Bulgaria's banks recently published their 2006 results and strategies for the next two years, with figures showing a fast-growing and competitive market. While the merger of Italy-based UniCredit's three Bulgarian subsidiaries will create a new leading player, other foreign and Bulgarian-owned banks also have ambitious plans for growth.
The loan portfolios for Bulgarian banks grew year-on-year by 23.9% to $15.03bn in 2006, according to the Bulgarian National Bank (BNB). Total deposits grew 30.6% to $22.79bn, while total assets grew to $28.98bn, an increase of around 28.5%. The strong performance increased the total net profit of the banking industry by 35.9% to $544.89m.
As of the beginning of the year, the largest bank was DSK Bank, part of the Hungarian OTP Bank since 2003, followed by UniCredit's Bulbank and United Bulgarian Bank (UBB), owned by the National Bank of Greece. In December 2006, Bulgarian financial group DZI sold its banking arm to Greece's EFG Eurobank, which plans to merge it with Postbank to create the fourth-largest bank in the country.
However, the dynamics of the market are expected to change this month following the merger between UniCredit's three Bulgarian subsidiaries (Bulbank, HVB Bank Biochim and Hebros Bank). The banks will officially merge on April 27, overtaking DSK and making it the largest bank in the country in terms of assets. The bank will be named UniCredit Bulbank and will have a network of more than 300 branches - though the number may be slimmed down slightly - and over 1m clients.
"The new bank will have total assets of $5.5bn and boast a market share of around 25%," recently reported Bulbank's CEO Levon Hampartzoumian. Last year, Bulbank saw a 23.4% rise in assets to $2.88bn, though it reported a 18.1% decline in net profit because of the costs of the merger. HVB Biochim saw its assets rise 3.3% to $2.06bn while net profit doubled to $29.46m. Hebros Bank experienced a 3.1% fall in assets to $633.29m.
In the wake of the merger, DSK Bank has committed to fight for its position in the market, on the back of impressive growth last year. In 2006, the bank posted net profit of $121.8m, up 42.6% year-on-year. Assets increased 33.6% to $4.26bn. DSK told the local press they were targeting pre-tax profit of 100m euros ($134.28m) for 2008.
DSK was acquired by OTP, the biggest commercial bank in Hungary, for $418m in October 2003. At that time, OTP announced it would invest $400 in DSK until 2008 to build the branch network and develop the IT infrastructure. DSK currently operates more than 360 branches nationwide.
Meanwhile, Greece's UBB announced equally ambitious plans to increase net profit by two-thirds over 2007 and 2008. UBB predicts total assets will rise from $2.72bn in 2006 to $3.36bn at the end of 2007 and $4.33bn in 2008.
First Investment Bank (FIBank), the largest of the few Bulgarian-owned banks on the market and the fifth-largest bank by assets, announced plans for an IPO to boost its capital. The offer of 10m shares with a face value of around $0.69 each is expected to increase its nominal capital to $75.54m. The bank has not yet announced the issue price nor set a date for the offering, but said the cash raised by the IPO would be used to finance loan portfolio increases, issue more bank cards and develop its branch network.
Two more Bulgarian-owned banks, Corporate Commercial Bank and Investbank, are also planning IPOs on the Bulgarian Stock Exchange.
The International Monetary Fund (IMF) urged Bulgaria's central bank in January to further tighten its restrictions on growth in lending, which the IMF blamed for the country's rising current account deficit. Although the BNB axed loan limits on January 1, when Bulgaria joined the EU, it has pledged to keep annual lending growth below 20%.