Bulgaria’s banking sector: Facts & Figures
Updated September 2018 – For earlier editions of Facts & Figures click here
Driven by private consumption, exports and business investments, in 2017 the Bulgarian GDP recorded real growth of 3.6% on an annual basis. The pace of growth was slower compared to the growth of 3.9% in 2016 but, nevertheless, it was above the average for the EU.
In 2017 the unemployment rate declined to 6.2%, remaining at its lowest level since 2008 when it was 5.6%. 2017 was the first year with inflation since 2012. The average annual change of the Harmonised Index of Consumer Prices (HICP) in Bulgaria was 1.2% compared to -1.3% in 2016.
In 2017 the banking system showed solid resilience, sound capital adequacy, high profitability and stable growth in the context of the rising credit portfolio and attracted deposit resources. This was supported by the favourable condition of the Bulgarian economy, the low level of unemployment and rising incomes, despite the effects of the low interest rates and the heavy regulatory environment in the banking system.
As of 31 December 2017, there were 27 banks operating in Bulgaria, five of which were foreign banks’ branches. The top five banks held approximately 55.9% of all assets in the banking system. At the end of 2017 the market share of domestic banks and those of the EU subsidiaries remained unchanged at 23.5% and 72.9%.
Changes in the ownership of some banks were observed in the last year and in the beginning of 2018. In 2017, the Belgian bank KBC, the sole shareholder in the second-tier bank CIBANK finalised a deal to acquire the National Bank of Greece’s Bulgarian subsidiary United Bulgarian Bank (UBB), which was in the first group of banks. The merger took place in February 2018 and the new bank ranked third in terms of assets.
The volume of cashless payments has been growing steadily. More specifically, between 2014 and 2016 the number of card payments increased by 44%, and the amount of card payments increased by 38%, while the amount of card payments initiated through virtual POS terminals grew by over 20%. In 2016, more than 50% of credit transfers were initiated electronically by users, which represents two thirds of the total value of all credit transfers. According to preliminary data from the Bulgarian National Bank (BNB – the Central bank of Bulgaria) for 2017, these trends have been maintained.
In 2017 banks’ total assets increased by 6.2% year-on-year to €50 billion (BGN 97.8 billion). The share of loans and advances increased to 61% compared to 60.7% at the end of December 2016. The share of cash rose to 19.9% from 19.7% and the share of securities decreased to 14.3% from 14.7%.
The loan portfolio of the banking system grew at a moderate pace due to the favorable economic environment and the low interest rates on loans. The BNB’s interest rate statistics for 2017 registered a continuing decline in the average interest rates on new loans in all sectors and currencies.
The total amount of loans outstanding to the non-government sector (non-financial corporations and households), increased by 3.3% on annual basis reaching €25.93 billion (BGN 50.71 billion) in comparison with the reported growth of 1% in 2016, according to the BNB monetary statistics.
In the last year the outstanding loans to non-financial corporations, including small and medium-sized enterprises (SMEs), representing 99.9% of all enterprises in the country, increased by 1.7%, reaching €15.9 billion (BGN 31.08 billion). By sectors, the highest amount of loans and deposits were in the trade, manufacturing and construction industries.
Deposits held by banks continued to grow, although with a slower pace. As of the end of December 2017 they reached €37 billion (BGN 72.383 billion), or 73.8% of GDP, despite the low interest rate levels. Approximately two-thirds of the deposits were held by the household sector (66.1%).
The active efforts of the banks for optimizing their portfolios led to a gradual decline in the share and the amount of non-performing loans (NPLs). As of 31 December 2017, the amount of NPLs (excluding Central Banks and credit institutions) declined to €2.89 billion (BGN 5.65 billion) in absolute terms, or to 10.07%.
Total operating expenses decreased by 0.7% on an annual basis to €914.7 million (BGN 1.789 billion). As of the end of 2017 the cost/income ratio increased to 46% from 43.2% a year earlier, remaining below the EU average.
Net interest income declined by 4.6% year-on-year to €1.37 billion (BGN 2.675 billion). Net income from fees and commissions grew by 8.1% to €509 million (BGN 995.7 million).
The net profit of the banking system increased by 9.1% in 2017 to €600.3 million (BGN 1.174 billion) compared with 2016 where there was a one-off effect arising from the deal between Visa Europe and Visa Inc. which affected the net profit for 2016.
As of the end of 2017 the total capital adequacy ratio increased from 20.88% to 22.08% on a system level. The CET 1 of the banking system remained unchanged at 20.41% compared to a year earlier. The liquid asset ratio accounted for 38.97%. The ROA and ROE were 1.2% and 9.32%, respectively.
In 2017 the banks paid €68.7 million (BGN 134.3 million) as a corporate tax, which represented 5.8% of all corporate tax revenue in 2017.
As of the end of 2017, 63,700 people were employed in the financial sector, as approximately half of them were in the banking sector.
Contributor: Svilen Kolev firstname.lastname@example.org