Gabriela Nistor, Deputy General Manager Retail Banking, BT, recently gave an interview to the online publication Banking News in which it addresses the subject of the observed trends in the lending field and the forecasted estimates in this sector, for the year 2022. Below I have fully included the interview, enjoy! 😊

How are banking products and services intended for the population transformed as a result of the impact of the health crisis generated by the pandemic, what needs do customers have in the new context, and how does Banca Transilvania respond to the new challenges?

Products and services must take into account trends, needs, and lifestyle. And what we saw in 2021 with our clients was the need for mobility of banking services offered – remote banking, because that's the way times are, new functionalities, but also online security. Products transform either through upgrades or by launching digital versions, such as cards – which, besides being in the wallet, can now also be on the phone. This is how we, BT, responded to the new challenges: through new ideas, adaptation, exemplary team mobilization, and investments in technology.

How prepared are Romanians for adopting digital banking, how familiar are they with digital transformation, and what measures are necessary to accelerate digitalization in Romania? What news does Banca Transilvania have from this point of view?

Romanians have made steps forward in this regard and clearly, this is the way, regardless of whether we are talking about banking or other fields. Those who are most familiar with digital transformation are those in the private sector who set the tone in this regard years ago, teams that generate and contribute to recalibrating business models, day by day. And the population benefits from this transformation. For example, at BT, out of over 3.2 million clients, over 2.5 million, almost 70%, are digitalized. And here I refer both to individuals and companies. What does this mean? That they use at least one of the bank's digital solutions – either mobile applications or Internet Banking. In 2021 we continued launching remote banking solutions, most of them related to BT Pay. Thus, there was the possibility to obtain the STAR Forte shopping card 100% in about 10 minutes, through the application. Or the launch of the option to pay bills through BT Pay, as well as payments through Alias Pay, through which our clients can make payments using a mobile phone number instead of the IBAN. Regarding the digitalization of Romania, fortunately, companies have been on this path quite a few years before the pandemic, and the pandemic only accelerated digitalization in the private sector. Practically, it pushed companies to find new solutions to respond to the context. All our admiration, as the bank of enterprising people, goes to entrepreneurs who have understood that digital transformation can contribute to relaunching their business or to sustainable growth. We already see that the public sector is increasingly contributing to digitalization by digitizing workflows – which will not only ease interactions but will essentially contribute to increasing the level of digitalization in Romania. An essential contribution can also come from reducing the digital gap between urban and rural areas, as well as from digital education and skills development in this regard. Romania's paradox is that, although we have a large number of IT graduates and are in the top 5 in the European Union in this respect, we still have a deficit, which limits the capacity to take advantage of the benefits of digital transformation.

How has consumer lending evolved in Banca Transilvania's portfolio and what expectations do you have for the upcoming period? What impact will the interest rate hike, rising inflation, energy crisis, and political instability have on the bank's activity in the retail segment? What solutions are available to debtors who might face difficulties in paying their installments in the near future, for which the forecasts are not the most optimistic? How does Banca Transilvania approach saving and what evolution has the deposit portfolio recorded?

If we look at BT’s figures from the period January – November 2021, we can say that people continued to have plans, and this makes us optimistic. Specifically, we have over +60% loans granted compared to the 2020 level. If I am to refer to the balance of loans granted to individuals, here too we have growth: +12% compared to the level registered in November 2020. For 2022, we expect the continuation of the personal lending cycle with robust annual rates. There are favorable prospects for productive investments, with positive implications for the labor market climate. From what we see, regarding the evolution of retail lending at the banking system level, in 2022 we estimate growth of over 9%. For clients who nevertheless face personal problems that may affect their ability to pay installments, our bank can offer credit restructuring solutions, such as rescheduling the balance over an extended credit period or reducing the monthly payment obligation for a certain period. The clients in question must contact the bank as soon as possible to find solutions together and thus avoid accumulating many arrears. Regarding saving, the balance of term deposits recorded moderate year-on-year growth, in line with market trends. Banca Transilvania encourages both the classic saving model through term deposits and alternatives from the range of investment funds offered through BT Asset Management. Also, through BT Capital Partners, we are among the participants in the issuance of government securities issued by the Ministry of Finance.

What expectations do you have regarding the evolution of risks that contribute to the composition of financing costs for the population in Romania? How will 2022 unfold from the perspective of risks and how will financing costs evolve at the local market level, taking into account the uncertainties and risks hovering over the local economy?

If we look at interest and risk, which form the cost of financing, we can also outline our estimates. In the last 6 months, we have seen a trend of rising financing costs – I am referring to interest, to government bond yields, and this will lead to increased costs for customers. However, we hope this will be a short-term trend. If I refer to risk, it is hard to anticipate the effect on the cost of financing, but we hope it will remain stable, even if the purchase value of real estate has increased quite sharply recently.

The coronavirus pandemic did not cause a credit freeze; on the contrary, the real estate financing segment recorded growth far beyond the most optimistic expectations. How do you comment on this acceleration of mortgage lending over the past year and a half, and what has been the basis of the enthusiasm in the specialized market? What influences will the health crisis have, what needs has it generated among the population, and how will it change mortgage lending in the coming years? What is the situation of the mortgage loan portfolio at Banca Transilvania, and what objectives do you have for the upcoming period?

Mortgage lending continued the upward trend even after the outbreak of the health crisis. The evolution was supported by the government program Prima Casa/Noua Casa, as well as by the low level of real financing costs. The rapid recovery of the economy and the positive climate in the financial market sphere also contributed to the increase. At Banca Transilvania, at the end of November 2021, the balance of real estate loans, including Prima/Noua Casa, recorded an increase of 15% compared to the end of 2020. For the next year, we aim for an evolution similar to that estimated for the banking system. However, it is difficult to anticipate what the post-pandemic world will look like – and not even when it will begin.

What is the profile of clients who have accessed a housing loan – income, down payment, loan amount, type of interest rate. What kind of houses do they opt for and which are the areas (cities) with the highest levels of demand?

In general, those who access a home loan are 35 – 40 years old, with an income of approximately 5,000 lei, married, with higher education and a job in the private sector. The average down payment is 24% and corresponds to a guarantee made up of a two-room apartment, in the urban area. If I were to refer to the areas where the most such loans were accessed, the ranking includes: Bucharest, Cluj, Timis, Constanta, and Iasi.

What advice do you have for Romanians who are considering the possibility of taking out a loan for a house? What are the elements they should analyze and what are the aspects that can largely certify if they are prepared for this step? What product features should they look for in the loan selection process?

Buying a home is certainly an achievement and we all dream of this moment, especially since we, Romanians, have a developed sense of ownership. But also because having your own house is somewhat part of our education, it is a milestone, a sign of fulfillment, of stability. Nevertheless, these are the longest-lasting loans, stretching over many years, a period in which ups and downs can occur – which is why the decision must be weighed very carefully, so it must be a responsible one. Each installment should be seen as a contribution to that property, and the bank, a partner in fulfilling a dream. If I were to give some advice regarding what clients interested in mortgage loans should look at, I would refer to the Annual Effective Interest Rate. For comparability, it is important to follow the same coordinates regarding the amount and the period. The total cost of the loan is important, especially when we talk about a lending period of decades, but it is also good to take into account the following aspects: how long it takes to receive the loan; minimum monthly payment; the component of property insurance; early repayment without fees, but also the relationship I have with that bank, an advantage being if you are already a client. Last but not least, clients should look at the following forward-looking information: income, installment, estimates regarding financial situation or the possibility of early loan repayment. We must consider that many things can happen in 20 – 30 years and we must not stretch ourselves beyond what we can bear. If we talk about loans through government programs Prima Casa or Noua Casa, guaranteed by the state through FNGCIMM, the main characteristics of the loan regarding price, down payment, maximum amount, and currency are regulated and provided by law. Considering this, banks have very little room to maneuver to truly differentiate their offer. For this reason, the APR for Prima Casa or Noua Casa will have very similar values from one bank to another.