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Bulgaria’s banking sector: Facts & Figures

In 2016 the Bulgarian economy grew more slowly with GDP growth at 3.4% compared to 3.6% in 2015, according to the preliminary data of the National Statistical Institute (NSI). Due to the strong export and final consumption the Bulgarian economy continues to expand faster than the EU average. The economy grew in its seventh consecutive year. The previous year was marked by the presidential elections and the resignation of the government, which led to early elections in March 2017. The political situation did not disrupt economic activity nor did it affect banks’ role as financial intermediaries.

There were 27 banks operating in Bulgaria, five of which were foreign banks’ branches as of 31 December 2016. The top five banks held approximately 57.3% of all assets in the banking system. At the end of 2016 the market share of domestic banks decreased to 23.5%, while the share of the EU subsidiaries continued to grow and reached 72.9%.

The banks in Bulgaria showed resilience and stability as indicated by the results of the Asset Quality Review (AQR) and stress tests, conducted by the central bank of Bulgaria, Bulgarian National Bank (BNB) and independent consultants in August 2016. The scope of the assessment was larger than its European counterparts as it was held for all the banks in the country, except branches, covering about 96% of all assets and 75% of the loans.

The consolidation in the banking sector continued in 2016 with a deal announced in December 2016, between the Belgian KBC, sole shareholder in CIBANK, and the National Bank of Greece for acquiring its Bulgarian subsidiary United Bulgarian Bank, one of the five biggest banks in the country. In March 2016 Eurobank Bulgaria acquired the Bulgarian branch of Alpha Bank. The negotiations about the sale of Commercial Bank Victoria, one of the smallest banks in the market, are ongoing.

Most Bulgarian banks offer online and mobile banking payments via mobile phone or other electronic devices and those type of services have experienced rapid growth.

In 2016 the Bulgarian banking system remained stable, with growing assets and deposits and improved capital and liquidity positions.

The BNB’s interest rate statistics for 2016 registered a continuing decline in the average interest rates on new loans in all sectors and currencies, which is one of the main factors, driving the lending activity.

In 2016 the lending activity showed distinct signs of revival. The total amount of the outstanding credit to the non-governmental sector (non-financial corporations and households) recorded its first positive growth since 2012. According to the BNB’s monetary statistics, in 2016, the amount of outstanding loans for businesses and households rose by 1% year-on-year to €25.1 billion (BGN 49.09 billion) compared to the drop of 0.7% in 2015.

Last year, the outstanding amount on loans to non-financial corporations grew by 0.3% to €15.64 billion (BGN 30.58 billion), which was the first annual growth since 2013. Excluding overdrafts, loans to non-financial corporations recorded faster growth of 2.3% on an annual basis, reaching €11.03 billion (BGN 21.57 billion.

Deposits, accumulated by banks, continued to grow, although at a slower pace, compared to 2015. As of end-December 2016 they reached BGN 68.189 billion (€34.865 billion) despite the historically low interest rate levels. Approximately two thirds of the deposits were held by the household sector (66.5%).

In 2016 banks’ total assets increased by 5.2% year-on-year to BGN 92,095 billion (€47,874 billion). The share of loans and advances slightly decreased, accounting to 60.7% of the total assets, the share of cash declined to 19.7% from 20.9% and the share of securities increased from 12.7% to 14.7%.

Net interest income rose by 1.2% year-on-year to BGN 2.81 billion (€1.42 billion). Net income from fees and commissions grew by 3.5% to BGN 920.7 million (€470.8 million).

Total operating expenses decreased by 12.8% on an annual basis to BGN 1,763 billion (€901.4 million). In 2016 the cost/income ratio declined to 43.2% compared to 48.16% in 2015.

The share and the amount of non-performing loans in the banking system continued to decline in 2016. The share of non-performing loans dropped to 12.83%, which is the lowest since 2011.

Thanks in part to effective cost management and certain one-off effects in 2016, the net profits increased substantially by 40.5% year-on-year to BGN 1.262 billion (€789 million).

Total capital adequacy ratio and Tier 1 capital adequacy ratio for the banking system was 20.88% and 20.41%, respectively, in 2016. The liquid asset ratio accounted for 38.24%. ROA and ROE increased respectively to 1.37% and 10.41%.

In 2016 the banks paid BGN 147.6 million (€75.5 million) as a corporate tax, which represents 7.1% of all budget revenues arising from taxes in 2016.

As at the end of 2016, 58,600 people are employed in the finance and insurance sector, and approximately half of them are employed in the banking sector.

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