Banks have only collected 30% of their bad loans

For three years Bulgarian banks have collected only 30% of the thier bad loans and at expenses worth some 10% of the value of the receivables. In Austria thisprocedure takes twice less time and the collection rate is some 82% of the outstanding debts at 5% cost.

This is data from the Doing Business 2012 report of the World Bank and was presented by Momchil Andreev, Chairman of the Management Board and CEO of Raiffeisenbank Bulgaria at a discussion on Wednesday. The meeting was titled "The Stability of the Banking System - a Prerequisite for Sustainable Economic Growth" and it was organised by the Bank of the Year Association. Precisely problems with the collection of bad loans and the retrospective announcement of bankruptcy harm banks the most. According to Andreev, the volume of bad loans is increasing, but this is due to the fact that these had been problematic even back in 2008 and 2009, while the quality of the newly extended ones is actually very good. 

For these few years, banks have even restructured the loans a few times and in 50% of the cases, clients managed to stabilise their financial conditions. The other 50% may be doomed, reported also the banker. In his words, from 2008 to 2011, the capital buffer accumulated by financial institutions in Bulgaria jumped double from BGN 1.5 bln to to BGN 3 bln, which may allow for extended crediting if the economy allows it.
In addition, it appears that bank safes have BGN 7.1 bln (capital buffers and provisions), excluding collaterals. Their liquid assets amounted to BGN 13 bln four years ago, while late last year they reached BGN 17 bln. In the same period, the profit declined 60 % from BGN 1.4 bln to some BGN 600 mln. The return to profit of shareholders, in its turn, shrunk double from 15% in 2008 to 6.7% in 2011. It turns out that shareholders receive a return rate equal to that which one deposit would have yielded, indicated also Momchil Andreev.

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