Banks still unaffected by home sales decline

For the time being, sales of real estate loans by the major local banks have not been subject to the adverse effects of the slump in trades on the residential sector, bankers assert.
The stalemate on the real estate market has sent the amount of credits engaged for residential purchases 2% down in July – in an unprecedented move – at a time when prices for old apartments have decreased.
“Our promotional campaign has prevented a negative impact of the real estate market on BCR real estate credit sales,” director of the BCR Retail Services Development Department Sorin Mititelu told Business Standard.
Although the bankers reported significant growth in the credit activity for the first half of the year, July’s results point to a setback in housing credits and the forecast for the next months, when the new central bank regulation will be applied, are not quite optimistic.
In a one-of-a-kind announcement, BNR reported in July a 2% decrease in the amount of residential loans. The new loans added to the banks’ portfolios were not enough to cover monthly reimbursements or in-advance repayments.
In the last 6 months, prices for the residential sector shrank by over 10% for old apartments and stagnated for new apartments, in evident opposition to previous years when they had grown by a yearly 30%.

“The campaign we have been running on the segment of real estate loans over May – August has pushed us above the market average. Therefore the situation of the real estate market has not affected the bank’s relevant sales,” said the BCR representative.
At the end of H1, BCR’s credit portfolio stood at 11.18 bln euros, of which retail credits accounted for 54%.
In the opinion of the BCR official, the new, more restrictive regulations on retail lending might affect the advance of consumer loans.
Other players share the same opinion. “In August, Volksbank’s credit portfolio advanced by 110-120 million euros. We plan to grow according to targets, but the BNR regulation will probably impact credit activities,” said Volksbank president Gerald Schreiner.
In July 2008 Volksbank Romania topped the three-billion euro line in retail and corporate
financing; at the end f August, the bank’s loan portfolio stood at some 3.15 billion euros. Volksbank retail credits accounted for more than 75% of the bank’s total financing. On the retail segment, mortgage loans accounted for over 90% of the portfolio.
Although the bankers would seek a fast-paced advance of mortgage credits this year, the share of this type of loan is still below 20% of total credits accessed by the population, although the amount of residential loans has doubled from July 2007. The twofold increase in just one year of the portfolio of residential loans was prompted by the relaxation of lending terms in 2007.
The bankers are currently counting on the Romanians’ enhanced appetite for credits, given the fact that there is just one month left before the new, more restrictive BNR regulations are implemented.

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