New loan data combined with the dynamics of the stock of loans, published by the National Bank of Romania, indicate that the banks have massively shifted their focus to refinancing over the past year – quite successfully judging from the banks’ record January-September aggregated profits.

This shift coincides with the rise in the interest rates from 5%-6% before January 2022 to 9% in September 2022 and 9%-10% between September 2022 and September 2023. Borrowers naturally took a cautious stance and avoided adding more loans, as indicated by the modest (4.5% y/y) rise in the stock of loans over the past year.

Romanian banks extended new loans (new business) worth over RON 130 billion (EUR 26 billion) in the 12 months to September 2023, but the stock of bank loans increased by only RON 16 billion (EUR 3.2 billion) over the same period, according to data published by the National Bank of Romania (BNR).

In the previous 12-month period, despite only slightly fewer new loans extended, worth RON 126 billion (EUR 25 billion), the stock of loans had increased more than three times faster: by RON 50 billion (EUR 10 billion). 

Although the debt repayment naturally pushes the stock of loans down (other things ignored) at various rates depending on the type of loan (of its maturity or repayment schedule), the shift towards refinancing – counted as a new business – as opposed to genuine new loans extended to new customers was thus massive. 

The increase in the refinancing business (not nonexistent in the past) can be estimated at some EUR 6 billion compared to the total EUR 10 billion “new loans” (refinancing included) in the 12-month period to the end of September 2023.

Overall, the volume of new retail loans was RON 54 billion (EUR 11 billion) over the past year, but the stock of retail loans hasn’t changed. In fact, consumer loans have a high turnover rate, and it is reasonable to assume that a significant volume of genuine consumer loans were issued. But not the same can be said for mortgage loans, where the stock of loans actually decreased.

iulian@romania-insider.com

(Photo source: Elizaveta Elesina/Dreamstime.com)