Profit of Bulgarian Banks Down by 30% in 2010 H1

The Bulgarian National Bank has pointed out the stability of the country's banks. File photo

The total profit of Bulgarian banks in the first half of 2010 amounted to BGN 353 M, announced the Bulgarian National Bank.

This is a decline of 29.3% year-on-year, the statistics of the BNB show.

In the first quarter of 2010, the overall capital adequacy ratio of the Bulgarian banking system was 18.03% (against 18.24% three months ago), and the slight decline is not due to fundamental factors.

“The upward trend of classified loans continues, as well as the trend of impairment costs and specific provisions for credit risk related to them. In the period March – June the share of exposures past due more than 90-days in the total gross loans (excluding those to credit institutions) increased from 7.81% to 9.45%, although such deterioration was fully covered by the banks’ operating incomes. Total impairment costs of the banking sector during the first half of 2010 amounted to BGN 566 million, i.e. exceeding by 41% those in the same period of the previous year. Nevertheless, the profitability of the system remained at acceptable levels,“ reads the statement of the Bulgarian National Bank.

The reported end-June profit was generated by the banks’ core activities and provides 0.99% return on assets. No significant balance sheet fluctuations were observed in the second quarter. Total assets amounted to BGN 71 billion, marking 2.2% increase against June 2009. During the reporting quarter, there was an insignificant decrease in the cash and an increase of the securities in trading, available for sale and held to maturity portfolios. This dynamics resulted in a 1.1 percentage point contraction of the market share of the five largest banks down to 56.3%.

Gross loans and advances amounted to BGN 60 billion, of which 54.7% were corporate loans, 31.1% – retail exposures, and 14.2% – institutions (credit and non-credit ones) and central governments. Within the quarter, there was a trend of intensification of lending in two of the segments. Loans to corporations increased by 0.7%, and housing mortgage loans – by 0.9%. Some fluctuations were registered in the claims on credit and noncredit institutions, as well as in consumer loans.

At the end of June, the attracted funds in the Bulgarian banking system amounted to BGN 60.8 billion. Domestic sources of funding for banking transactions remained stable, and as of end-June provided a little over 3/4 of total attracted funds in the system.

The share of deposits of individuals and households continued to increase, reaching 43.3%. During the quarter, they increased by 2.2%. The balance sheet capital of the banking sector contained its strength and level. In the second quarter, issued capital, premium reserves and current year earnings increased. The retained profit and revaluation reserves dynamics did not weaken tier 1 capital. The Y-O-Y growth of the balance sheet capital was 7.8%.

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