Romanian banks have more money than they can place as deposits are rising while loan books are shrinking

The total deposits placed by resident customers in Romanian banks have increased by 5.4%, or EUR 2.5 billion, from September 2013 until September 2014, while the total loans outstanding granted by local banks have declined by 4.5%, or EUR 2.26 billion, during the same period, according to data from Romania’s National Bank (BNR). This trend led to excess liquidity in local banks, with the loans to deposits ratio for the banking system now standing at 0.98. Total loans stood at some EUR 48.2 billion, at the end of September 2014, while deposits were almost EUR 49 billion. This is partly due to the local banks’ efforts to clean up their portfolios by removing or selling their non-performing loans (NPL). Several banks, such as BCR, Volksbank and Bank of Cyprus, have sold large NPL portfolios this year, or are in the process of selling these. The BNR’s efforts to bring down interest rates for local currency and encourage lending, by successively reducing the monetary policy interest rate, haven’t yielded any significant results so far, as Romanian companies continued to put more money into bank deposits, while there was no significant recovery in lending. The total loans for companies were down by 7.4% in the last year, to EUR 25.3 billion, while their deposits went up by 8%, to EUR 19.3 billion, BNR data shows. Loans granted to the population declined by 2.5%, to EUR 22.9 billion, while deposits from retail clients increased by 3.8%, to EUR 29.7 billion. Still, the lower rates for RON-denominated loans have helped increase the total loans in local currency, by some 7.6%, in the last year, while loans in foreign currency dropped by 12%. Andrei Chirileasa, andrei@romania-insider.com