The euro-denominated loan price hike season has started when Volksbank, one of the most aggressive banks when it comes to low interest rate offers, applied a retroactive increase of 1.5%, with other bankers anticipating, at least, "small increases" in interest rates. This proves that Romania is not immune to the tension of foreign financial markets, on the contrary: customers who have already taken out loans have found themselves having to repay higher instalments (by as much as 100 euros) and with an indebtedness level of over 60% because of higher interest rates and the depreciation of the RON.
"The trend is to go for a slight increase in the prices of loans in euros. Banks that had cheap offers are now forced to acknowledge the real facts, because the euro has become more expensive both in RON, and in terms of interest rates. Banca Transilvania does not have any cheap euro-denominated products because we wanted to offer a fair price, to reflect even the domestic risk. We can be considered a barometer because we are a Romanian bank," Robert Rekkers, general manager of Banca Transilvania told ZF. However, he adds: "Slight rate moves may also occur at BT. I don't see any sudden significant changes, though."
Rekkers explains that the shortage of cash in euros on the foreign market is spreading to the Romanian market, even though it is "quite liquid in RON" and also in euros.
Sorin Popa, deputy general manager of the retail segment of BRD Soc-Gen says the second biggest bank on the market does not intend to increase interest rates "for now", but anticipates "a minimum increase" of the cost of the euro loans on the entire market.
"We will not take any steps yet, but we could do so if a trend emerges on the market or if we believe we have to rally to other standards. It depends on NBR's moves and on macroeconomic indicators and there could be chain reactions. We can anticipate a minimal increase on the entire market, because the current interests on the real estate loans have gone very low and you can no longer be certain whether the product you are selling allows you to make a profit," Sorin Popa told ZF.
The head of BRD retail says adjusting prices to the current conditions is the natural thing to do, because banks ultimately seek to turn a profit. "Many banks forgot to check the profitability and the income per product. There's been a dumping on the market, which needs to be adjusted, because small banks are unable to cope with higher costs and remain profitable at the same time. BRD was careful with every interest rate decision - we have neither been the most expensive nor the cheapest."
On the other hand, such measures could create a lot of problems for customers that have to repay significant amounts of money, in particular those who borrowed this summer when the euro was very low in RON. At the same time, an increase in euro loans will restrict access to financing, which includes home buying, which could temper the real estate market.
"Certainly some customers could find themselves in trouble, especially if they were close to their indebtedness cap when they received their loan. The method used to attract clients with interests that only remained low for a few months mislead customers and as such they risk defaulting, which is bad for them and for the bank," adds Sorin Popa.
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