Retail lending slightly rebounded in March, compared with January and February when loan sellers lied idle. If this rebound is stimulated with lower interests, the banking market could end the year with a slight increase, says Steven van Groningen, Raiffeisen Bank chairman.
"March was different than January and February, when nothing happened. The business picked up, even though at a lower level compared with last September and an interest in loans is visible. After all, if you don't lend, you cannot justify an infrastructure of hundreds of branches and our ambition is to grant loans."
The banker believes that even though adjustments in some sectors were as high as 40% in the first quarter compared with 2008, that does not necessarily mean the entire year will be like this.
However, he says that the agreement with the IMF, the statement signed by the major banks in Vienna, or the money from the banks' minimum reserves to be freed up by the NBR, do not necessarily mean that lending will be resumed in full gear.
"We cannot expect lending to revert to September 2008 levels tomorrow, because there is no simple solution. It is not enough to inject liquidity on the market, or to cut interests. Small steps need to be taken on several fronts and the beginning of a trend created, because abrupt moves are dangerous and encourage speculation. The rebound of the market depends a great deal on the sentiment, on the client's behaviour. Exaggerations were made in the past, when demand was relying very much on the future, on expected incomes, but today people have gone to the other extreme and even those that have money would rather wait than buy something. Today much fewer people come to the (banking) office today and even fewer qualify because of the higher risk."
After the improvement in the sovereign risk perception as a result of the agreement with the IMF has reduced the cost of foreign currency financing, Van Groningen hopes there will be room for cutting interest rates on RON loans, considering the risk of a decline affecting the RON's exchange rate is not so high any more.
"The biggest risk for banks was the increase in the non-performing loans as a result of the RON depreciation. The risk cost was high in the first quarter, and manageable, at least for us. What's important now is the trend: it either stays at the current level or continues to go up and at what speed," Raiffeisen's boss says, pointing out that the lending slowdown makes the share of non-performing loans increase even more. He reiterates how important it is to use instruments to hedge against the foreign exchange risk, as the lack thereof has led to the companies that borrowed extensively in euros being "almost killed" by the abrupt depreciation of the RON since the beginning of the year.
"Banks are now very scared by non-performing loans. You don't lend 100 million euros expecting to lose 15%."
As for corporate financing, Van Groningen says it is still difficult to talk about a trend until the risk situation is clarified.
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