The credit risk in Central, Eastern and Southeastern Europe (CESEE) remains under control, but commercial real estate’s loans seem vulnerable, notes the latest report of Vienna Initiative, which overviewed the banking sector and non-performing loans (NPL) in the region in 2023. Generally, the bank’s NPL-level in CESEE stays at a stable plane in the background of constant economic insecurity.
Contrary to the downward trend since 2020, the NPL-volume has risen slightly in the last year as an absolute value – with 0.9% up to EUR 27.5 billion. But the share of NPL as a part of all credit portfolios remains without change at all – 2.1%.
Bulgaria notes the biggest decrease of NPL – with 0.9 percentage points up to 3.6% share at the end of 2023. Compared to other states in the region, the share of overdue bank debt in Bulgaria remains very high, more than double the average (see the chart).
“The fact that the NPL ratio and coverage ratio remain stable, despite increasing NPL stocks, indicates that the banking sector in the region shows resilience to external shocks such as high inflation and the low purchasing power of households”, the report says.
But experts of Vienna Initiative predict that the sector remains vulnerable, mostly in commercial real estates’ lending and small and medium enterprises credits, as a result of reduced demand and risks of refinancing with high interest rates. High inflation and economic uncertainty are factors, which can bring to rise on NPLs, noted the report.
Last year NPL’s deals activity was low, despite activity on the Greek market, caused by secondary sales. According to monitoring of Vienna Initiative’s experts, now the banks approach sales tactically, rather than as a crisis response. The dynamics of credit service’s consolidation also has helped for extension of the secondary flows in 2023.
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