The Bulgarian banking sector continued improving its performance in Q2’24 on the back of the rising interest rates and loan portfolio size. Q2’24 net income grew +9.6% YoY to BGN 992.1m as net interest income registered a new record high at BGN 1.4bn (+14.2% YoY; +BGN 171m YoY). Net F&C income and gains from securities also added to the profitability by increasing BGN 32.7m and BGN 101.3m respectively. On the other side was the BGN 15.9m lower FX gain compared to Q2’23. Total operating income (TOI) grew 17.3% YoY (+BGN 294m) to a new all-time high number of BGN 2bn, which is 7.4% higher than the previous record quarter (Q1’24). Below the TOI line there was an increase (+14.7% YoY, +BGN 87.2m) of administrative cost as well as higher (+44.4% YoY, +BGN 43.5m) credit provisioning. H1’24 performance was similar as in Q2’24 alone with net income reaching BGN 1.8bn, +7.1% YoY on growth of net interest income, net F&C income and gains from securities, while performance partly limited by the lower FX gains, higher administrative cost and loans provisioning. 12-m trailing ROE of the banking system came to 17.8% vs 18% at end of Q1 and 18.5% at end of 2023. The breakdown by the 23 banks and branches operating in Bulgaria shows that DSK bank booked 27.8% of the sector’s H1’24 profit, followed by Unicredit Bulbank with 25%, UBB with 12.8% and Eurobank Bulgaria with 10.3% and while only one bank branch closed the period with a net loss. Total assets of the banking system increased 10.8% YoY to BGN 178.4bn, as the growth came mainly from the net loan portfolio (+14.1% YoY) and the investment portfolio (+29.4% YoY). UBB remains the market leader by assets for fifth consecutive quarter with 19.53% (-0.14 p.p. QoQ) share followed by DSK bank with 19.20% (+0.18 p.p. QoQ), Unicredit Bulbank with 17.91% (-0.61 p.p. QoQ), Eurobank Bulgaria (11.40%, +0.02 p.p. QoQ) and Fibank (8.14%, +0.18 p.p. QoQ). Gross loans and advances increased by 13.5% YoY as the growth was across all segments - corporate loans (+8.9% YoY, +BGN 4.1bn), mortgage loans (+22.8% YoY, +BGN 4.5bn), consumer loans (+14.8% YoY, +BGN 2.5bn) and other financial institutions (+16.2% YoY, +BGN 1.2bn). After a short deviation (only in Q1’24) from multiyear trend of loan quality improvement, the 90-days overdue loans ratio declined to 2.29% compared to 2.44% at end of Q1’24, while NPE ratio came to 3.99% (3.64% of total loans and advances) from 4.27% (3.74% of total loans and advances) at end-Q1’24.