The tendency for decrease in the volume of non-performing loans (NPL) in Bulgarian banks, combined with high levels of coverage with impairments, is deepening, according to the latest report of the Bulgarian National Bank (BNB) – “Banks in Bulgaria”, which covers the second quarter of the year.
Liquidity in the banking system remains stable at high levels. Compared to March gross loans and advances in the system remained almost unchanged – BGN 114.2 billion, (EUR 58.39 bln) which is a 0.1% growth on a quarterly basis.
According to the BNB’s assessment, in April-June the banking sector in Bulgaria operates under relatively favorable macroeconomic conditions, regardless of the risks in the external environment. Private consumption is the main contributor to economic activity, thanks to rising incomes at rates above inflation, the central bank’s report states.
The BNB also reminds of the measures it has taken to limit the risk in the system, after increased requirements for granting loans were introduced from October 1. Some of the key indicators that the central bank monitors are moving into a higher risk category, including credit growth, indebtedness, house prices and overvaluation of these assets, average loan size, etc. Supervisory analysis indicates that this is a potential accumulation of medium-term risks in the banking system.
Weighted average credit standards are not deteriorating, although there are potential areas of vulnerability. They are in line with a set of loans in intervals where they have a higher ratio to the collateral, as well as a higher indebtedness of the borrowers.
The latest data of the BNB from the monetary statistics at the end of September show a 13.6% annual growth of loans granted, but it should be taken into account that this includes not only new loans, but also restructured ones.The largest increase was in loans to households – over 20% per year to nearly BGN 44.4 billion (EUR 22.7 bln, see on the chart). The breakdown shows that the record for growth came from mortgages, up 25% year-on-year, while consumer and corporate loans posted more modest increases.
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