Bankers' biggest challenge now is to persuade businesspeople totake out loans, given that the lack of demand growth prospects isdampening any investment plan, says Omer Tetik, firstvice-president of Credit Europe Bank, a domestic medium-sized bank,part of the financial group controlled by Turkish businessman HusnuOzyegin.
On the other hand, Tetik says the retail segment is nowperceived as quite risky, as redundancy programmes have not beenhalted.
"High school teachers are the best payers. But how can you lendto them, when you don't know if they are to be laid off," CreditEurope Bank manager wonders, considering the state is stilldelaying implementing expense reduction plans though it is evermore clear tough cost cuts cannot be avoided.
In the absence of funding to support consumer spending, firms donot have anybody to produce for, either, but all clients are nowmore wary in taking out loans after the 2008-2009 shock, wheninterest rates soared and banks almost completely frozelending.
"We have cash and we want to grant loans, but good clients arehighly reluctant. Firms with a sound financial situation areputting off investments, and individual clients are waiting forprices to go down some more," Tetik says. He says in the case ofCredit Europe 20% of assets are placed in liquid instruments(either on the inter-bank market, or in bonds i.e.), but thesituation is similar on the entire market.
However, for 2010, the Turkish bank plans to boost the volume ofloans by 15%-20%, which would, however, mean a little more thanrecouping the 2009 decline. "We ended last year with a loan volumeof 900m euros. In 2009, we sold a mortgage loan package worth 360meuros to the parent company in the Netherlands. Without the impactof this transaction, the volume would have dropped by 15%, becausesales were weak across all lines," Tetik states.
He accounts for the sale of loans to the parent company by plansto better use capital at group level, considering the portfolioquality was very good.
On the other hand, Credit Europe manager says the bank will fundthis year's loan advance by attracting deposits on the Romanianmarket, but it can also access funds from the group.
"We have no financing lines on the short term. Except clientdeposits, in 2010-2011 we do not have any funding falling due".
The high provisions set up to cover potential losses related tobad loans ate almost the entire income from current operationsCredit 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 provisiondeduction," Tetik says.
The bank last year implemented an extensive cost cuttingprogramme, ranging from headcount cuts to branch closures.
The impact of the economic downturn on loan portfolios followedthe classical trajectory, says Tetik, with retail loans the firstto be hit, followed by those aimed at small and medium-sizedenterprises and then large companies.
However, for this year, Credit Europe has budgeted net incomeworth 14m euros (after provisions and tax). Tetik, as a matter offact, says that in the case of loans granted in the second half of2009 there are no clients with instalment payment delays of morethan 30 days.
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