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Interest on RON Loans Gets Back To 20%

Saturday, 08 November, 2008

The large banks operating in Romania have increased the interest rates they are charging on loans denominated in the local currency, the leu (RON) and the single European currency, the euro, by 4-5%, with the nominal interest rates on consumer loans standing at more than 20% per annum.

BCR, Raiffeisen, UniCredit Tiriac and ING have already increased loans costs, while Volksbank is expected to follow suit before the end of the week, daily Ziarul financier reports, adding that some banks have decided to hike interest on already extended loans.

On the other hand, in order to draw in large amounts of money, the banks announce they are increasing the interest they pay on deposits, which in the case of BRD and Alpha Bank exceeds 12% per annum.

BCR has recently hiked its reference interest rates charged on RON loans by 1.2%, a hike that concerns both the new and the old clients. BCR’s current interest rates vary between 13.85% and 16.6% per annum, on both personal and real estate loans. The interest on euro-denominated mortgage loans varies between 6 and 7% per annum.

UniCredit Tiriac has increased interest on new loans only, but its adjustment, at 4% on euro loans and 5% on RON and euro loans, is the largest in the market.

The adjustment applies on new loans exclusively.

Raiffeisen Bank has in turn increased by 1% interest on unsecured loans in its portfolio, on both euro and RON loans, but kept costs for mortgage loans at their current levels.

On new retail loans, Raiffeisen hiked the interest rates by between 0.5 and 2%, according to product. For instance, interest on RON-denominated personal loans is between 17.5 and 20% per annum, while the interest on euro-denominated personal loans stands between 12.5 and 13.5% per annum. As far as mortgage loans are concerned, interest on them is now 15.3% on RON-denominated loans and 7.1% on euro and Swiss franc loans.

ING Bank’s interest went up as from October 24 on euro-denominated loans to individuals. At the same time, interest on ING Extra ROL credit line advanced from 20.75% to 21.75% per annum. Unlike the interest on euro loans, interest on RON loans is adjustable on existing credit lines as well.

In the case of already extended RON loans pegged to the ROBOR indicator, which has recorded high volatility over the past weeks, the banks are expected to make a decision soon.

Analysts argue that competition among banks will be throat cutting in the period immediately ahead as far as savings are concerned. BRD announced it would increase the interest paid on one-month and three-month Deposit 1,000 deposits to 12% per annum, while the interest paid on 12-month deposits will go up to 11.5%.

BCR is expected to start next week a campaign for its savings accounts, while Alpha Bank has increased interest to 12.75% per annum on six and nine-month certificates of deposit.

Intesa Sanpaolo Bank has also increased its interest pad on ROL deposits to 10.5% per annum in the case of one-
year deposits and to 10% per annum in the case on three month deposits.

BCR has came up with a new offer in the case of consumer loans, extending loans at a fixed interest rate of 14.5% per annum.

Although BCR does not charge fees for loan statements or administration of loans taken out by the end of the year, the annual effective interest rate on a 10-year loan goes as high as 23% per annum.

Ziarul financier reports that starting on October 29, if the ROBOR interest charged by the banks exceeds 17.81% or goes higher than 25% of the interest charged by the National Bank of Romania (BNR) on loans – 14.25% per annum – BNR may suspend posting the ROBID/ROBOR indices computed on the quotations of the 10 participating banks.

On October 28, average ROBOR interest rates continued at above 18% for six month loans, reaching 18.8% on one-month loans.

Source: http://www.financiarul.ro/