Banking interests take a nosedive

Over the past two weeks, several commercial banks cut interest on both loans and deposits. These decisions come as a natural measure, said analysts, and are generated by the signing of the financing agreement with international institutions, and the reduction in the cash reserve ratio.

"We expected this to happen, as pressures on financing decreased after the IMF [International Monetary Fund] agreement. Moreover, the cash reserve ratio dropped, the foreign loan improved Romania's rating, and the central bank continued capital injections," Ionut Dumitru, Chief Economist of Raiffeisen Bank, told Business Standard, adding that interest rates will decline five-six percentage points by year-end.

"Interest rates peaked in January-February, but now they are back to a downward trend. We will no longer see promotions on interest rates for deposits of seven percentage points above the inflation rate. Lending will be relaunched, especially for corporate clients, while individuals will continue to save, attracted by real positive interest rates," Lucian Anghel, Chief Economist of Banca Comerciala Romana (BCR), told Business Standard.

Raiffeisen Bank Romania, the fourth-largest player in terms of assets, cut interest rates on lei and foreign currency-denominated loans granted to individuals, by an average 3-4 percentage points. "The foreign financing agreement signed last week with important international institutions is already having a direct effect on the perception of risk in Romania. It is very likely that lending will increase at a much more normal annual rate now, of 10-15 percent," added Razvan Munteanu, Vice Chairman of the Retail Division of Raiffeisen Bank.

Business Standard