Банкеръ Weekly



The group of most actively crediting financial institutions in Bulgaria went through some significant changes. In the end of March 2003, no bank ranked among the top ten institutions in terms of three indicators on which the BANKER weekly bases its traditional ranking - total amount of launched credits, loans growth in one-year term, and loans to assets ratio.According to the results shown by the Bulgarian National Bank (BNB), the greatest amount of credits by March 31, 2003 have been launched by DSK Bank (BGN1,198MN), United Bulgarian Bank (BGN757.95MN), BULBANK (BGN584.15MN), Biochim (BGN484.47MN), First Investment Bank (BGN428.23MN), Bulgarian Post Bank (BGN401.08MN), Raiffeisenbank (Bulgaria) (BGN389.5MN), SG EXPRESSBANK (BGN298.93MN), HEBROSBANK (BGN229MN), and the Bulgarian-American Credit Bank (BGN139.34MN).In terms of the second indicator considered by the BANKER weekly - the growth of the credit portfolio, the leading position is occupied by BNP-Paribas (Bulgaria), followed by the Commercial Bank of Greece (Bulgaria), and ProCredit Bank. However, the top ten ranking does not include DSK Bank, FIB, Bulgarian Post Bank, Raiffeisenbank (Bulgaria), SG EXPRESSBANK, HEBROSBANK, and BACB.The third indicator - the share of credits in all assets, leaders are the Commercial Bank of Greece (Bulgaria) and ProCredit Bank, along with BACB. This category of most dynamically growing credit institutions does not include UBB, BULBANK, and Biochim. This is quite normal for banks that possess huge assets and launch considerable credits. The levels reached by the giants in this branch are high and balanced enough to allow sudden changes.Eventually, the fact that there is no institution that occupies all the three top positions for the first time since the BANKER weekly started ranking the most actively crediting banks in 2000 is eloquent - competition is getting fierce on the Bulgarian crediting market.For just one year - from March 2002 till March 2003, the total amount of credits launched in Bulgaria increased by 37.3% - from BGN4.35BN to BGN6.94BN. In the end of March 2003, credits accounted for 46.33% of all bank assets. A year earlier, their share was 34.23 per cent.The revenues that banks have collected from their credits for a year were up from BGN132.34MN to BGN172.43MN. However, crediting income did not changed as a percentage - it accounted for 77% of all revenues both in March 2002 and in March 2003. The reason isthe gradual reduction of interestson different loan types. In a year (from March 2002 till March 2003), interests on short-term credits in euro to individuals and companies fell down from 10.37% to 6.47% per annum, and those on credits in US dollars (payable in up to one year) went down from 11.54% to 11.03 per cent. For the same period of time, according to BNB statistics, interests on long-term loans in Bulgarian levs decreased by 1% or 2% - for companies they fell from 12.2% to 11.17%, and for individuals - from 16.88% to 14.42 per cent. Interests on credits in foreign currency payable in more than one year declined from 12.56% to 11.03% (for companies), and from 16.07% to 13.62% (for individuals).Only interests on short-term corporate loans in Bulgarian currency registered a growth from 10.32% to 11.69% per annum. Obviously, the growth is not sufficient to make up for the general interest decline. In conclusion, if a bank wants to keep making profit, it should try to get more competitive, attract new customers, and increase its assets. It's not by chance, for example, that until a year ago corporate, home and consumer credits were only launched by DSK Bank, UBB, SG EXPRESSBANK, Post Bank, BACB, and Raiffeisenbank (Bulgaria). In 2003, however, the list already includes BULBANK and Biochim.Since they no longer get satisfactory revenues by depositing assets in first-class credit institutions (a logical sequence from the world economic decline), Bulgarian banks found themselves forced to change their tactics. So, they started applying the world experience. Specialized products were created such as car credits, computer credits, furniture credits, student credits, etc. What the Bulgarian market has not yet copied are the holiday credits, but they, too, will probably be introduced some day. Therefore, some curious changes are going on in BULBANK and Biochim. Until recently, these banks had not launched consumer credits. By March 31, 2003, credits launched by BULBANK to individuals already exceeded BGN33MN, while a year earlier they only amounted to BGN16.1MN. For the same period of time, Biochim raised the total amount of its consumer credits from BGN16.3MN to some BGN45MN.Regardless of the credit expansioncrediting proceduresin Bulgaria remain too complicated, the service fees - too high, and the red-tape and collaterals - beyond the strength of most clients. Seven years after the bank bankruptcies and inspite of the new Banks Act, Bulgaria still applies the rule saying that it is almost impossible to draw a credit for candidates who have no contacts with the right people. In the country, directors of bank branches were caught making schemes with local businessmen in order to get consumer credits which were later used to finance corporate deals. The drafting of business plans is still a problem for the companies. Even though they are no longer required in some banks - SG EXPRESSBANK, for example, from companies which apply for credits worth up to BGN50,000. The only requirement is that banks have operated for at least two years and are making profit. Besides, the credit needs to be secured by a mortgage.As for a larger credit, businessmen can also turn to consulting companies. Apart from preparing business plans, they also offer easy utilization of the credits in return to a 10% fee. When all costs needed to get a corporate credit are calculated, it turns out that the real interest that is to be paid is not 9 or 10%, but twice higher. Although people sometimes agree with paying more when they badly need a credit, they will not tolerate this approach forever. If banks fail to make the crediting procedures more transparent, they will find it difficult to survive among their competitors. When Bulgaria joins the European Union (in 2007, 2010, or 2017), the credit institutions registered and operating in accordance with the Bulgarian legislation will be obliged to meet the EU requirements, which protect the interests of the bank customers to a much higher extent. Laws for consumers protection in Germany, Portugal, and Italy contain special provisions that protect borrowers from self-willed bank officers. So, when banks in Bulgaria become part of the European Monetary Union, they will be forced to introduce such requirements, too.

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