Business and mortgage NPL decrease, consumer’s noted an increase

Non-performing loans (NPL) as a share of the Bulgarian bank’s portfolios continued to decrease in the first quarter of the year, shows the latest data from Bulgarian National Bank (BNB). The decline is in almost all segments, but the overdue consumer loans have increased both as share and value. At the end of March the total amount of loans overdue for more than 90 days was nearly BGN 2.544 billion or 2.5% of all granted loans. This doesn’t include loans with delayed payment up to 90 days. 

According to the generale European rules, loans with a greater delay are non-performing, the rest are risky, classified as Stage 2 loans. In many cases these types of loans began to be serviced on time again, but in some cases delays became longer. Typically, loans with less delinquency are considered an indicator of future trends in non-performing loans.

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In mortgage loans the share of NPL fell below 1% at the end of March. The reason is both the decrease as an absolute value and the increased loan portfolio of the banks. It is precisely because of the strong growth in lending that the BNB, like other central banks, is trying to take measures against increased lending and high inflation. BNB announced that it will increase the countercyclical capital buffer to 2% from October 1. This is another stage of its increase – from January 1 this year it is 1.5%. Thus, banks will have less liquid funds to distribute as loans.

The Bulgarian National Bank does not have a mechanism for changing the main interest rate, as the ECB has. At the beginning of May, the ECB announced a new interest rate hike, signaling that it would not be the last. So far, banks do not report NPL problems. 

However, the negative change in the other loans of Bulgarian households – consumer loans – deserves attention. The value of the unserved at the end of the first quarter is close to BGN 700 million (see the chart), their share is now 4.18%, with 0.12 percentage points of growth in just three months. Thus, the gap between them and overdue corporate loans is increasing more and more. The latter were 3.53% at the end of March, after falling below 4% at the end of last year.

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