Three of the four key lending segments in Bulgaria have already reported an increase in the share of non-performing loans – non-banking, known as “fast loans”, as well as consumer and corporate bank loans. The mortgages are the only onе segment whose levels still decreased in January 2021, according to the data of the Bulgarian National Bank (BNB).
At the end of 2020 the overdue non-banking loans increased to almost 10 percent of all (see the chart below) – the highest level for more than two years and the first growth in seven years. According to the latest BNB’s data there is an increase in the share of NPLs and of the restructured debt to more than 8% in January 2021. This is a minimal growth after seven month of decrease.
The rising of overdue consumer and corporate bank loans in January coincided with the expiration of the loan moratorium for some debtors. The moratorium was introduced last year as a temporary measure to support households and businesses in the context of COVID-19 pandemic. The payment holiday for most of the debtors expires at the end of March 2021, so there are expectations that it will lead to accumulations of a large volume of NPLs for the rest of the year. The expected amount of NPLs in Bulgaria is about BGN 1.5 – 2 billion (1 BGN=1.95583 EUR). According to the European Central Bank’s worst scenario the total NPLs across the EU will rise to €1.4 trillion, as the current level is at €600 billion. According to Citigroup’s forecasts NPLs will amount to €1 trillion.
Non-banking loans aren’t included in the payment holiday, so it gives a more realistic picture of the real financial health of households that is getting worse as expected. At the same time the share of bad loans is three times smaller than their level in 2013, when they exceeded 30% of all portfolios.
The rise of overdue debt means that more NPL-portfolios will be offered for sale to the debt purchasers like Debt Collection Agency EAD (DCA). In this way the fast loans lenders managed to solve the problem with high volumes of overdue loans in the last years. They started to sell these portfolios more actively and at a much earlier stage.
“The early sale of the overdue loans provides the creditor with liquidity and an opportunity to concentrate on his core activities – the new lending”, commented Nadezhda Gonova, Commercial Manager of DCA.
This year is expected to be much more active in terms of debt purchases in comparison with the previous one, including both the traded volumes and the structure the portfolios. This trend will concern the banks too.