Non-performing loans in Bulgarian banks fell below 4%

Non-performing loans (NPL) in the Bulgarian banking system fell to 3.8% of total assets, show the Bulgarian National Bank (BNB) data for the second quarter of 2023. According to the supervisory data at the end of June loans, which are overdue 90 and more days, are above BGN 2.54 billion (EUR 1.3 billion). If we add the loans with a shorter delay, the amount reached BGN 4.1 billion (EUR 2.1 billion), with BGN 200 million (EUR 102.26 million) drop, compared to March 2023. As a share of a portfolio there is also a decrease, since in the first quarter of the year 4.05% of debt was overdue. 

Apart from absolute value, overdue loans are also decreasing due to the strong growth of lending (see the chart).

Officially, loans with shorter than 90 days of delay are still not non-performing according to the European bank rules, but the BNB statistics also count them. Almost 70% of the loans with up to 90 days of overdue are corporate. The situation is similar also in the other type of delayed loans – more than half of NPL in the Bulgarian banks’ assets are granted to non-financial enterprises, i.e. real business.

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A total of 5.8% of all granted corporate loans to enterprises have some kind of arrears. Overdue loans to households are 3.6% of all loans, with consumer loans being the most problematic. For mortgages secured by residential property, less than 2% are delinquent for any period, and if those less than 90 days late are removed, their share drops to just 0.82%. The tendency for company loans to be more often non-performing has been going on for years, and traditionally mortgages rarely fall into arrears. The exception so far has been the years since 2008, when the housing crisis caused an increase in all delinquent loans and a subsequent wave of foreclosure sales.

In consumer loans late payments are more common, but it should be borne in mind that with some banks, consumer lending is outsourced to separate companies. They are outside of the banking statistics and are included in the data on non-bank lending companies.

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