In 2012, the aggregate net profit of the banking sector in Bulgaria dropped for a third year in a row, central bank data showed. The consolidated profit of banks in 2012 continued to shrink but the annual drop rate follows a persistently easing trend - from 21% in 2010 (the first drop since the crisis) to close to 5% in 2011 and 3.3% in 2012. Therefore, in the absence of external or internal shocks it is safe to say that in 2013 the sector has good chances to submerge from the red although the improvement will be mostly due to low base effects. The year-end profit was BGN 567mn (EUR 290mn), down from BGN 604mn as of end of November due to BGN 37mn loss reported in December alone. Net interest income remained below its year-ago levels - down 4% y/y in December and 8.5% y/y for the whole year, as credits growth is sluggish and fails to compensate for high funding costs. Impairment charges, on the other hand, affected positively banks' income statements throughout the whole year although the reason for their decline may be sale or restructuring of bad loans, rather than what the government hopes for, or a fundamental drop in NPLs due to improved economic conditions.
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