The balancing of the loans to deposits ratio, the growth in the volume of new loans and the visible reduction of interest rates are signals that point to the approach of a new cycle of growth in financial leveraging, Alpha Bank CEO Sergiu Oprescu considers.
“There are sign that the apex of the financial cycle’s contraction is approaching an end and there are arguments in support of a recovery in confidence in the economy. The lowering of interest rates and their maintenance at a low level point to the fact that we can expect the start of the growth cycle of crediting,” Oprescu stated at the EU-COFILE seminar organized by BNR, ARB and Alpha Bank.
He pointed out that the balancing of the loans to deposits ratio and the rise in new loans are signs that point to the end of the financial contraction. This year deposits surpassed the volume of loans offered by banks for the first time in seven years. In October deposits totaled RON 218 bln, while loans totaled RON 214 bln.
The banks were forced to increasingly rely on local financing considering that they lost a part of their financing from abroad. The drop in crediting also contributed to the balancing of this ratio. The stock of loans has dropped by 3 per cent in the last year, while deposits have grown by 5 per cent.
Oprescu nevertheless states that stabilization in corporate loans is being observed, while on the retail segment the collapse of consumer loans has been compensated by the growth of real-estate financing. Loans for the purchase of homes were representing just EUR 5 bln of the EUR 25 bln loans offered to physical persons at the start of the crisis. Now that level almost doubled, the sales registered in recent years being backed by the government’s “First House” program.
“The effect of the drop in consumer loans was cushioned by the expansion of home loans. The small share of mortgage loans in 2008 was an advantage. What was a risk for others became a medicine for the Romanian banking system,” the head of Alpha Bank concluded.