An analysis of Bulgarian National Bank (BNB) data shows that retail borrowers are taking loans in leva and euro, while companies have an overwhelming preference for borrowing in euro.
According to BNB data, loans in leva added up to 54 per cent of the banks' portfolio at the beginning of October with a separate 44.7 per cent in euro. These figures are not far away from the same point in 2005, when they were respectively 52 per cent and 43 per cent.
Over the past year, the local banks have sold abroad loan packages worth about 2.2 billion leva, which distorts loan statistics.
The combined credit portfolio of the local banking system increased by 3.6 billion leva in the past 12 months, including 2.2 billion of loans in leva.
Only 37 per cent of corporate borrowing was in leva, while the rest was mainly in euro, followed by some other foreign currencies.
In absolute terms, consumer loans increased by 607 million leva in the past 12 months, including 485 million leva in the Bulgarian currency and the equivalent of 100 million leva in euro.
In the mortgage market, borrowers are increasingly opting for the euro.
Mortgage lending increased by 1.13 billion leva in the past 12 months, including 710 million leva in the local currency and the equivalent of 415 million leva in euro.
In September, it emerged that pace of credit growth, which was the main concern of the BNB and the International Monetary Fund in 2005, had increased to a slight degree in the previous few months.
The growth of bank credit to the private sector slowed to 18 per cent year-on-year in May 2006, below the BNB target rate of 20 per cent.
Although some of the increase could be the result of a base effect (lending surged in March 2005 ahead of the imposition of BNB credit controls, but then grew much more slowly in the following months), the slowdown prompted BNB to slightly ease some of its lending controls, and to express the hope that all the extra controls could be removed by the end of 2006.
However, private-sector borrowing rose by 24 per cent year-on-year in June and remained close to this rate in July and appeared to continue the trend in August.
In contrast to 2004-05, when household borrowing was the main cause of the sharp increase in bank lending, the increase in credit growth in June to August appeared to have been caused by borrowing by companies. Household borrowing, spurred by sustained growth in mortgage lending, has continued to rise at about 40 per cent year-on-year, a significant decrease compared to the rate of 60 per cent in the second half of 2005.
On October 13, in an interview with Bulgarian-language weekly newspaper Banker, Krassimir Katev, a member of the EIBank managing board, noted that according to central bank statistics, in terms of the consumer and mortgage credits to GDP ratio, Bulgaria was gaining on the countries in Central Europe but at slightly lower levels at present. The indicator is a few times lower compared to that in Western European countries, Katev said.
