the raise in taxation would cause a contraction in consumption, and implicitly a reduction in the companies" sales, which will affect private companies in particular. In the absence of any positive economic factors, lending will most likely remain restricted, "Coface" analysts consider.
Financial analysts however expect bankers to continue to lend money to businesses with a good financial standing and a solid management.
In May, the balance of non-governmental lending amounted to 203.11 billion lei, up 1.4% compared to the previous month, and 2% over May 2009, according to data from the Central Bank.
Out of this amount, 102.61 billion lei went to companies (non-financial companies and non-monetary financial institutions).
In lei, the balance of loans issued to non-financial companies and non-monetary financial institutions stood at almost 40.19 billion lei, down 0.3% over April, and down 4% over May 2009.
The balance of loans for non-financial institutions and non-monetary financial institutions amounted to 62.42 billion lei, up 2,7% over the previous month and up 9% compared to May 2009.
Lucian Oană, manager of SME sales with OTP Bank, said that the banks are increasingly willing to lend money, and added: "It is true that banks are asking for increasingly higher downpayments for loans in this sector, meaning that loan applications are not as numerous".
For instance, in order to encourage lending, OTP has decided to extend until September 30 the offer for short term loans, with a promotional interest rate of 9%, even though it was initially scheduled to end on July 9th. The only thing that changed is the management fee, which went from being unspecified, to 0.15% a month, as ROBOR continues to rise.
The representative of OTP said that the average interest rate of the market for loans keeps dropping: "Last month, the average interest rate for loans denominated in lei dropped almost 1%, and it dropped 0.5% for loans in Euros. A minimum would be 9%. On the other hand, we have customers coming in looking to refinance their credit lines, due to the high interest rates of 20-22% that they are paying".
Lucian Oană mentioned that OTP saw no drop in the pace of lending on the corporate segment: "Over the last six months, the demand for corporate lending was rather big, compared to the estimates made by the bank in the beginning of 2010.
We do not forecast a drastic drop in demand for SMEs. Only during summertime can we expect such a phenomenon, because that"s when businesses usually drop."
• Nicolaie Alexandru Chidesciuc, ING: Demand for loans will drop significantly in the near future
Nicolaie Alexandru-Chidesciuc, chief-economist at ING Bank, said that he expects corporate demand for loans to drop in the near future, "because the hike of the VAT will cause consumption and investments to drop, thus having a strong effect on demand for loans".
The representative of the ING does not expect banks to apply new lending restrictions for companies, expecting them to be limited to the part of the population affected by the wage cuts.
• Gheţea, CEC Bank: Retail demand for loans is zero; companies that prove they have a cash-flow and bring collateral, can get financing
Demand for loans from individuals is zero, said Radu Graţian Gheţea, the president of CEC Bank and of the Romanian Banking Association.
He went on to say: "Companies that prove they have a cashflow and bring guarantees, can get financing".
One problem is the depreciation of loan guarantees, the president of CEC Bank said, and he added: "We have relaxed the lending norms for legal entities. The interest rates are down, as did the required collateral, which went down 10 points, from 120% to 110%, for those who access European financing".
• Lucian Anghel, BCR: Banks will focus on current lenders first, and then on issuing new loans
Lucian Anghel, the chief-economist of the Romanian Commercial Bank (BCR), considers that banks will focus first and foremost on supporting their current loans, "which they will be careful to help them get through the crisis", and only then will they focus on new loans.
He said: "Bank have already imposed restrictions on lending, I do not think they will do so any further. The management of the companies is very important when it comes to new loans. We will not see an increase of the collateral requirements.
• Bogdan Baltazar: It is possible banks will demand additional guarantees
Analyst Bogdan Baltazar expects lending terms will remain restrictive, just like they were until now. Furthermore, it is possible that bankers will require additional guarantees, to compensate against any subsequent depreciation: "Demand for loans on the corporate segment remains weak. It will remain like that at least until October, because business is slow in the summer".
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