Банкеръ Weekly



Western and Bulgarian Capitals in a Fierce Struggle for the Local MarketThe war between banks for larger market shares, which has been waged in the world for several years now, and the fierce clashes for purchase and take-over of financial and tangible assets, are gradually spreading to Bulgaria as well.In fact, a big struggle is coming into view on the local banking front. The bid will be for 6% of the finance and credit system's assets, and the loot for the winner is called Biochim commercial bank. Interest towards its acquisition has been announced by BULBANK, the French Societe Generale (the owner of SG EXPRESSBANK), and HEBROSBANK. ROSEXIMBANK and the financial holding TBI (which owns the insurer Bulstrad and through it 33.34% in Tokuda Credit Express Bank) also intend to participate in the bidding.It is obvious that most of the big banks, which according to the BANKER weekly's rating in end-June (table 1 on p. 6-7) and in end-September (table 2 on p. 6-7) are on the list of the best Bulgarian banks, are getting ready for the privatisation deal.Despite the changes in the managerial team of BULBANK in the summer of 2001 and the partial outflow of personnel from it to ROSEXIMBANK and Raiffeisen (Bulgaria), the credit institution retained its top position as the biggest and most profitable Bulgarian bank. By mid-2001 BULBANK held more than 24.1% of all assets of the local finance and credit system and its balance sheet value was about twice that of United Bulgarian Bank (UBB), which rates second on the local market according to the amount of its assets (table 3 on p. 6-7). BULBANK also retained its leadership according to the indicators equity capital (table 4 on p. 6-7) and profit (table 5 on p. 6-7).After Levon Hampartumyan assumed his duties as Chairman of BULBANK's Management Board in September, the bank declared its intention for aggressive expansion of its market positions. If it wins in the bidding for Biochim and takes it over, BULBANK's market share will reach 30% of all bank assets.Biochim itself is also in the group of the best Bulgarian banks, both in the rating for the first six months of 2001 (table 1) and in that for end-September (table 2). The financial institution rates fourth according to its balance shee value.However, a decisive role for its rating among the top local banks was the reported high profit (table 5), which amounted to BGL9.2MN in end-June and exceeded BGL16.9MN three months later. Thanks to that financial result, Biochim reported also a very good return on the share capital (table 6) and on assets (table 7).In financial circles it is commented that the bank's profit for June and September has been quite exaggerated. Necessary provisions in compliance with the requirements for conservative appraisal of the credit risk are calculated on part of its big credits. It is claimed that Biochim's managers Nikolai Kavardjikliev, Tsvetan Tsekov, and Plamen Dobrev, will have to set aside additionally between BGL6MN and BGL10MN for provisions on its risky receivables. If this is done, the bank's profit by end-September will amount to BGL9.6MN, its return on share capital will exceed 33%, and its return on assets will be around 1.6 per cent. However, the bank will find its place in the group of the best Bulgarian credit institutions with these results.SG EXPRESSBANK is within the group of leaders for a comparatively short period of time. The French Societe Generale, which purchased the bank in the end of 1999, needed more than a year and a half to restructure it and make it competitive to the other local financial institutions. As of the beginning of 2001 the managers of SG EXPRESSBANK Sandi Jilio, Philippe Guidesse, and Gabriel Shonoltser are pursuing a very active crediting policy, staking mainly on consumer loans, which rose from BGL246,000 to almost BGL43MN within the first nine months of 2001, while credits to companies rose by BGL5MN only. The bank has not yet settled all its problems in the sphere of crediting in the corporative sector.In end-June 2001 SG EXPRESSBANK's profit totalled BGL7.8MN and three months later it exceeded BGL10.9MN. The return on its share capital was about 27.4% in mid-year and almost 38.4% in end-September. The indicator return on assets improved considerably as well, from 1.5% in end-June to about 2% three months later. If the bank keeps the current tendency of improving its financial performance, it would certainly occupy a lasting position in the club of the best credit institutions.However, SG EXPRESSBANK's owner Societe Generale has much higher ambitions for the Bulgarian bank market and has decided to achieve its goal by a single stroke - by purchasing Biochim. In case the French acquire the bank and merge it with SG EXPRESSBANK, they will take hold of almost 10% of the local financial market. And the new bank's balance sheet value will exceed BGL1.1BN.HEBROSBANK is also planning to expand on the back of Biochim. In the end of 1999 the Plovdiv-based financial institution was bought by I Regent Group (which was then named Regent Pacific Group). Since the autumn of 2000 it is among the most persevering candidates for the purchase of the state-owned Biochim. However, the bid, which it submitted in the beginning of 2001 was rejected by the Bank Consolidation Company due to the low offered price of EUR26MN. However, HEBROSBANK's managers did not give up their intention to acquire Biochim, and by a merger of the two credit institutions to set up a bank with a balance sheet value of about BGL937MN, to control over 8% of the local financial credit system's assets.HEBROSBANK is also in the group of the best Bulgarian credit institutions. In mid-2001 its profit amounted to BGL5.1MN and reached BGL6.4MN three months later. The return on share capital and on assets rose considerably from March. But its managerial team, chaired by Gautam Vir, should walk a long way in order to establish it firmly as a leader on the local financial market. And the quickest way for achieving this aim is obviously the purchase of another big Bulgarian bank.The other method for expanding the market positions is through offering of new financial services and increase of crediting, which would attract new clients to the bank.First Investment Bank (FIB) and BULBANK are the only credit institutions, that have been inevitably members of the best Bulgarian banks' club over the last three years. In 2001 FIB's managers - Matyo Mateev, Maya Georgieva, and Yordan Skorchev - succeeded to increase its assets by 45 per cent, and their total amount reached BGL463,200,000 by end-September, rating it seventh of the list of the biggest Bulgarian banks. It is following an extremely aggressive crediting policy and its interest is concentrated on corporative financing. Thanks to the efforts of its Executive Director Maya Georgieva, FIB attracted more than USD70MN of medium-term and long-term financing from private foreign and international credit institutions. The amount of loans, extended by FIB in the first three quarters of 2002 rose 51% and its credit portfolio amounted to some BGL230MN by end-September.In mid-June 2001 FIB reported a profit of BGL9.2MN, and three months later it exceeded BGL11.6MN. In the second quarter of the year the bank ranked first according to the return on share capital indicator - 92 per cent - and retained this position in end-September when this indicator exceeded 116 per cent. Its return on assets was good too - 2.15% in June and 2.5% for the first nine months of 2001. In September DSK Bank returned to the group of the best Bulgarian credit institutions, after having dropped out of it in June. Its BGL11.1MN profit was not in correspondence to its huge assets of BGL1.29BN. For that reason DSK Bank was not among the first ten credit institutions according to the return on assets criterion. Within three months, however, its profit rose by some 73% to BGL19.2MN. The return on its share capital was about 27.5% in end-September, and the return on its assets was 1.4% for the same period. But the merit for this positive performance goes to its former managerial team, headed by Spas Dimitrov, which was replaced on September 19, 2001.The new management, headed by Krassimir Angarski, is yet to uphold DSK Bank's position in the group of the best Bulgarian credit institutions. The management's task will be to expand its market positions, increase the number of offered foreign currency services, and prepare the bank for privatisation. Its privatisation will be in fact the last opportunity for the players on the Bulgarian financial market to acquire more quickly a larger share of it.The financial performance of UBB by end-September did not allow it retain its position in the club of leaders. The credit institution is second according to its balance sheet value and rates third according to its profit of about BGL17.1MN. However, it was not sufficient for the bank to rate among the first ten banks according to the return on assets indicator. The reason for the comparatively small profit for a bank of UBB's size are the considerable funds - exceeding USD10MN - which it invested in the renovation of its informational system. Thus, UBB is the bank with the highest expenses for economic elements. They totalled BGL53.6MN in end-September, while the respective amounts for BULBANK and DSK Bank were around BGL34MN and BGL52MN.The investment, which UBB is presently making, will allow it to considerably increase the number of services it offers to its clients. The bank is preparing the establishment of its own network for issuance and servicing of debit and credit cards. New services to citizens, small and medium-sized companies, are being developed as well. These projects will start bringing considerable proceeds next year when the bank's expenses will be much lower than presently and this will result in a significant increase of its profit.UBB's managers - Stliyan Vutev, Radka Toncheva, and Christos Katsanis - succeeded to set up a solid basis for the planned market invasion. By end-September 2001 UBB held 12.2% of all bank assets and controls 6% of the local credit market.Bulgarian-American Credit Bank (BACB) is one of the institutions, projecting to expand its market positions by offering new services, and not by purchasing other banks, despite the rumours spread in financial circles. BACB is still following the six-year policy, imposed by its Chairman and CEO Frank Bauer. The bank extends long-term and short-term credits for investment projects, as well as housing and consumer loans to private clients. BACB's managers were among the initiators for passing the Mortgage Bonds Act. It was the first bank to launch on the market these securities and succeeded to quickly sell the entire issue worth EUR3,242,000. The proceeds from the sale will be again invested in loans to companies.glad the 2002 Budget was passed at first hearing in the National Assembly.BACB is the only bank, operating in Bulgaria, whose credits account for about 90% of its assets and it is a live proof that crediting is a profitable activity in Bulgaria. In mid-2001 BACB's profit amounted to abount BGL4.1MN. In end-September the bank rated fourth according to return on share capital (over 32.7%) and was second according to return on assets (around 3.8%).

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