Romanians' borrowing frenzy and the banks' pursuit of as quick a retail market share expansion as possible is taking its toll: overdue payments on ROL-denominated loans due in more than three years increased over 5 times in 2003, moving faster than the total lending, which rose only 4.5 times from 2002.
The overdue payments on such loans, which are mainly used for buying homes, therefore reached some 6.2 million euros. Not much, yet the growth speed may spell trouble. If looking at the overall market of retail lending (1.8bn euros), the amount of overdue payments on instalments tends to become substantial, totalling 11.2 million euros at the end of last year.
As shown by NBR's statistics, the payment of instalments has become more and more difficult for those individuals who took out loans in foreign currency for medium and long-term, too: the overdue payments in this regard almost tripled in 2003, while the amount of these credits increased four times if calculated in ROL equivalent.
On the other hand, the much maligned short-term credits, which include funding for buying home appliances for instance, saw only 13.7% rise in overdue payments, while total credits in this regard progressed by 69%. At the same time, the overdue payments on foreign currency loans taken out by individuals for short-term went up, while the amount of such credits calculated in ROL fell 51% from 2002.
So this is how the boom of the consumption on credit, which gave the Gross Domestic Product a substantial boost in 2003, is starting to show its weaknesses. Those banks that kept behaving like there was little risk in expanding their individual client portfolios so fast might find themselves faced with significant costs caused by provision building and debt collection.
The effort to pay the overdue instalments on the ROL loans could become harder and harder to bear given that interests are not going to fall any sooner than the second half of this year and the inflation will be less and less a factor in thinning down the real cost of borrowing. At the same time, the growing unpredictability of the ROL exchange rate against the euro and the dollar could result in surprises, albeit the expected stability of the ROL/EUR rate would make it easier to repay the loans denominated in the European currency. The non-governmental lending progressed by 70.1% (49% in real terms) in 2003, due to the increase in ROL-denominated lending by 102.7% (77.7% in real terms) and in the foreign currency-denominated lending by 50.7%. razvan.voican@zf.ro
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