Caution generated by uncertainty regarding the progression ofincomes is driving companies and the population to keep saving,with the loan/deposit ratio dropping to 117% in late September, alevel that had not been reached since early 2008.
A year ago, the loan/deposit ratio stood at 124.7%, before alreadydropping to around 119% in mid-2009, according to NBR statisticaldata.
"There are several factors behind this decline. First, solventdemand for loans is slowing down, while savings are rising. At thesame time, the way foreign currency financing can be obtained isanother element generating this tendency," points out LucianAnghel, a chief economist with BCR.
On the other hand, several banks have removed loan portfolios worthhundreds of million euros from their balance sheets. In any case,the ratio between loans and deposits of above 1 is entirelygenerated by foreign currency financing, in the context where inRON banks have granted loans of around 0.85 RON for each RONattracted from the market, according to NBR data.
At the same time, time deposits banks attracted in the first ninemonths of the year rose by 27% to 115.8bn RON (around 27.7bneuros), spurred in first half by the high interest rates offered byfinancial institutions as they fought for cash. Starting the thirdquarter, deposit interest rates have gradually declined.
Analysts say the way the loan/deposit ratio fluctuates in thefollowing period depends a lot on the way the "First Home"governmental programme reflects on the market. A possible reversalof the downward tendency also depends on economic recovery, butthis will not happen very soon.
At the same time, the profitability rate of the core business inthe banking system as a ratio of operating revenues and operatingexpenses in the third quarter climbed to around 153% after havingdropped from 182% to 148.7% during September 2008-June 2009,indicating banks are again having cost control troubles despitelayoffs.
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