BANKS LEFT CREDTING IN HALF-CLUTCH
There is no power which could force local banks to draw at least half of their foreign assets in the next few months and extend them in credits to domestic production. Despite of the grumbling and exorcism on the part of politicians and businessmen, Bulgarian banks still prefer to keep their deposits abroad. Since the beginning of 2001 till end-March their balance-sheet figure rose from BGL9.8BN to BGL 10.8BN, while the aggregate amount of released credits increased by the negligible BGL200MN, from BGN 3BN to some BGN3.2BN. On the other hand, deposits in foreign financial intitutions picked up from BGL3.9BN to BGL4.4BN. In addition, investments in securities rose by almost BGL300MN.
The bitter truth is that banks still consider crediting of Bulgarian companies an unduly risky venture and prefer to deposit their money abroad. Moreover, this policy is likely to continue till the country's economy gains speed and Bulgarian businessmen give a proof of their ability to manage their firms wisely. At the same time, it is them who suffer most from insufficient credits.
In the first three months of 2001 the loans lent by private companies rose just 4.3 per cent, from BGL2.33BN to BGL2.43BN. This is an insignificant growth, taking into account the fact that the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank have launched several credit lines for financing small and medium-sized business in Bulgaria. There are also several funds set by the State for granting credits to small and medium-sized enterprises. Although Bulgarian-American Credit Bank (BACB) and Intensive Bank have focused their activities on that type of enterprises, there has not been a visible effect.
Obviously, financing of big companies with significant turnover and competent management is still much more advantageous to banks, than lending loans to small and medium-sized businesses. Most of the large banks (with the exception of DSK Bank) prefer to extend credits to companies, that have been traditionally established on the domestic market. BULBANK, United Bulgarian Bank (UBB), Bulgarian Post Bank, SG EXPRESSBANK, Biochim commercial bank, First Investment Bank (FIB), Raiffeisenbank (Bulgaria), and BNP-Paribas (Bulgaria) have already directed their efforts to the attraction of such clients. Indicatively, at the end of 2000 two of the above-mentioned financial institutions - Raiffeisenbank (Bulgaria) and FIB - were included in the BANKER weekly's ranking of the most active crediting institutions in Bulgaria.
Towards the end of March 2001, BANKER's ranking was topped by FIB. In the first quarter of the year the credits extended by FIB rose by 20.7 per cent, and the aggregate amount of its credit portfolio - BGL182.6MN - ranked it fourth after DSK Bank, BULBANK and UBB. Within that period about 49.3% of FIB's assets were invested in loans, 97.8% of them - to private enterprises. In addition to short-term loans, the bank offers long-term credits, as it handles many credit lines from abroad. Moreover, it is the only local financial institution, that succeeded for a second time within four years to attract financing from a consortium of Westeuropean banks. With a view to the recent changes in the political situation in the country, FIB's managers will have to assess very carefully the political risk.
FIB intends to continue its aggressive policy on the Bulgarian crediting market, as it expects a new financial injection of EUR10MN in August. The loan, to be allocated by the EIB for a period of seven years, will be guaranteed by a consortium of western financial institutions, headed by Beirische Landes Bank.
FIB also intends to issue 3-year mortage bonds in order to ensure funds for releasing medium-term credits to its clients.
In March Raiffeisenbank (Bulgaria) failed to retain its 2000 most active crediting bank award. Raiffeisenbank (Bulgaria) is on the list of the top 10 financial institutions in terms of extended loans, and the bank's credit portfolio accounts for 44.8% of its aggregate assets. Raiffeisenbank (Bulgaria) ranks tenth according to that indicator, following BACB, International Commercial Bank (renamed to Commercial Bank of Greece - Bulgaria in May 2001), First East International Bank, Corporate Bank, Demirbank (Bulgaria), FIB, DSK Bank, Intensive Bank and Central Cooperative Bank. With the exception of FIB, all above-mentioned financial institutions have remained outside of the most active banks ranking due to several reasons. One of them is that the total amount of loans they have lent is too small, or the growth of their credit portfoilio within the first three months of 2001
is not sufficiently high. The second reason is connected mostly with DSK Bank and Raiffeisenbank (Bulgaria).
The total volume of loans allocated by the Austrians has dropped by some 12% in the first quarter of this year. This was the period when the bank's former executive director Momchil Andreev, who was in charge of crediting, was initiating his successor Johan Jonah in the office. Mr Jonah, who was elected Chairman of the bank's Management Board last May, is an uphoder of the aggresive crediting policy and under his management Raiffeisenbank (Bulgaria) has begun regaining its positions on that market.
Raiffeisenbank (Bulgaria) is the first bank, operating on the local market, which is successfully financing farmers for the purchase of agricultural equipment under the EU's SAPARD programme. The bank allocated seven loans totalling BGL4.4MN to farmers from the Rousse region for purchase of agricultural equipment bearing the trade marks of Germany's Klaas and of USA's John Dear. Half of the money will be recovered to farmers from SAPARD's funds.