High interest rates keep clients away from consumer loans

Consumer lending continues to stagnate, with new loans unable to keep up with those that have reached maturity because the high interest rates discourage prospective clients, while banks do not grant non-secured loans as easily as before, amid uncertainties related to the economy's progression. At the end of August, the overall volume of consumer loans amounted to 73.9 billion RON (17.5 billion euros), a similar level to that recorded in the previous month, but down 3% against the volume posted at the beginning of the year. Mortgage loans, on the other hand, rose for the fourth consecutive month, by around 4% against this year's April minimum. Bankers explain the poor performance of consumer loans by the fact that only a small share of these products are secured, which makes them the biggest loss-makers for banks. Clients are there, but banks are more tight-fisted when it comes to the amounts they lend. "The volumes sold at present are not offset by repayments. It is normal to see this progression on the lending market in a time of economic decline. At our bank, for instance, the sums approved are lower than in previous years," said Gabriela Nistor, retail credit manager at Banca Transilvania. Against August 2008, the volume of consumer loans granted by banks in Romania is almost eight per cent higher, the lowest annual rise recorded since 2005. Until early 2007, consumer loans recorded annual increases of up to 100%, with the banks' portfolios largely set up after 2004.