Credit Europe: We have money to lend, but good clients are reluctant

Bankers' biggest challenge now is to persuade businesspeople to take out loans, given that the lack of demand growth prospects is dampening any investment plan, says Omer Tetik, first vice-president of Credit Europe Bank, a domestic medium-sized bank, part of the financial group controlled by Turkish businessman Husnu Ozyegin.

On the other hand, Tetik says the retail segment is now perceived as quite risky, as redundancy programmes have not been halted.

"High school teachers are the best payers. But how can you lend to them, when you don't know if they are to be laid off," Credit Europe Bank manager wonders, considering the state is still delaying implementing expense reduction plans though it is ever more clear tough cost cuts cannot be avoided.

In the absence of funding to support consumer spending, firms do not have anybody to produce for, either, but all clients are now more wary in taking out loans after the 2008-2009 shock, when interest rates soared and banks almost completely froze lending.

"We have cash and we want to grant loans, but good clients are highly reluctant. Firms with a sound financial situation are putting off investments, and individual clients are waiting for prices to go down some more," Tetik says. He says in the case of Credit Europe 20% of assets are placed in liquid instruments (either on the inter-bank market, or in bonds i.e.), but the situation is similar on the entire market.

However, for 2010, the Turkish bank plans to boost the volume of loans by 15%-20%, which would, however, mean a little more than recouping the 2009 decline. "We ended last year with a loan volume of 900m euros. In 2009, we sold a mortgage loan package worth 360m euros to the parent company in the Netherlands. Without the impact of this transaction, the volume would have dropped by 15%, because sales were weak across all lines," Tetik states.

He accounts for the sale of loans to the parent company by plans to better use capital at group level, considering the portfolio quality was very good.

On the other hand, Credit Europe manager says the bank will fund this year's loan advance by attracting deposits on the Romanian market, but it can also access funds from the group.

"We have no financing lines on the short term. Except client deposits, in 2010-2011 we do not have any funding falling due".

The high provisions set up to cover potential losses related to bad loans ate almost the entire income from current operations Credit Europe made last year.

"Operating income reached 27m euros. Audited data are not final, yet, but we expect to have a lower net income after provision deduction," Tetik says.

The bank last year implemented an extensive cost cutting programme, ranging from headcount cuts to branch closures.

The impact of the economic downturn on loan portfolios followed the classical trajectory, says Tetik, with retail loans the first to be hit, followed by those aimed at small and medium-sized enterprises and then large companies.

However, for this year, Credit Europe has budgeted net income worth 14m euros (after provisions and tax). Tetik, as a matter of fact, says that in the case of loans granted in the second half of 2009 there are no clients with instalment payment delays of more than 30 days.