The increase in the number of failed real estate projectsfinanced by banks, both on the residential and on the retailsegment is raising doubts about how bankers calibrated their loanportfolios, as long as real estate accounts for up to 10% in theirbalance sheets and a field with guaranteed sales such asagriculture for merely 3%.
At the end of the first quarter of 2010, the volume of loansgranted to the agricultural sector reached 6.8 billion RON (1.65billion euros), the same as at the end of 2008, NBR datareveal.
Banks have long neglected agriculture and only after farmers gainedaccess to structural funds did they start to finance theirprojects. As a result, the volume of loans granted to this sectorstarted to increase as late as the last three or four years,doubling from 2006 through the end of last year.
At the same time, loans granted to the constructions sector almosttripled, to 9% of the total loans. The volume of loans to thissector reached 22 billion RON (5.4 billion euros) in March, havingmaintained relatively constant over the past year, considering lastyear's recession dealt it a heavy blow.
Over the past year, almost 15 big residential and shopping projectshave failed in various stages of completion or their developerswent insolvent, causing banks to set aside very expensiveprovisions.
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