Central Bank Reports Bad Loans at 2.42% at End-2008

At the end of last year the rate of default on high-risk loans and receivables overdue for more than 90 days was 2.42 per cent, up from 2.05 per cent in 2007, but the rate of year-on-year increase was 59 per cent higher than the increase of the credit portfolio of the banking system, the Bulgarian National Bank (BNB) said in a report on the performance of the banking system posted on its website.

The provisions in the banking system provide 114 per cent security for unserviced debts and ensure a significant capacity for taking the shocks. That is due, among other things, to more stringent requirements by the banking supervision authorities in respect of banks' criteria for rating credits and receivables, the report says.

The BNB also reported a relatively high GDP growth rate of 6 per cent in 2008. GDP growth decelerated more tangibly in the last quarter when it grew 3.5 per cent on an annual basis. A considerable drop in the households' consumption in the last quarter translated into a 1.5 per cent increase on an annual basis.

The foreign trade deficit of the pervious year persisted but improved in 2008. Inflation slowed down to 7.2 per cent in 2008, with services contributing most to to the increase in price levels.

The BNB said that the currency board arrangement should be kept in place at the current exchange rate until Bulgaria joins the Eurozone. This priority is shared by Parliament, the government and the general public, the central bank said.

The banking system posted a profit of 1,374 million leva at the end of 2008, up 223 million leva from a year earlier. Still, the increase in the financial result slowed down steadily every quarter, and the financial result grew least in the last quarter when the rising price of the liabilities shrank the net margin to 4.91 per cent.

In 2008 the central bank improved its systems and structures and strengthened the capacity of its employees in line with the requirements for membership in the European System of Central Banks and with the best practices, the BNB said.

Source: BTA