Banking system Q2’22 net income improves 45.2% YoY with gains on securities being the biggest growth contributor
Source: BNB; FFBH
The Bulgarian banking system reported Q2’22 net income of BGN 448.9m, registering 45.2% YoY (+BGN 139.7m YoY) growth. The biggest contributors to the growth were the 242.9% YoY higher (+BGN 143.1m) gains on securities, the 51.6% YoY lower (-BGN 94.9m) credit provisions, the 9.8% YoY growth (+BGN 66.1m) of net interest income and the 21.7% YoY (+BGN 65.3m) growth of net F&C income. For a second consecutive quarter FX operations weighed on the profitability being negative BGN 91.1m in Q2’22 vs positive BGN 42.6m in Q2’21. Furthermore, reducing the net income growth were the 10.4% increase (+BGN 52.2m) of administrative cost and the 286.5% YoY (+BGN 43m) higher contributions to resolution funds and deposit guarantee schemes (one-off event of lower contributions last year).
For the H1’22, the banking system registered 54.5% YoY growth of net income to BGN 1 017.8m. The biggest drivers were similar to Q2’22 alone - the BGN 234.1m increase of gains on securities, the BGN 124.2m growth of net F&C income, the BGN 118.8m increase of net interest income and the BGN 117.5m lower credit provisions. On the negative side were the increase of administrative cost and the FX losses. 12-m trailing ROE of the banking system continued improving for a sixth consecutive quarter to 10.8% from 10.1% at end of March and 5.5% at end of 2020.
Total assets of the banking system increased by 10.6% YoY to BGN 142.1bn, with the growth sourced mainly from the net loan portfolio (+BGN 9.6bn). Unicredit Bulbank with 18.55% (-0.38 p.p. QoQ) market share by assets remains the largest bank, followed by DSK bank (17.75%, -0.14 p.p. QoQ), UBB (11.64%, +0.21 p.p. QoQ), Eurobank Bulgaria (10.40%, -0.22 p.p. QoQ) and Fibank (8.32%, +0.12 p.p. QoQ). Note that the acquisition of Raiffeisenbank Bulgaria by KBC, the UBB owner, creates the largest banking group in Bulgaria. Gross loans and advances grew 13.2% YoY as the growth was across all segments - corporate loans (+11.9% YoY, +BGN 4.6bn), mortgage loans (+15.9% YoY, +BGN 2.3bn), consumer loans (+13.3% YoY, +BGN 1.8bn) and other financial institutions (+13.6% YoY, +BGN 0.7bn).
Loan portfolio quality continued improving as the 90-days overdue loans ratio declined for a eleventh consecutive quarter to 3.42% compared to 4.05% at end-2021, while NPE ratio declined to 5.82% (5.24% of total loans and advances) from 6.55% at end-2021.