Bank services in Bulgaria, similar to other Central and Eastern European countries in transition, have been transforming into a routine for the people whose income allows them to buy more than just food.
This was shown in an article in the local Bulgarian-language newspaper Banker.
Settlement, deposits, loans, debit and credit cards these are no longer unknown and fearful words to many Bulgarians, which is seen in the statistical data.
The numbers show that bank assets have grown. At the end of March this year, they totalled 34 billion leva, or five billion more than they amounted in March 2005. And just seven years ago, in June 1999, when the lev was denominated (turning 1000 old leva into one new lev), the assets of the banking sector were about seven billion leva.
The rapid growth of the financial market made Bulgarian people witness radical changes in the banking sector. State-owned banks almost disappeared. Foreign capitals conquered about 85 per cent of the banking systems assets. The policy of the credit institutions turned 180 degrees from abstaining from launching credits in 1998 to an aggressive and sometimes frantic competition to gain customers.
Furthermore, it happened in the field of services such as home and consumer loans, which were quite forgotten until 2000. Currently the banking system is entering a new stage of development mergers and acquisitions that will change its face radically.
A merger between two institutions may in a short time create a player of strategic or, as they put it at the Bulgarian National Bank (BNB), systematic importance for the market and even send it to the leaders position.
For instance, the merger of Bulbank, HVB Bank Biochim and Hebros Bank will give birth to an institution whose market share will be unattainable for its competitors for a long time (22 per cent market share in terms of assets).
Naturally, with the financial and crediting sector growing, hastily problems inevitably arise and may also be defined as growth errors. While competing for redistribution of market shares, some banks underestimate the crediting risk and start increasing the amount of their delayed receivables.
In fact, this danger was also noted by BNB in its 2005 report. The experts of the Banking Supervision Department of the central bank claim that the negative trend for gradual increase of non-performed mortgage and consumer loans has been continuing in the first quarter of 2006. They say, however, that the banking sector as a whole is stable since it disposes of a significant net worth.
At the end of March it amounted to 3.68 billion leva three times higher than the amount in March 2005. The total amount of the profit is up, too. For the first quarter of 2006 it amounted to 213.66 million leva, while a year earlier it was 128.89 million leva.
However, this result has been significantly influenced by revenues that did not result from banks operating activities and occurred only once. These are provisions of considerable amount planned on banks receivables served irregularly and released at the beginning of the year, because the credits were paid off.
This amount increased the financial results of some of the banks, which provoked a sudden growth of their profits.
As to the smaller credit institutions, they are proving their competitive power on the market They report a permanent increase of their assets. If they manage to continue the expansion by year-end, some banks will overcome the psychological barrier of one billion leva-worth of assets.
The competition for redistribution of market shares among the banks will keep defining the face of Bulgarias financial and crediting sector at least until the end of the current year, most experts believe.
