Romanian Lenders See Record-Low Rates Failing to Spur Credit

Romania’s record-low borrowing costs will probably fail to trigger a lending expansion this year as new credit falls short of compensating for bad loans transferred from banks’ balance sheets, lenders said.

The amount of loans may show growth of “slightly above zero” this year, compared with a 3.1 percent decline in 2014, Radu Ghetea, the head of the Romanian banking association, said at a conference in Bucharest on Wednesday.

Romanian banks have been struggling since 2009 to cope with non-performing loans, which caused a record combined loss of more than 1 billion euros ($1.1 billion) last year. That forced lenders’ owners, mostly foreign institutions, to inject more capital and strengthen balance sheets. The central bank cut the benchmark interest rate to 2 percent from 2.25 percent on March 31 as inflation lingers below its target.

“I think we’ll have a rather flat growth this year, but in structure, total loans will probably exceed 50 billion euros,” said Petre Bunescu, deputy chief executive officer at BRD-Groupe Societe Generale. “Demand for new loans is gradually picking up for individuals, but many companies still put plans on hold because of the lack of progress from the state in improving infrastructure and the business environment.”

Credit volume declined 3.7 percent in February, from a year earlier, to about 210 billion lei ($51 billion) after a 7 percent advance of leu loans and an 11 percent decline of foreign-currency credits, according to latest central bank data.

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