02 November
Bulgarian banks achieve second Y/Y profit growth since financial crisis
In September 2011, profits at Bulgarian banks registered their second year-on-year growth since the start of the financial crisis, according to a report by the Bulgarian National Bank (BNB) on the state of the local banking system as of end-September 2011.
For the first nine months of 2011, the sector booked total profits of 484.5 million leva, which represents year-on-year growth of 1.7 per cent. In May, Bulgarian banks recorded their first earnings rise since the crisis struck, achieving growth of 3.3 per cent on an annual basis. So far, year-on-year growth rate has been sliding but since February it has moderated to single digits as opposed to the double-digit drops seen in 2010.
BNB says that the overall sector results have benefited from the slower rate of increase in loan impairments. Related costs amount to 953 million leva. According to the central bank, there is also a continued decline in the proportion of loans more than 90 days in arrears. Excluding obligations to credit institutions, such loans accounted for 14.45 per cent of the gross total for the nine months under report.
The overall value of loans more than 90 days in arrears stands at nearly eight billion leva and the amount grew by 564 million leva over one quarter. Non-performing business loans account for 10.4 per cent of the total, while the respective proportions for overdue mortgages and consumer loans are 2.25 per cent and 1.76 per cent. As of end-September 2011, problem loans in the corporate sector added up to 5.7 billion leva, with the amount growing by 350 million leva over three months. The combined value of overdue mortgages is 1.2 billion leva, while the figure for non-performing consumer loans is 968 million leva.
BNB reports that banking sector assets grew by two per cent during the third quarter of 2011 to reach 76.5 billion leva, supported by strong core capital and liquid assets growth. At the end of September 2011, the total capital adequacy ratio was 17.75 per cent and the tier one capital ratio was 15.64 per cent.
Eurozone banks have yet to start raising additional funds to build their tier one capital ratios to nine per cent. In Bulgaria, where the regulatory minimum is set at six per cent, the central bank explicitly recommended as early as 2008 that local lenders maintain a 10 per cent ratio. By end-September 2011, the Bulgarian banking system had 10.2 billion leva in capital.
There is also continued growth in household deposits and they play an increasingly important role in bank financing. Over one month, the total amount increased by 496 million leva to reach 30.5 billion leva, meaning that deposits account for 46.6 per cent of the total resources attracted by the system. At the same time, there is a decline in the share of funds drawn from credit institutions, those typically being parent banks. This has further increased the proportion of local resources, which made up 79.1 per cent of the total attracted by the end of the nine-month period.
