TEN BANKS CONTROL OVER 72% OF THE CREDIT MARKET
Nobody blames the banks anymore for not releasing credits. The rebukes have been forgotten. In the last four years the aggregate amount of the loans allocated by local financial institutions increased by 170% - from BGN2.4BN in 1999 to BGN6.3BN in end-2002. However, it's more important that in 2002 banks in Bulgaria began making their living by crediting. While in 1999 loans amounted to about 29% of the banks' assets, in end-2002 this share rose to almost 42 per cent. Presently, nearly all credit institutions offer loans, both to companies and to citizens (housing and consumer credits). Specialized products, such as loans for purchase of cars, computers, for students' education, etc. are already offered. The first real credit cards appeared in 2002. From the financial services offered in the Western countries only loans for a vacation seem to be still missing on the Bulgarian market. But they will also be included in the range of credit products because the competition for clients will necessitate it. The procedures for launching creditsremain quite complicated in Bulgaria at present, the fees for servicing them are considerably high, the guarantees are still unaffordable, and there is still too much bureaucracy. These components of crediting obviously are yet to be improved. If the bankers find a lobby in Parliament, which could amend the Natural Persons Income Taxation Act in such a way that the amount paid through the year in interest and principle of loans are acknowledged as expenses, and they are deducted from the taxable income, the burden on the creditors will be reduced. This is the practice in the US and in many West European countries. Its introduction in Bulgaria will encourage the population to draw credits and repay them. Ten banks controlled more than 72.2% of the local credit market in 2002. They extended BGN6BN-plus. The top 10 local credit institutions includeDSK Bank, with 15.2% market share, United Bulgarian Bank (UBB) - with 1.1% share, BULBANK - 8.4%, Raiffeisenbank (Bulgaria) - 7.1%, Biochim Commercial Bank - 7%, Bulgarian Post Bank and First Investment Bank (FIB) - both with 6.5% share, SG EXPRESSBANK - 4.7%, HEBROSBANK - 3.4%, and Bulgarian-American Credit Bank (BACB) - 2.3 per cent. But according to the BANKER weekly's rating for 2002, only Raiffeisenbank (Bulgaria) is included in the group of financial institutions which are most active in extending credits. Raiffeisenbank (Bulgaria) is the only one which ranks among the first according to all three indicators (on the basis of which the ranking is made) - the total amount of released loans, their share in the bank's assets, and the growth of extended credits. Raiffeisenbank (Bulgaria) rates fourth according to the volume of credits launched in 2002 (BGN429MN), third in respect of their share in its aggregate assets (72.7%), and eighth according to the growth of loans (43.8%). The accent in the bank's policy is on corporate crediting. Loan to firms totalled BGN404.8MN, and those to citizens amounted to BGN5.2MN. Crediting is the main source of incomes for Raiffeisenbank (Bulgaria). According to BNB's statistics, in 2002 it accounted for about 60% of all its proceeds. In 2003 the bank will continue to follow its aggressive policy and will aim at expanding its share in financing private firms. Consumer loans are also connected with it. Raiffeisenbank (Bulgaria) applies a specific scheme for releasing consumer credits. They are extended mainly to employees of firms, serviced by the bank.A considerable growth of the loansreleased to firms and citizens in 2002 were reported by UBB (69.5%), BULBANK (56.3%), HEBROSBANK (54.4%), and Biochim (47.6%). They are among the first ten according to the volume of extended credits as well, but lag behind the others in terms of the share of credits in their total assets. The above-mentioned financial institutions have a considerable financial potential for expanding their positions. UBB is the leader on the market of corporate credits, controlling 11.3% of it. In 2002 it allocated to private companies loans exceeding BGN554.8MN. BULBANK holds 9.9% of the local credit market. Biochim and Raiffeisenbank (Bulgaria) each hold 8.2% of it, FIB's share is 8.1%, Bulgarian Post Bank holds 6.7%, HEBROSBANK - 4.4%, SG EXPRESSBANK - 4%, DSK Bank - 3.1%, and BNP-Paribas (Bulgaria) - 2.5 per cent. These banks control 66.4% of the loans, allocated to private firms, and the other 33.6% are distributed between the other 18 banks operating in Bulgaria, and the six branches of foreign credit institutions. In 2003 they will be releasing huge credits to companies from the energy sector, to the mines, and for implementation of infrastructural projects. And big credits can be allocated only by banks with big capital. For example, BGN20MN-plus can be allocated by a bank whose equity capital is BGN80MN. This restriction is stipulated by the Banks Act which does not allow a credit institution to extend a credit to a single company which exceeds 25% of the bank's equity.The consumer credits market is distributed between fewer financial institutions. For several years DSK Bank has been the undisputed leader on it, but its monopoly is already breaking up. Five years ago DSK Bank controlled 90% of all consumer loans. Currently, its share is 63.8 per cent. Its biggest competitor is UBB, which extended 9.6% of all consumer loans (BGN119MN) in end-2002. UBB will yet compete for leading positions in this kind of crediting, as it counts on unguaranteed loans, released within a few hours, and on credit cards, entitling their holders to draw money without having to submit documents and guarantees. The biggest break-throughin crediting citizens over the last two years was made by SG EXPRESSBANK. Without a long history or the clients' trust (which DSK Bank had gained in the course of many years) the Varna-based credit institution gained hold of 7.7% (BGN96.8MN) of the consumer credits market. Bulgarian Post Bank controls 5.8% (BGN72.7MN) of it. Among the big players on the consumer credits market in 2002 were also BULBANK with 2.7% share (BGN33.5MN) and Biochim with 2.5% (BGN31.4MN). BACB also succeeded to strenghthen ist positions. Despite the comparatively small amount of its assets (BGN176.5MN), it manages 2.1% (BGN26.3MN) of the consumer credits.In the futurethe market of loans extended to citizens will be redistributed several more times. Banks with flexible teams of employees are expected to outstrip those with traditions in the sphere of consumer crediting, but with bureaucratic services. It is widely known that consumer loans are expensive for financial institutions. They are small in size - up to BGN20,000, but the expenses for servicing them (at least in Bulgaria) are almost the same as those allocated to big corporate clients. Numerous small credits to a large number of clients should be extended in order to get profits from that kind of service, and this is not lucrative for a small or medium-sized bank (Bulgarian banks' assets are usually between BGN300MN and BGN500MN). Undoubtedly, the transposition of layers on the local bank market will continue in 2003. Some of the smaller banks will probably succeed to quickly expand their positions in crediting, and some of the present leaders may narrow their scope. In a year or two a group of big banks will be formed, which will be offering to their clients services that presently sound strange in Bulgaria.