With bank instalments to repay that amount to 16% of their incomes, Romanians are more indebted than customers on mature markets in Western Europe and even Americans. "The debt service, which stands at 16%, is among the highest, leaving many countries in Europe and the United States behind," notes Razvan Munteanu, Raiffeisen Bank's retail unit vice-president.
For comparison purposes, the debt service in the eurozone stands at only 10.4% and at 14% in the US. Romanians are doing better in terms of indebtedness than Poles, Brits and Dutch, who repay one fifth of their incomes to banks.
The share of the bank debt service (principal and interest that is) in the total income has gone up rapidly over the last few years, given the steady rise in the loans taken out by the population.
NBR data reveals that the debt service stood at only 11% at the beginning of the year, up from the 7% in December 2005.
Sergiu Oprescu, chief executive of Alpha Bank, explains that retail lending doubled every year from 2001 through 2007. Individuals have accumulated 22.2 billion euros worth of debts to banks, according to the NBR data at the end of April.
Razvan Munteanu notes that although the 16% may seem alarming, the domestic market has certain peculiarities that make it easier for people to bear their debts to banks.
On the one hand, most people own the home in which they live in Romania, that is over 90%. Therefore Romanians do not have to factor in rent, unlike the clients on Western markets, where the percentage of people living in their own homes is much lower.
"There is also a significant grey economy component, which means unstated incomes. If such unstated incomes were deducted from it, the debt service would probably be lower, 13%," Munteanu adds. Still, the data is calculated as an average for the entire population, while the data of the Credit Bureau reveals that only four million Romanians have loans taken out from banks and consumer finance companies. Moreover, the total number of credit accounts is 6.6 million, so that two out of three clients have taken out more than one loan.
Bankers, however, remain optimistic about the potential for development of retail lending, considering the local market is still behind those in the region.
The share of the non-governmental lending in the Gross Domestic Product is now close to 40%, so that Romania is close to Poland in this regard. Loans taken out by the population accounted for only 18% of GDP at the end of last year, compared with 22% in Poland and 54% in the eurozone.
"Although the growth rate of lending seems rapid, the big picture shows that we've been moving in sync with the region," Raiffeisen's vice-president points out. The Romanian real estate financing market still lags behind the rest of the region judging by most criteria for comparison.
On the other hand, Sergiu Oprescu says that the exuberance in the real estate field of the last two years has died down, after the turmoil on international financial markets.
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