The banking sector in Bulgaria has overcome the problem of bad loans. The year 2013 showed that the main efforts of the managers were geared towards clearing the loan portfolios, and guaranteeing the troubled receivables with enough provisions as well as increase the stability of the banks. This is evidenced by the fact that non-performing debts to banks rose for one year by a quarter of a billion levs and at the end of 2013 were about 9.87 billion levs, while provisions allocated for them have risen by more than half a billion levs and are now beyond 7.2 billion levs. Actually, this is the price paid for the banks to overcome the crisis. The coverage ratio of non-performing loans with provisions also increased from 70.32% to 73.21%. And if one takes into account all regulatory requirements and the market value of collateral, this coverage exceeds 90%. This is extremely high level and far exceeds the standards in most industrialized countries. It says that the banking system is coping with its main task – to remain a source of security and does not burden the public finances with their own problems.
The good news is that the banking system profit for 2013 increased from 566.8 million levs to 584.9 million levs. Depositor confidence remained extremely high, as the deposits of individuals and companies in banks increased by nearly 5 billion levs and at the end of 2013 they reached 62.9 billion levs, although the average interest rates for the same period decreased by an average from 4.7%, down to 3.6 % per annum for deposits in local levs and from 4.24% to 3.3% for those in euros. These are savings of citizens, because they represent 54% of all attracted funding, with which banks operate.
The bad news is that there is no change in the main trends in the development of the credit market. Due to the insufficient number of wealthy clients who wish to develop their own business,
the credits only increased by 300 million levs for one year
and at the end of 2013 were 56.81 billion levs, and the growth is due to corporate and consumer loans. But this really is symbolic growth because it is less than 1%, reflecting the full stagnation in industry, trade and consumer demand. Not that people and businesses are reluctant to borrow money. On the contrary, only a few candidates from the table are those who can prove they have sufficient income to service their debts. Now first of all items in the risk assessment is the client’s solvency and the collateral goes to the second position. It is true that in the current situation this is quite conservative, but that allowed the Bulgarian banking system to survive the crisis without any serious disturbances. Unlike many EU Member States, where the system came to bankruptcy, or need of state aid, rescue operations with international creditors, etc.
The problem is that currently
there is still no indication of the revival of the market
And this is shown not only in the symbolic growth in lending. The net proceeds of the banking system from interests in 2013 continued to decline – over 12 months by about 85 million levs. This decrease can not be covered by increased – by 50 million levs – net receipts from fees and commissions. The bitter truth is that the higher financial performance of the sector compared to the end of 2012 was due mainly to lower costs of provisions.
It is a fact that there are several credit institutions which deal with the challenges of the market much better than others. And this is reflected in the indicators which for almost two decades the BANKER has used to prepare quarterly rankings on the best banks in Bulgaria. These are the balance sheet, the amount of equity, profit, return on assets and return on equity. These five criteria are a good balance between size, stability and efficiency of each bank. They largely allow the avoidance of faults in the financial data that can be caused by sporadic transactions. And only banks that fall within the top ten of the five indicators get into the final ranking and into
the group of the best.
For 2013 this list includes DSK Bank, Unicredit Bulbank, Corporate Bank and Societe Generale Expressbank. The first three banks account for nearly 80% of all profits of the financial and credit sector and manage a third of its assets. The French Societe Generale Expressbank is one of the most stable credit institutions in the past few years.
Overall, the financial and credit sector, however, ended 2013 successfully – without smoldering embers that can cause violent and uncontrollable fire in the future.
What will happen in 2014? The only clear thing so far is that this year the dream of many people for an avalanche of cheap and easily accessible loans will not come true. Which might not be a bad thing after all.
The BANKER
