THE STATE HAS ABANDONED THE BANK SECTOR
THE BANKS ALREADY COMPETE FOR NEW CLIENTSOnce upon a time there were state-owned banks in Bulgaria... Or the other beginning would be: While till 1999 the state-run banks were controling more than half of the local financial market, only one state-owned credit institution remained after February 2002... Doesn't it sound too hackneyed!?In fact, the beginning of future articles about the system of state-owned banks in Bulgaria is predictable. Because this system will soon become a history. By the spring of 2003 at the latest, 13 years after the establishement of the first private bank in Bulgaria - First Private Bank (FPB), which is now defunct - the domestic financial market will be entirely controlled by foreign capital. Until then the Bank Consolidation Company (BCC) will have already chosen the purchaser of DSK Bank. And BCC's Board of Directors will discuss the scheme under which it should be dissolved after it completes the tasks it has been set for - the privatisation of state-run credit institutions.Wise-crackers may say that Incentive Bank is still and will remain property of the Finance Ministry. But as a comparatively new credit institution (set up in March 1999) it could be hardly expected to control a considerable market share.Thus, the State says good-bye to the bank sctorThe future will show if this is a well-timed or belated decision. Bulgaria is perhaps the only country in Eastern Europe with state-run financial institutions, owned by the government, through which it pursues its policies.Foreign capitalscontributed to a certain extent for the financial stabilization of the Bulgarian bank system and helped it regain its prestige, lost after the crisis and hyperinflation in 1996-1997. Over the past five years since 1997, when the first sale of a state-owned bank - United Bulgarian Bank (UBB) - was effected, the domestic financial and credit sector is continuously refuting the negative attitudes towards it. The citizens who suffered the greatest shock before that, losing a considerable part of their savings, can see that a system for protecting their deposits has been practically established. After the failure of Credit Bank (in 1999) and Balkan Universal Bank (in 2000) their depositors got their money from the Bank Deposit Insurance Fund within 45 days after the court adjudicated these financial institutions insolvent. The regained trust of citizens in the bank system resulted in more attracted money and higher aggregate assets of the banks. In end-September 2002the money of natural persons and firms,entrusted to the banks amounted to BGN8.89BN, up from BGN7.55BN a year earlier. Within the same period the aggregate assets of credit institutions picked up from BGN10.6BN to BGN12.66BN. In 2002 the myth that banks do not extend credits was refuted as well. Numbers are an eloquent testimony in that respect. In end-September 2002 the amount of launched credits totalled BGN4.72BN, up form BGN3.27Bn a year earlier. The shares of credits in the aggregate volume of banks' assets increased from 30.9% to 37.33 per cent. This shows that credit institutions more and more rely on extending loans in order to raise their proceeds and accumulate profits. A large number of banks, including rhe top ones (as UBB for instance), attract credit lines from international financial institutions (EBRD and the International Financial Corporation) and from foreign private and state-run structures, by which they finance special programmes for crediting small and medium-sized enterprises. In the reports of commercial banks to the BNB there is not a special column for entering this kind of loans, but according to some experts their size is half of the aggregate volume of credits, allocated to private enterprises. And according to the BNB, in end-September 2002 the loans to private firms amounted to BGN4.43BN, up from BGN2.84BN a year earlier. The volume of consumer credits (to citizens and households) has also picked up considerably, and they have become one of the main sources of proceeds for the banks this year. In end-September 2001 they totalled BGN776.4MN, while in the same period of 2002 they almost reached BGN1.13BN. The banks' proceeds from interest on credits (BGN416.5MN) account for about a half of their aggregate incomes for the first nine months fo 2002 and contribute considerably to their fair profits, amounting to BGN201.74MN in end-September (after payment of taxes of about BGN57.56MN). The return to creditingwhich was recommended by the BNB Governor Svetoslav Gavrijsky back in end-2000, and imposed by the recession of world economy in 2001, helped the financial institutions maintain their profits and develop operations. Back then the BANKER weekly worked up a special ranking - for the bank which is most active in extending credits. All banks have been evaluated according to three criteria - volume of launched credits, share of credits in the bank's aggregate assets, and growth of extended credits. The first ten banks in the ranking according to all three criteria can be qualified as the most actively crediting financial institutions. The ranking shows that in end-September 2002 Bulgarian Post Bank was the leader on the domestic credit market. It ranks fourth according to the volume of extended loans, totalling BGN390MN. DSK Bank, BULBANK, and UBB have larger credit portfolios, but their assets are 2-fold to 3.5-fold larger than those of Post Bank. Therefore, the credits launched by them amount to 17% to 49% of their assets. Moreover, they do not rank among the top ten financial institutions according to one of the criteria - share of credits in the balance sheet value, while Post Bank ranks seventh by 55.13 per cent. It ranks tenth according to the growth of allocated credits criteria, and thus qualifies as the most active bank in the extenstion of credits.For a fifth year now the BANKER weekly has been ranking quarterlythe best commercial banks in BulgariaThe ranking does not include the branches of foreign credit institutions in this country, as they do not set aside provisions on overdue credits and their financial performance cannot be compared with that of the banks. The BANKER has been rating the best Bulgarian banks according to several indicators: balance sheet value, equity capital, profit, return on assets, and return on share capital. According to BNB financial data, the invariable participant in the group of the leaders - BULBANK - was again on the list end-September. The other financial institutions in the ranking are: DSK Bank, UBB, SG EXPRESSBANK, and First Investment Bank.HEBROSBANK and Biochim Commercial Bank, which were also on the list in the previous months, dropped out in end-September due to their low profits.