Банкеръ Weekly



Will Bulgarian banks reach last year's levels of distributed dividends? It is still difficult to answer that question as only five credit institutions - United Bulgarian Bank (UBB), SG EXPRESSBANK, EUROBANK, BULBANK, and Municipal Bank - have held their annual general meetings. The aggregate amount of dividends to be distributed among their shareholders is about BGN101.9MN. For comparison, throughout 2003, all local banks paid a total of BGN120.2MN in dividends.A quick review of financial markets shows that the stocks of most Bulgarian banks are quite a decent source of incomes. Here is the proof: the annual interest rate on deposits in credit institutions in 6% at the most, while proceeds from government securities and mortgage bonds are up to 8 per cent. But the yield from all these three financial instruments is several times lower than the dividends, paid by some banks from their 2003 profits. It should be noted that the most sizable dividends (as a percentage of the par value of their shares and as a total amount) have been offered by the big privatized banks. This could be easily explained - large-scale foreign investors which have bought them are now regaining the invested money. Along with them, Bulgarian firms and citizens holding small packages of shares in these financial institutions also have reasons for joy. BULBANK has again kept the tradition of paying the highest dividendIt has been doing that since 1994 when Bourgas Commercial Bank and Stara Zagora Commercial Bank merged into the former Foreign Trade Bank. For almost a decade now the credit institution has been distributing its entire profit or at least a considerable part of it among its shareholders. Before its privatisation in November 2000 it was mainly the State (which was holding 98% of BULBANK's stocks through the Bank Consolidation Company) that profited from that policy. The private shareholders from the former Bourgas and Stara Zagora banks also heaped tidy sums of money due to the solid positions of the parent bank. Within nine years in raised its equity capital more than 2.5-fold (in terms of US dollars) and it currently totals BGN166.37MN, distributed in 16,637 shares of BGN10 par. Moreover, BULBANK has distributed about USD317.2MN (almost three times its present shareholders' equity) in dividends since 1994.While BULBANK was state-owned its managerial team was neglecting neither the interests of the Treasury nor those of the small private shareholders who owned its stocks even during the years of financial crises. Strange as it might seem, a 35% dividend was distributed in 1996 when 16 banks went bankrupt and the domestic financial system collapsed. On the proposal of BULBANK's then executives - Chavdar Kunchev, Ventsislav Antonov, Dimiter Atanassov, Kiril Stefanov and Kiril Kalinov - the financial institution paid also the 15% tax on the dividend, due by its shareholders. That gesture was intended to protect the interests of small shareholders, but it remained a single act. Nevertheless, the bank continued distributing high dividends over the years that followed. It was 50% of its stocks' par in 1997, 40% in 1998, and 61% in 1999. Since 2001 the bulk of its profit goes to the financial institution's new owner, the Italian bank group UniCredito, which purchased 95% of BULBANK's shares in November 2000 against EUR360MN, inheriting also its huge annual profit of BGN186MN. The Italians hurried to collect BGN183MN of that amount still in 2001. A year later they received from the bank a 33% dividend, equal to BGN52MN, and in 2002 they got BGN51MN. The tradition was kept this year, too. At the general meeting on April 20, 2004 a decision was made that BGN65.12MN of BULBANK's 2003 profit would be distributed as dividend among its shareholdersBGN55MN of that amount has been set aside for UniCredito Italiano. Thus, for three years and a half since the Italians acquired the top Bulgarian bank, they received as dividend BGN341MN or EUR174MN. UniCredito got another EUR26.7MN from BULBANK's shares which it sold in 2001 to the Italian agency for small and medium-sized enterprises Simest and to the International Financial Corporation (which is part of the World Bank's group). Thus, its proceeds from BULBANK presently total almost EUR201MN. In other words, UniCredito has already regained some 56% of the money (the EUR360MN), spent in 2000 for the acquisition of BULBANK. Distribution of dividend becomes a tradition for UBB as well, which will remit BGN24.5MN-plusto the deposits of its shareholders, as per the decision of their annual general meeting, held on March 2, 2004. BGN21.4MN of the aggregate amount will go to the accounts of National Bank of Greece, which is the owner of 88.9% of UBB's stocks. The European Bank for Reconstruction and Development (EBRD), that holds 10% of the Bulgarian credit institution's equity capital, will get BGN2.46MN, and the balance of BGN246,000 will be distributed among several dozens of small shareholders who own 0.1% of UBB's paper. UBB has been making happy its owners for a fifth year in succession. Before 1999 they had never received such tidy sums from the bank. At one of the general meetings, held in mid-1999the small shareholders tried to organize a kind of revoltRoumen Stoyanov - who then owned 6,367 stocks of BGN1 par - protested, insisting to get a dividend. Pierre Mellinger, the then chairman of UBB's Board of Directors, and the bank's CEO Stiliyan Vutev tried to calm down Mr. Stoyanov, explaining that the lack of a dividend is compensated by the almost 3-fold increase of the credit institution's equity. The two managers said the effect of the capital raise would become evident later on when UBB's shares are listed for free trade on the Bulgarian Stock Exchange. Five years later, however, this has not happened yet, but as of 2000 the bank has been paying dividend each year. That radical change in UBB's policy is not due to the fact that its managers have taken to heart the wails of small shareholders. Rather, its major owner - National Bank of Greece (which paid EUR185.2MN for 89.9% of the credit institution's equity in September 2000) - is gradually regaining its investment. Four years and a half after paying USD39MN for a 97.95% stake in SG EXPRESSBANK (in end-1999) the French financial giant Societe Generale Group drew for the third time a dividendfrom its Bulgarian acquisition. At the general meeting, held in Varna (where the bank's headquarters are located) on April 15, 2004, the shareholders voted for distributing in dividend BGN8.84MN-plus of its 2003 profit (totalling some BGN15.38MN). This means they will get BGN0.31 per each stock of BGN1 par. Of course, the lion's share - BGN8.67MN - will be remitted to the accounts of Societe Generale. For three years the owner of SG EXPRESSBANK collected a total of BGN20.77MN (about USD11.8MN). Thus, it can be calculated that from the distribution of dividend alone the French bank group regained 30.3% of its investment in Bulgaria. EUROBANK also made its owners happyBy the tradition of the last three years the financial institution distributed the bulk of its 2003 profit as dividend. The decision for that was made by the shareholders at their general meeting on March 23, 2004. According to the report, attested by the auditors Deloitte Touche DEA OOD, EUROBANK's after-tax profits for 2003 amounted to BGN3,448,000. About a quarter of that amount - BGN821,563 will be set aside into the Reserve Fund, and the balance of BGN2,626,000 will be distributed as dividend. The lion's share will go to Eurocapital Bulgaria AD - the company that holds a 85.35% stake in the bank. The company itself is owned by Petrol AD, more than 90% of which equity is in the hands of Naftex Bulgaria Holding, controlled by Nasko Subev. In April 2002 Petrol paid BGN14.5MN for the bank through Eurovapital AD. In 2004 Municipal Bank will for the first time distribute dividendIt's a fact that the credit institution, in which the Sofia Municipality holds 67%, began to distribute part of its profit under pressure. Immediately after the end of the local elections (in November 2003) the new councillors from the UDF and Gergyovden started criticizing Mayor Stefan Sofianski for the lack of proceeds from the bank, in which the municipality is a majority shareholder. In order to parry the attacks, in January 2004 the executives of the credit institution proposed to its shareholders to pay them part of its 2002 profit. At that meeting the shareholders made a decision to distribute as dividend BGN980,000 of the bank's profit for 2002. The credit institution's report for 2003 was approved at its general meeting on April 23, 2004. In their wish to exclude mayor Sofianski from participation in the meeting, a day earlier the councillors made one of the most strange and senseless decisions, entitling the municipal council's Chairman Vladimir Kisyov and his four deputies to vote by the municipality's shares in the bank. It is said that the bank's Executive Director Vanya Vassileva has held long meetings with the five representatives of the Municipal Council, in order to persuade them vote unanimously for the separate items on the agenda. Finally, the five councillors did not cause any problems. ON April 23 the shareholders in Municipal Bank decided that BGN1.2MN would be distributed as dividend for 2003. Several more financial institutions will probably join by the year-end the group of the above-mentioned five banks which have made their shareholders happy. Bulgarian Post Bank, HEBROSBANK and DSK Bank are expected to distribute dividends. BNP-Paribas (Bulgaria) and Raiffeisenbank (Bulgaria) might also do so. The smaller financial institutions, however, will hardly distribute dividends. They would rather include the 2003 profit in their equity capital and will thus cover their expenses for renovation of their information systems and for launching new financial products on the market.

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