During 2004/2006 Banks Lending In Bulgaria Accelerated Dramatically, Raising Concerns about the Overall Macroeconomic Stability In View Of Worsening Current Account, and Inefficiency.

DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c45047) has announced the addition of Banking Market In Bulgaria 2006 - CEE Banking Series to their offering

The report 'Banking Market In Bulgaria 2006 - CEE Banking Series' is a well structured and synthetic source of key data about the banking market in Bulgaria. It consists of 8 chapters and contains among others: a macroeconomic overview, general banking market statistics with identification of key players, separated parts on retail and corporate banking, a section about profitability, current market valuation, one-page profiles of TOP 5 players and finally mid-term forecasts of key banking volumes (deposits and loans) for each segment: retail and corporate banking.

Most of the data presented in this report has been updated as of 1H 2006. In case 1H 2006 data was not available, end of 2005 figures have been used.

Similarly to other publications (CEE banking series) this report consists mainly of graphs, tables and charts. The share of text has been reduced to necessary comments and conclusions only.

Countries Covered:

- Bulgaria

- Poland

- Czech Republic 

Content Outline:

1. Macroeconomic overview

2. Banking market

3. Retail banking

4. Corporate banking

5. Banks profitability

6. Banks valuation

7. Top banks profiles

8. Mid-term forecasts

9. Notes on methodology

Stable growth of the economy

The Bulgarian economy has been growing steady since 2000. The average GDP growth rate remained stable in the 4%-6% p.a. range during 2000-2006 and the initially high unemployment rate dropped below 9% in 2006. High growth of the economy together with a tight budget policy of the government resulted in the impressive budget surplus of over 3% GDP in 2005. The only two problems that could not be solved so far are: relatively high inflation and negative current account balance. The key reason for C/A deficit is growing foreign trade imbalance, caused by exploding internal demand and growing prices of imported resources. Fortunately Bulgaria is able to draw more and more FDIs, which are compensating a big part of the trade deficit.

EU accession and reforms

The long expected accession to EU (Jan 1, 2007) is getting closer. Bulgaria has done a big effort to comply with various EU requirements and regulations. Nowadays authorities are already looking ahead to make most of the EU membership. The Parliament has just cut the corporate tax rate to 10% (effective Jan 1, 2007), making Bulgaria one of the most attractive places to invest in the whole Europe. It is expected that setting favorable economic conditions will attract new foreign investors and will draw more FDIs, similarly to other countries that have already joined EU: Slovakia, Czech Republic, Baltic etc. Bulgaria is also expected to join ERM II shortly after enlargement as it fulfills most of the convergence criteria. The adoption of EURO is likely in 2010

Banking market growth

Since the year 2000 banking market is developing quickly, with the annual assets growth rate exceeding 26%. One of the major growth drivers was an explosive lending growth. During 2004/2006 banks lending accelerated dramatically, raising concerns about the overall macroeconomic stability in view of worsening current account, and inefficiency* of traditional monetary policy instruments. The Central bank has reacted in early 2005 with introduction of drastic penalties on excessive lending growth at banks. Applied measures proved to be successful and contributed to moderating lending growth. As a side-effect the unsatisfied demand for loans (especially in corporate sector) moved to other financing forms as: leasing, corporate bonds or equity increases.

Future prospects

Available banking penetration benchmarks (for example assets per capita: 2400 EUR) indicate that there are still significant growth opportunities laying ahead. In the retail segment further strong growth of mortgage and consumer lending is expected. The use of cash (nowadays cash makes ~43% of retail deposits) is likely to drop and its conversion into deposits and other PFA categories is likely. In the corporate business a significant growth of deposits can be assumed, resulting from reduced taxation and cash accumulation prior to using of EU structural funds. Lending growth will most probably relax below current growth levels.

Companies Mentioned:

- DSK Bank

- Bulbank

- United Bulgarian Bank 

- HVB Bank Biochim 

- Raiffeisenbank (Bulgaria)

- First Investment Bank

- Bulgarian Post Bank

- Economic and Investment Bank

- SG Expressbank

- DZI Bank

- EFG Eurobank

- UniCredit

- Hebrosbank

- Central Cooperative Bank 

- Procredit Bank

- Piraeus Eurobank

For more information visit http://www.researchandmarkets.com/reports/c45047