Bulgaria's banking sector, has seen impressive growth this year, according to recent third quarter results.
This week, the central bank announced that 20% of Bulgarians have borrowed money from a local bank. Among them are 1.18m retail loan borrowers and 48,300 corporate borrowers who have borrowed money from Bulgarian banks. The bank stated that the average retail credits loan was Lv7000 ($4630) while the average corporate credits loan amounted to Lv250,000 ($165,000). A recent report by UniCredit Group projected that total profits of the sector will reach $560m in 2007 and $605m in 2009.
DZI Bank posted a $1.83m profit to the end of September, an increase from $1.64m compared to the same period last year. The bank has total assets of $700m and a credit portfolio of $306m.
Greece's EFG Eurobank Ergasias acquired a 74.26% stake in DZI Bank at the end of September in a deal worth 157.76m euros ($202m). Postbank, in which EFG Eurobank Ergasias has a majority share, announced that its nine-month net profit climbed 57.6% to $14.81m. The bank has a wide geographical coverage, with 130 branches across the country. Postbank, the seventh-largest bank in the country in terms of assets, is set to merge with DZI after the EFG acquisition.
Economic and Investment Bank (EI Bank) announced an outstanding nine-month growth, with net profit at $17.67m, compared to $3.23m in the first nine months of 2005, a surge attributed to the reintegrated credit provision. Asset growth was more modest but none-the-less impressive, with total assets at $848m from $776m at the beginning of the year.
However, other banks brought less good news. Commercial bank MKB Unionbank (owned by Hungarian MKB) saw its nine-month profits fall to $2.3m, a decline of 67.7% compared to the same period last year.
The growth of Bulgaria's banking industry has raised a number of issues. According to the National Bank, suspect loans in the system increased by 19% in the last 12 months, up to a total of $920m. However, these figures should be set against Bulgaria's dynamic banking growth; in the three months to the end of September, the proportion of loans listed as suspect decreased from 7.47% to 7.36%.
The banking sector in Bulgaria is dominated by large foreign-owned banks, with the three biggest alone - DSK Bank, United Bulgarian Bank (UBB) (90% owned by the National Bank of Greece) and Bulbank - making up 55% of the domestic customer and mortgage credit total, according to the National Bank.
Bulbank, Biochim and Hebros Bank, which are all part of the Italian-based "European" bank UniCredit Group, are to merge by mid-2007 to create a "superbank" under the name UniCredit Bulbank. The banks together currently have assets of 3.4bn euros ($4.4bn) and 326 branches across the country. After merging, the new group will overtake DSK as the largest bank in the country.
Bulgaria is an attractive destination for banks from EU countries such as Greece and Italy, which are small-to-medium sized by global standards. Penetration of banking services is generally low, meaning that there is significant opportunity for growth. Greek economist Vassilis Panayotidis recently told the press that Bulgaria is a natural market for Greek banks, and that investment in Bulgaria and Romania was "a matter of strategic importance" as they were faced with an increasingly saturated domestic market.