Overdue non-banking loans have fallen to nearly 2-years low

Overdue loans from non-banking financial companies have fallen to their lowest level since June 2020, according to the latest Bulgarian National Bank’s data at the end of March 2022. In the first quarter of this year the downward trend in the share of non-performing loans (NPLs) continued, after an increase by more than 2 percentage points at the end of 2020. 

The absolute value of NPLs for the second consecutive quarter is increasing, but due to the overall growth of the market, their share in the portfolio is shrinking. The volume of non-banking loans has continued to increase by more than 5 percent for the quarter since June 2021. Growth is even higher on an annual basis – nearly 25 percent, exceeding the increase in December 2021. During COVID-19 pandemic and following restrictions, the non-banking loans growth is slower and even with briefly low tide (see the chart). 

Interestingly, the proportion of households as clients of non-banking companies continues to decrease – in 2019 they withdrew over 80 percent of loans, now their share barely exceeds 70 percent, with a downward trend. On the other hand, there are more companies from the real economy (industry) that don’t take loans from the banks and since the end of last year they occupy more than a quarter of the non-banking credit market.

The explanation can be the searching for more flexible solutions from small and start-up businesses, as well as difficult access to bank loans. The credit moratorium, which was introduced to overcome the aftermath of the pandemic, finally expired at the end of 2021. Meanwhile, the market shows many signals from the banks for tightening the requirements for credit applicants and this affects business. In the first quarter of this year, for the first time, non-banking loans for the companies exceeded BGN 1 billion. Compared to nearly BGN 40 billion business credits from the banks, this number seems small, but the ratio could change, if the upward trend in non-banking business loans continues to outrun increase in bank loans. 

According to the data, there have been no major changes in the terms of loans in recent quarters. The shortest-term loans with a maturity of up to 1 year continue to increase slightly, and the share of those with a maturity of up to 5 and over 5 years to decrease minimally. However, in all segments there is an increase in the absolute value of loans.

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