site.btaBulgaria's Banking System Reports BGN 1.8 Bln Profit in First Half of 2024

Bulgaria's banking system reported a profit of BGN 1.8 billion as of June 30, up BGN 130 million (7.7%) from the first half of 2023, according to a Bulgarian National Bank report published on the institution's website on Thursday. The banking sector's return on assets stood at 2.03% at the end of June, while return on equity was 17.17% (vs. 2.09% and 18.36% as of June 30, 2023).

Total gross loans and advances at the end of June were BGN 114.2 billion and increased by BGN 111 million (0.1%) compared to the end of March. During the period, claims on credit institutions declined by BGN 3.9 billion, or 28%, to BGN 10.1 billion. The banking system's gross loan portfolio increased by BGN 4 billion (4%) to BGN 104.1 billion during the quarter. Loans to households increased by BGN 2.3 billion (5.5%) and loans to non-financial corporations by BGN 1.4 billion (2.8%). Increases were also recorded in loans to other financial enterprises by BGN 306 million (3.6%) and to the general government sector by BGN 66 million (7.8%).

In the April-June period, deposits in the banking system increased by BGN 2.2 billion (1.5%) to BGN 152.3 billion. Deposits of households increased (by BGN 2.2 billion or 2.6%), as well as those of non-financial corporations (by BGN 1.2 billion, 2.7%), and of the general government sector (by BGN 15 million, 0.3%). There were decreases in deposits of credit institutions (by BGN 599 million, 5.1%) and other financial corporations (by BGN 613 million, 14.6%).

The equity in the balance sheet of the banking system as of June 30 reached BGN 21.1 billion and increased by BGN 457 billion (2.2%) compared to the end of March. The main contributors to this were the increase in current profit as well as higher other reserves and accumulated other comprehensive income. During the period, there was a decrease in retained earnings in the banking system, the report noted.

It is also reported that during the second quarter of the year, the banking sector in the country carried out its activities under relatively favourable macroeconomic conditions, notwithstanding risks in the external environment. The dynamics of economic activity continued to be characterized by a major contribution of private consumption, among the factors of which was the increase in wages and salaries at a rate exceeding the growth in consumer prices.

The volume of non-performing loans followed the downward trend observed in previous years, coupled with high levels of impairment coverage. The capital position of credit institutions is solid, with total equity increasing by BGN 1 billion (5.4%) to BGN 19.9 billion in the second quarter of the year.

Having a strong capital position is essential for the sustainability of the banking sector and mitigating the effects of the potential realization of cyclical and structural risks.

The liquidity position of the banking sector remained solid. The deposit base is growing steadily and the levels of the liquidity coverage ratio and the net stable funding ratio are well above regulatory requirements, the BNB said. The Central Bank added, however, that credit institutions should nevertheless take into account the high degree of uncertainty and the likelihood of changes in the volume and structure of deposits that could occur in the event of potential adverse changes in the financial situation of enterprises and households.