Analysts expect lending to bounce back in 2010

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The cut in the benchmark rate and loans taken out by the Ministry of Finance from the local market could lead to a decline in lei financing costs in 2010, according to analysts interviewed by Business Standard.

‘There is room for interest rates to drop on lei-denominated loans, still very high. We are witnessing a downward trend. On the euro-denominated loan segment, we could see a decline if we witness a change in the perception on Romania. Euribor will clearly rise in the near future, so improving this perception is very important for rates on euro loans,’ said the Chief Economist of Raiffeisen Bank, Ionut Dumitru.

The average interest rate on new lei loans granted by banks in October was 16.38 percent, up from the 15.31 percent level registered the previous month, according to data provided by the National Bank of Romania (BNR). On the retail segment, the average interest rate was 17.45 percent, slightly lower than the 17.45 percent level registered in September.

Private lending in Romania registered the fastest growth pace in October in the past nine months, of 1.2 percent. According to data provided by the central bank, the annual growth rate resumed its upward trend, after 12 consecutive months of decline. In real terms, the growth rate of lending was of -0.1 percent.

‘Interest rates on lei loans could slide further, because I believe BNR will continue to cut the key rate to some 6.5-7 percent by the end of next year. Rates on lei loans also depend on how much the Ministry of Finance will continue to borrow from the local market, because this approach affects the level of resources available for financing the private sector,’ said Me lania Hancila, analyst within Volksbank.

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