NBR’s chief economist to banks: Take lower profits and make loans in RON cheaper

The spreads between the interests on new loans and new deposits in RON that banks operate with have tripled since the beginning of the year and one of the reasons for this is that banks are now trying to boost profits to offset the losses from the loans granted in the past, says Valentin Lazea, chief economist of NBR. In turn, bankers say that the constant deterioration of loans is a reality that reflects the difficult economic environment, which they cannot overlook when granting a new loan.

"This is not good for banks. They should take responsibility for their mistakes and show it in lower profits this year compared with the previous years. Not punish new customers," Lazea said at the "What loan is better - in RON or in euros?" seminar organised by Ziarul Financiar and CEC Bank.

The share of loans overdue by more than 60 days in the total portfolios of banks has doubled since the beginning of this year until July, jumping over 12%, NBR's latest data reveal. As far as individual clients are concerned, past due loans went up by 10% month by month this year. Unsecured consumer loans, the granting of which sometimes required as little as an ID card from the applicant, as promoted in 2006 and 2007, are now the most troublesome as far as bankers are concerned.

The gap between the average interest on new loans in RON and the average interest on new deposits in RON rose to 7.3 percent in August, from 2.4 percent last December, according to the calculations of NBR's chief economist.

"I find this huge and I honestly believe banks are killing the goose that could have laid the golden eggs," Lazea says.

He adds that lending in foreign currency witnessed a minor increase in the first eight months of the year (if calculating the volume of loans in euros), while lending in RON fell by 9% in real terms.

The high interests on loans in RON are therefore the only economic argument supporting loans in euros, but they have managed to drive the clients to loans in foreign currency, which are riskier, though.