SOFIA (Reuters) - Bulgaria’s banks are likely to see further consolidation, and those with a market share of five percent or above may be especially attractive to buyers, Deputy Central Bank Governor Kalin Hristov said on Thursday.
Greek banks hold just under a fifth of Bulgaria’s banking assets, some of which they may be forced to shed in exchange for state aid they received to weather their country’s debt crisis.
Bulgaria’s Postbank, a unit of Greek lender Eurobank (EURBr.AT), is acquiring the Bulgarian operations of Greece’s Alpha Bank (ACBr.AT). It may make further acquisitions in what it says is an overcrowded market.
“We definitely know that there would be strong demand for banks that have above 5 percent market share,” Hristov said in an interview at the Reuters Eastern Europe Investment Summit.
Given the weak growth of lending and increased regulation across Europe, “the only way to do a return of capital is to get a bigger scale,” he said. “... from the market intelligence we know that some people have interest, but this is going to be revealed over time.”
Hungary’s OTP Bank OTPB.BU is considering acquisitions in Bulgaria, Romania and Serbia, where Greek banks are also present.
The European Central Bank is assessing the capital needs of Greece’s top four banks — National Bank (NBGr.AT), Piraeus (BOPr.AT), Eurobank and Alpha. They have seen billions of euros flow out of accounts and are restricted by capital controls.
All four have a presence in next-door Bulgaria, prompting the Bulgarian central bank to take steps to shield local lenders from the fallout of the Greek crisis earlier this year.
Bulgaria forbade Greek-owned banks from having exposure to their parents and asked them to have a higher liquidity ratio of 30 percent, compared with 20 percent for other banks.
“There were small outflows but not significant,” said Hristov, when asked whether Bulgarian depositors withdrew money from Greek-owned lenders this year.
“All of them all the time had liquidity above 20 percent. Of course, they started with a higher level, they started with 30 but all of them remained above 20 after the whole period.”
Asked about the central bank’s outlook for next year, Hristov said he expects credit growth of 1.6 percent in 2016 from “close to zero” this year.
“We still see relatively weak credit growth. It is not about lack of liquidity, or lack of capital that do not allow banks to lend. It is more of a demand problem,” he said.
The economy has performed better than expected in the first half of this year, prompting the central bank to raise its forecast to 2.2 to 2.3 percent from an initial 1.8 percent.
“For next year, we have a forecast for 2.4 percent, which is mainly with the stronger private consumption, and we see stronger government consumption. We also see slight improvement in investment,” Hristov said.
Hristov said non-performing loans before and after provisioning were falling, and now stand at 19 and 10 percent respectively as a percentage of total loans. He did not provide corresponding data from last year, because of a change in the way such loans were measured.
He said a planned asset-quality review and stress test of banks would be finished by the middle of 2016 and could put Bulgaria in a position to apply to join the EU’s banking union.
Bulgaria’s president has called for a swift entry into the union as a way of boosting trust in the banking system after the sudden collapse of a major Bulgarian lender last year.
“We have to prove to the ECB and to our counter parties that our system is sound and we do not have issues in the banking system,” Hristov said.
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Editing by Larry King