Financial Crime World

Bulgarian Banking Sector Maintains Stability Amid Global Challenges

The Bulgarian banking sector has demonstrated remarkable resilience and adaptability in the face of global challenges, emerging from 2023 with a strong capital and liquidity position.

Key Indicators

  • Net interest income increased by 50.4% on an annual basis, reaching BGN 4.9 billion (EUR 2.48 billion) as of December 2023.
  • Net income from fees and commissions rose by 4.3% to BGN 1.5 billion (EUR 762 million).
  • The banking sector’s net profit showed a significant increase, reaching BGN 3.416 billion (EUR 1.75 billion) as of December 31, 2023.

According to the Bulgarian National Bank (BNB), key trends that will shape the sector’s future development include:

  • Accelerated process of digitization of banking products and services
  • Instant BLINK payments
  • Achievement of goals and regulatory requirements related to the transition to a green and sustainable economy

Positive Developments in Private Consumption and Loan Volumes

Despite challenges, private consumption expanded in 2023, supported by: + Good labor market performance + Increased consumer confidence + Reduced inflation + High credit activity

  • Double-digit growth of loan volumes across almost all business segments contributed to the banking system’s financial results.

Return on Assets and Equity

The return on assets (ROA) increased to 2.1% from 1.4%, while the return on equity (ROE) rose to 18.5% from 12.3%.

Interest Rates

  • Average interest rates on newly contracted deposits showed a gradual increase, with households and non-financial enterprises facing higher rates.
    • Home loans in levs: APR decreased to 2.86%
    • Consumer loans in levs: APR increased to 10.14%
    • Average interest rates on newly granted loans to non-financial enterprises:
      • BGN: 4.55%
      • EUR: 5.85%

Regulatory Requirements and Challenges

The banking sector’s performance was influenced by the implementation of new regulations and regulatory requirements, including:

  • Increase in minimum required reserves from 10% to 12%
  • Designation of eight banks as domestic systemically important banks (O-SIIs)
  • Countercyclical capital buffer changes

Outlook for Bulgaria’s Potential Adoption of the Euro Currency

As Bulgaria prepares for its potential adoption of the euro currency, the banking sector is poised to play a crucial role in facilitating this transition. With its solid capital and liquidity position, the Bulgarian banking sector is well-equipped to navigate the challenges ahead and continue supporting economic growth.