Банкеръ Weekly



Bank services have been transforming into routine for the people whose income allows them to buy more than just food. Settlement, deposits, loans, debit and credit cards - these are no longer unknown and fearful words to many Bulgarians. Of course, there may be lots of opponents to this statement, but it is difficult to argue with the statistical figures. Once again, the numbers show that bank assets have grown. As of March 31, 2006, they total BGN34BN - BGN5BN more than they amounted in March 2005. Just seven years ago, in June 1999, when the lev denomination was fulfilled, the assets of the banking sector were approximately BGN7BN.
The rapid growth of the financial market made Bulgarian people witness radical changes in the banking sector. State-owned banks almost disappeared, foreign capitals conquered about 85% of the assets, the policy of the credit institutions turned 180 degrees - from refraining from launching credits in 1998 to an aggressive and sometimes hysterical competition to gain customers. What is more, it happened in the field of services such as home and consumer loans which were quite forgotten until 2000. Currently
the banking system enters a new stage of development
- mergers and acquisitions, that will change its face radically. A merger between two institutions may in a short time create a player of strategic or, as they put it in the Bulgarian National Bank, systematic importance for the market and even send it to the leader's position. For example, the merger among BULBANK, HVB Bank Biochim and HEBROSBANK will give birth to an institution whose market share will be unattainable for its competitors for a long time. The union between Piraeus Bank Bulgarian branch and Piraeus Eurobank created a new strategic player on the Bulgarian market, because after the merger the bank's assets exceeded BGN1.4BN. By this indicator, it ranks eighth in the sector anticipating EIBANK, Societe General EXPRESSBANK and DZI Bank.
Of course, with the financial and crediting sector growing impetuously problems inevitably arouse and may also be defined as
growth errors
While competing for redistribution of market shares, some banks underestimated the crediting risk and started increasing the amount of their delayed receivables. In fact, this danger was also noted by the BNB 2005 report. The Banking Supervision experts claim that the negative trend for gradual increase of non-performed mortgage and consumer loans has been continuing in the first quarter of 2006. They say, however, that the banking sector as a whole is stable since it disposes of a significant net worth. In the end of March it amounted to BGN3.68BN - three times higher than the amount in March 2005. The total amount of the profit is up, too. For the first quarter of 2006 it amounted to BGN213.66MN, whereas a year earlier it was BGN128.89MN. However, this result has been significantly influenced by revenues that did not result from banks' operating activities and occurred only once. These are provisions of considerable amount planned on banks' receivables served irregularly and released at the beginning of the year, because the credits were paid off. This amount increased the financial results of some of the banks which provoked a sudden growth of their profits.
As to the smaller credit institutions, Central Cooperative Bank, Allianz Bank and Corporate Bank
are proving their competitive power on the market
They report permanent increase of their assets. If they manage to continue the expansion by year-end, the three banks will overcome the limit of BGN1BN worth assets.
In fact, the competition for redistribution of market shares among the banks will keep defining the face of Bulgaria's financial and crediting sector at least by the end of the current year.

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