Wednesday, February 4, 2009

Romania BCR sees lending up 15 pct in 2009

BUCHAREST, Feb 3 (Reuters) - Private lending growth in Romania, once a key economic driver, will likely halve this year due to a global shortage of cash and worsening local economic conditions, the country's biggest bank BCR said on Tuesday.

Last month, the bank, owned by Austria's Erste Bank (ERST.VI) ERST.BX, said retail lending had fallen 60 percent in the fourth quarter, underlining a virtual freeze in loans as the global financial crisis cast its shadow over Romania.

"We believe somewhere around 15 percent is feasible," BCR chief economist Lucian Anghel told reporters, comparing such private lending growth predictions with last year's figure of 34 percent.

Much will depend on whether the Romanian central bank will start cutting interest rates in coming months, as many economists expect, Anghel said.

The central bank has already relaxed lending conditions last month to boost issuance of mortgage loans in a bid to support the economy. The decision had reversed some of the stricter lending rules imposed last August to stem household borrowing.

Anghel said that despite a lending slowdown the economy should avoid slipping into recession this year and forecast economic growth of 1.2 percent, compared with 7-8 percent in 2008.

"Domestic demand will remain positive, and it could drive growth," Anghel said.

He also forecast the central bank would bring its key interest rate down to 8.5 percent this year from the current 10.25 percent.

BCR is Erste's key growth asset and a slowdown in credit growth or a sharp rise in bad debt would weigh on the Austrian group's earnings development.

Depending on the severity of the earnings impact, it may also trigger an impairment of the 2.6 billion euros in goodwill Erste is still carrying in its books from its purchase of the bank, at six times book value, in 2006. (Reporting by Luiza Ilie, editing by Will Waterman)

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