The appetite for consumer loans slaked toward the end of last year. In December, the volume of consumer finance advanced by only 1.4%, compared with monthly paces of almost 10% seen at the middle of the year. Under the circumstances, at the end of 2006 consumer lending totalled 30.37 billion RON (8.98 billion euros), 94% higher than the level reached in December 2005. In 2005, consumer lending even doubled in nominal terms.
The slowdown registered in the last month of 2006 came about in the context where RON financing almost stalled at 21.4 billion RON, the advance against November standing at only 0.7%, despite banks' winter promotions. On the other hand, the need for cash for winter holidays was largely covered by salary raises and bonuses granted by employers.
Nevertheless, foreign currency lending climbed by 3%, to 9 billion RON (2.6 billion euros).
Overall, the appetite for RON financing fell considerably in the second half of last year, with the monthly growth pace slowing down to almost zero, after having exceeded 10% in May. Demand for foreign currency financing also got considerably lower, with monthly increases going down from almost 10% in June to less than 3% in November.
Population's lending demand shrank a great deal during the last months of 2006, with the trend being visible particularly on the segment of mortgage lending. NBR's monetary policy tightening in June last year had quite rapid effects as banks started paying better interests for deposits, but also raising the cost of lending. Thus, during the last few months of 2006 individual customers started switching to savings. Though the monthly expansion pace of consumer lending slowed down considerably during the last few months of 2006, the annualised growth pace was speedier.
The annualised growth of consumer lending accelerated from 89% to 93% in December. The movement was more visible on the segment of foreign currency lending: annualised growth accelerated to 90% from 55% in the previous month. By contrast, RON lending further slowed down, with the annual expansion rate decreasing to 95% in December, from 108% in November.
Consumer lending considerably outpaced mortgage lending in 2006, as well. Thus, its weight in the overall volume of loans contracted by the population from banks soared to 79% from 75% in December 2005.
Financing demand registers significant variations between counties, depending on economic potential. Bucharest alone concentrates over 23% of overall consumption financing contracted countrywide, with a volume of 7.17m RON (2.12 million euros).
Banks have so far concentrated their territorial presence depending on the economic potential of various regions. Amid rising competition, though, bankers will have to approach clients with a lower economic potential, too.
Consumer lending
Last December went up by only 1.4%, compared with monthly paces of almost 10% seen at the middle of the year
Reached an overall volume of 30.37bn RON (8.98bn euros) at the end of 2006, 94% higher than in December 2005
The slowdown seen in the last month of 2006 occurred as RON financing almost stagnated, at 21.4bn RON and foreign currency financing advanced by 3%, to 9bn RON (2.6bn euros)
Still, the annualised growth pace sped up from 89% to 93% in December
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