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Asociaţia Societăţilor Financiare - ALB România

Asociaţia Societăţilor Financiare - ALB România The Financial Companies Association – ALB Romania. 8 th ALB National Conference Evolution of the consumer credit in Romania. Bucharest, November 15 th , 2012. The European market accounts for 24% of the global market.

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Asociaţia Societăţilor Financiare - ALB România

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  1. Asociaţia Societăţilor Financiare - ALB România The Financial Companies Association – ALB Romania 8th ALB National Conference Evolution of the consumer credit in Romania Bucharest, November 15th, 2012

  2. The European market accounts for 24% of the global market Consumer Credit Outstanding per Region at the end of 2011 Sources: central banks, Asteres estimates • The global outstanding reached 5,597 billion € at the end of 2011, +4.5% compared with the end 2010 • 39% of the global outstanding is in North America: United States (32%), Canada (6%), Mexico (>1%) • Asia and the Middle East represents the second group with 29% of the global outstanding • Europe incl. Turkey and Russia is the third one with 1314 billion €, or 24% of the global outstanding

  3. Contrasting dynamics by regions Evolution 2011/2010 of Consumer Credit Outstanding per Region (%) Sources: Asteres estimates • The overall increase of the global market (+4.5%) demonstrates a certain amount of momentum • However, this increase conceals a decoupling between emerging markets, with brisk growth, and developed markets (except North America) which are struggling or even in decline • South America achieved the highest growth • Asia and the Middle East (including Japan) posted a growth of 5%, but slowed down by Japan, the first market of the region. Excluding Japan, the growth of this region was 16% • The markets in North America and in Europe have reached maturity and present more moderate growth • The market picked up in North America (+3.9% in 2011 following a fall of -1.7% in 2010) • In Europe (+1.3%) the market was driven by emerging economies, outside EU, with growth of +41% in Russia and +34% in Turkey while the EU27 saw a fall of -2.9%

  4. EU27 : the consumer credit outstanding unequally distributed Consumer Credit Outstanding at the end of 2011 (EU27) • Romania : Outstanding 14,6 billion€ = 1,4% of EU27 Sources: central banks, Asteres estimates • The markets are unequally distributed: the top 5 markets account for 75% of the total, while representing 63% of the population • The European market can be split into 3 main groups : • Northern Europe: 56% of the outstanding (41% of population ) • Southern Europe: 37% of the outstanding (39% of population) • Eastern Europe : 7% of the outstanding (20% of population)

  5. EU27: for the 2nd consecutive year the consumer credit outstanding dropped by 2.9% in 2011 • This was due to the degradation of the European financial and economic environment: • Low consumption in most of the countries (weak GDP growth, austerity measures in some countries) • High unemployment rate ( limiting access to the credit) • Only 7 out of 27countries posted a growth of the outstanding in 2011 • Excluding Slovakia, all Central & Eastern countries fell • Romania was also adversely affected in 2011 : - 3.5% Sources: central banks, Asteres estimates

  6. A clear link between the consumer credit growth and the GDP growth Growth of the consumer credit outstanding versus of the GDP growth (2011/2010) • 3 countries showing a decrease in outstanding: Romania (-3.5% yoy), Poland (-2.7% yoy) and Bulgaria (-2,2%yoy) • Some of the emerging countries have their credit consumer markets growing fast : Argentina (+50% yoy), Brazil(+20% yoy), Turkey (+32% yoy) and Russia (41% yoy)

  7. Credit to individuals (consumer and mortgage) compared to GDP Total credit outstanding to individuals ( consumer and mortgage) related to GDP in 2011 • The total households indebtedness (consumer and mortgage) compared to GDP is low in Romania (17%) • Romania is among the countries with the lowest share of mortgage credit in total credit (35%). However it increased compared to 2010 , when it was 31%

  8. Romania : high consumer credit penetration in % of GDP Consumer credit outstanding divided by GDP (2011) • Consumer credit penetration is important in Romania : 10.7% of GDP at the end of 2011 • However, it is decreasing from the 12.6% of GDP at the end of 2010 • Average outstanding per inhabitant in Romania in 2011: 671€ (also decreasing from 704 € in 2010)

  9. A Romanian market particularly hit by the crisis in 2009, recovering progressively • Consumer Credit Outstanding (banks + IFN) - June 2012: • 65.2 bn. RON, decreasing for the fourth consecutive year: • One of the most shaken markets: • A very fast growth before the crisis: +82% and +34% in outstanding 2007/2006 and 2008/20067) • Then a significant drop in 2009: -60% in production • Slow recovery in 2010 (+10%) and in 2011 (+10%) in 2011 • We expect the consumer credit production to recover the 2008 level only in 2013 or 2014 • A small market at the European level: 1.4% of the outstanding • but important in the Central & Eastern region (#2 after Poland)

  10. IFN results: New credit granted by Product TypeS1-2012 EUR 225.87 million Source: ASOCIATIA SOCIETATILOR FINANCIARE – ALB ROMANIA

  11. IFN results: New credit granted for Personal ConsumptionS1-2012 • Gradual recovery in terms of new credit granted for personal consumption in S1-2012: +3.7% vs. S1-2011 : • Revolving loans including credit cards: +18% S1-2012/S1-2011 • Direct personal loans: +4% S1-2012/S1-2011 • Credit at POS: -19% S1-2012/S1-2011 Credit at Point of Sale EUR 206.51 million Direct Personal Loans Revolving credit including credit cards Source: ASOCIATIA SOCIETATILOR FINANCIARE – ALB ROMANIA

  12. Credit Risk Evolution • Globally, the cost of risk (coming from new provisions) of the Consumer Credit companies increased strongly in 2009, and decreased in 2010 and 2011, thanks to a renewed approach both on lenders and consumers sides. • Banking sector : • The weight of the foreign currency loans is very important, representing a threat for the households’ financial health (% of foreign currency loans among total consumer credit outstanding): • 30% in Dec. 2006  48 % in Dec. 2008  56 % in Dec. 2010  57% in Jun. 2012 • The rate of non-performing loans has increased from 11.9% of total loans in Dec. 2010 to 14.3% in Dec. 2011 finally reaching 16.8% in June 2012 (aggregate level: corporate + individuals loans) • But this is a stock: it increases because the non-performing loans remain a long time in the books. Only the flux (new non performing loans) trigger new provisions. Sources: National Bank of Romania

  13. Conclusion • After the difficult 2009-2010 period, the Romanian consumer credit market is progressively recovering : • In terms of volumes – but this will need time • In terms of credit risk : we believe the non performing loans will reach the peak in 2012, followed by a better trend starting with 2013 • The regulatory environment is changing fast • Globally in a good direction: favoring transparency (ex : OUG 50 ) and responsibility of consumers and lenders (new NBR Regulation - foreign currency loans) • New regulations expected, especially from the EU (i.e. Shadow banking) • The approach of the lenders has been reviewed during the crisis. • Processes (incl. granting rules) • Transparency (ex : costs) • ALB Code of Conduct in place

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