Bad and restructured credits exceed record-high BGN 9 bn

Bad and restructured loans in the banking system continued to increase, reaching a record-high amount of BGN 9.02 bn at the end of October, showed monthly data of the Bulgarian National Bank (BNB). They already account for 22% of all credits, excluding overdrafts where there are no arrears. According to the methodology of BNB, the indicator includes both non-performing exposures (from over 91 to 180 days), losses (over 180 days) and restructured loans.

From the beginning of the year till the end of October, the figure increased by BGN 1.49 bn. The increase during that month, compared to September, was BGN 222 mln after the BGN 74 mln growth registered in September, compared to August. In June and July, problematic loans grew by about BGN 340 mln per month. According to BNB’s most recent data, the share of bad loans was 14.45% as of September 30.

According to the calculations of Georgi Angelov, an economist at Open Society, presented at a seminar in Bansko last week, this share is equivalent to BGN 7.95 bn. However, only BGN 0.7 bn of this amount were net bad debts and the rest were depreciated assets, provisions and collaterals. The expert stated that, against this amount, Bulgaria’s banking system has regulatory capital of BGN 9.2 bn.

According to Angelov, buffers against future non-performing credits could be sought in equity capital (shareholders’ money in banks) and in attracting new funds or recapitalisation of profits.

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