Банкеръ Weekly



A lot has been said about Bulgaria's economic growth and the investments promised to the country. Still, nobody knows where the expected money is. The banking sector is the only one able to boast of having accumulated billions of levs within a year. Statistics data showed that all bank assets in the country totalled BGN16.4BN as of September 30, 2003. The figure exceeds by BGN2.9BN the result reported for the same period of 2002. The 21.6% growth of these assets has been the highest since 1998 and it results mainly from the larger deposits made by individuals and companies (up by BGN2BN). Even the face value increase of the gross domestic product (GDP) for 2003 is expected to be lower (BGN2.6BN) than the growth of the bank assets.The data mentioned above do not at all correspond to the thesis constantly launched by the media about Bulgarian people's lower income and the companies' lack of money. According to preliminary information of the Bulgarian National Bank (BNB), citizens' savings went up 15% within a year, while money in corporate accounts rose by 22 per cent. A phenomenon like this should be considered as a sign that people and businesses in Bulgaria do have free resources at their disposal. And since an average income of BGN300 per one member of a household is not sufficient to pay for all community services, food, clothes, and even for household and consumer credits, there should be an explanation about where money for the increased deposits and credits has come from.The total amount of loans launched by Bulgarian banks grew nearly 47% within a year. By September 30, 2002, local banks had extended credits over BGN5.4BN, while a year later the financing exceeded BGN7.9BN. Credits accounted for 48% of all bank assets as of September 30, 2003, compared to 40% a year earlier.Credits launched to companies were up 44.5% - from BGN4.1BN to almost BGN6BN, for one year. Of course, a significant part of this growth was due to credits launched to large companies with annual turnover of BGN10MN-plus. As for small and medium-sized enterprises, they still find it difficult to access bank crediting. The crediting process is impeded by numerous formalities. And usually, credit agreements contain a large number of tricks which ordinary borrowers fail to notice but which enable banks to take their debtors' business and sell it to other customers in case of an even slightest neglect.Crediting to citizens marked a real boom, increasing almost 70% within a year from BGN1.1BN in September 2002 to BGN1.9BN in end-September 2003. Consumer and household credits are already allocated by almost all big banks in Bulgaria, whose assets exceed BGN500MN. Institutions like BULBANK and Biochim Commercial Bank for which such services were terra incognita about a year ago, presently hold a significant share on the market of loans to citizens. The quick growth of consumer credits surprised and even startled international financial institutions. The International Monetary Fund (IMF) warned that large-scale allocation of such loans could result in a steep increase of the import of consumer goods. The IMF forecasts that this would lead to an increase of the volume of foreign currency going out of the country and consequently to a higher deficit in the current account of the payment balance. The IMF projects the 2003 deficit at 7% of the GDP instead of the planned 5.4 per cent. Within a year - from September 2002 to September 2003 the total amount of consumer credits rose 68 per cent. IMF analysts believe its should be restricted to 30 per cent. Otherwise, they forecast that the current account deficit will continue to increase, which could result in a drop of the Government's fiscal reserve and of Bulgaria's forex reserve. However, it is not likely to find financial and legal mechanisms for making banks limit their crediting business which is quite lucrative for them. The banks' proceeds from interest on all kinds of loans, released till end-September 2003, amount to some BGN564MN, and another BGN51MN has come from taxes and fees for servicing credits. In other words, their incomes from such activities exceed BGN615MN (68% of all their revenues). In case Bulgarian banks lower their crediting activity, this would have an adverse effect on their profits, which totalled BGN293.7MN in the first nine month of 2003, up 45.6% from the same period of last year. It is indicative that the group of the best Bulgarian banks as of September 30, 2003 includes institutions, which develop the crediting of population in a very high speed. These are BULBANK, United Bulgarian Bank (UBB), Biochim and SG EXPRESSBANK, which satisfy all the creteria for the rating made by the BANKER weekly. Each quarter the financial newspaper ranks the credit institutions according to five criteria: balance sheet value, equity capital, profit, return on assets, and return on share capital. BANKER makes a list of the top 10 credit institutions on the local bank market, which have best perfomance according to all the five indicators.When preparing the rating for September 2003, a change in the criteria was made on the recommendation of some bank analysts. Thus, the return on share capital criterion was replaced by return on the equity capital. We hope that this would give a more accurate evaluation of the profitability which a certain bank brings to its owners. It is worthwhile to underline that even that change in the methodology has not influenced the final result in the ranking - BULBANK, UBB, Biochim and SG EXPRESSBANK have been the best performing domestic credit institutions.

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