LM Legal Services Blog

The Bulgarian banks – First Investment Bank, Central Cooperative Bank, Corporative Trade Bank – have increased their incomes by 15%, reaching 338.7 million levs, due to increasing their interest rates. The net profit of these banks for 2008 was 166.7 million levs, an increase by 13% in comparison with 2007. The increase of taxes and fees have led to the increase of their income by 12 million levs. However, their expenses have also increased to 2890 million levs from 236 million levs in the previous year.

According to analysts there are no indication for crisis in the banking sectior. The growth of the Bulgarian banks come to prove that they have not been affected dramatically by the recession.
Most of the analysts think that there will be no economic catastrophy and the private business will be able to repay bank loans.

According to a research carried out by Sega daily newspaper, some Bulgarian banks continue to charge a penalty fee in the cases of early repayment of customers’ loans, although the amendments to the Law for the Customer Loan have come into effect from 5 January 2009. According to the amendments, banks should not collect a penalty fee if loans ranging from 400 to 40 000 levs are repaid before the maturity date.

According to First Investment Bank, they still collect penalty fee because it is not clear if the amendment will affect old loans or will be valid only for new loans. UniCredit, UBB and Piraeus Bank said that they still did not have internal instructions and at the moment they collect the penalty clause as per the contracts signed with their clients. Allianz Bank declared that they continue to charge a penalty fee of 5% of the total amount if the customer pays in one go less than 6 instalments but if they pay more instalments at once, there is no penalty fee.

The number of the customer loans in Bulgaria has not decreased, only the requirements of the banks have become more strict, according to the statistic of the Bulgarian National Bank. The total amount of the bank loans in September was 48.15 billion levs which is an annual increase of 17.55 billion levs or 47.8%. in October the number of the customer loans continued to grow and it has reached 48.9 billion levs, and increase of 750 million levs in one month. The ratio of the customer loans in the bank assets have been constantly increasing and have reahced 71.24% in October 2008.

Between September 2007 and September 2008 the company loans have increased faster than the individual customer loans. The companies have received more than 10 billion levs in loans while the individual customers 5.1 billion levs.

However, it is worrying that the size of the loans exceeds the deposits of individuals and companies – in October they have reached 118.97% of the deposits.
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Mortgage interest rates offered by Bulgarian banks have reached their peak in November. According to the specialists the increase of the interest rates have stopped rather then the lending of new mortgages itself. Most of the banks have tightened their conditions last month and the largest mortgages now cover not more than 75% of the price of new properties in the big Bulgarian cities, while in smaller towns they do not exceed 65% of the price. Concerning apartments in prefabricated blocks from the days of socialism, mortgages do not go over 60% of the price.  At the same time, the number and the size of the new mortgages have decreased in November.