BRD-SocGen, the second largest player in the banking system in terms of assets, will continue network expansion, but with a more selective policy and feels the need to slow down lending for individual clients, as well as for small companies, amid an increase in risks.
"There are sectors where the risk cost is double compared with others, apparently for no logical reason. The higher criminal potential of those sectors seems to be the reason for this," says Lucian Cojocaru, chief executive of the Commercial Department of BRD-SocGen.
Under the circumstances, the French have decided to apply stricter conditions, which includes unsecured loans granted to small enterprises, after it made a similar move for individual clients. "Since the beginning of the year, we have put more emphasis on credits in RON, but the increase in the interest rate spread against the euro is not helping us."
Under the circumstances, the volume of loans granted to SMEs based on simplified paperwork has stayed below last year's level. Currently, the volume of these loans (included in the Ristretto range) account for around 4% of overall corporate financing, i.e. around 190 million euros.
The BRD has an overall exposure to SMEs (which include all companies with less than 50 million-euro turnover) worth 3.1 billion euros.
"Very small firms are a segment with significant potential. Unfortunately, the lack of data and the criminal activity have tarnished this segment, which is worth funding," says Cojocaru adding that the NBR (central bank) does not provide data on this segment, releasing just a synthetic indicator, which covers all corporate exposures.
"The market is more advanced than the NBR. One has to be more particular about risks. There is a big difference between the approach towards retail lending, which is very strict, and the corporate one, which is too vague and relaxed," believes the BRD manager.
The French entered the niche of standardised loans for small enterprises in 2006. This segment had been introduced on the market since as early as 2005, by Banca Transilvania, which over time launched a series of standardised products that allow for a quick financing decision to be made.
At the time, several banks were quick to enter the niche of standardised loans for small enterprises, which was seen as an outlet in case of a prospective slowdown on the retail segment.
"In terms of risks, this loan category is similar to consumer finance. The cost of risk (the share of overdue loans in the total amount of loans contracted) stands at around 2 - 3 percentage points."
The BRD has also increased restrictions for consumer loans since the beginning of the year, amid a risk increase, particularly on the segment of low-income clients. The French imposed a minimum monthly income of 500 RON for consumer loans, while for mortgage loans the minimum income stands at 500 euros.
BRD
The bank has decided to apply stricter conditions including for unsecured loans, granted to small enterprises
The bank has an overall exposure to SMEs (which include all companies with less than 50 million-euro turnover) worth 3.1 billion euros
The bank has also increased restrictions for consumer loans since the beginning of the year, amid a risk increase, particularly on the segment of low-income clients.
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