Two Bulgarian banks told to build up additional capital buffers

Two Bulgarian banks told to build up additional capital buffers
By bne IntelliNews August 15, 2016

Bulgarian commercial banks First Investment Bank (Fibank) and Investbank are expected to build up additional capital buffers, of BGN205.7mn (€105.2mn) and BGN33.3mn respectively, according to the detailed results of an asset quality review (AQR) and a stress test (ST) of the banking system published on August 13. The comprehensive assessments of both lenders were prepared by international audit and consulting group Mazars.

The banking system’s AQR and ST were launched on February 15 and were led by international professional services company Deloitte. They covered the 22 domestically-registered commercial banks, but not the foreign bank branches operating in the country. The purpose was to enhance stability and strengthen confidence in the financial system after the banking crisis in the summer of 2014.

Fibank is Bulgaria’s third largest commercial bank. It suffered a deposit run in the summer of 2014, but was rescued by the state. The lender is implementing a restructuring plan approved by the European Commission. On May 16, Fitch Ratings has affirmed Fibank’s long-term Issuer Default Rating (IDR) at B- with a stable outlook.

Fibank said that the comprehensive assessment has shown that it has sufficient capital to meet the requirements of the ST’s basic scenario, which most closely approximates the economic forecasts of the central bank (BNB) and the finance ministry. The lender has already “taken concrete steps, approved by the BNB, with a view to increasing its capital buffers under the hypothetical Adverse Scenario”.

One of the measures is retention of profit. Fibank noted that its profit before provisions and taxation for the first six months of 2016 amounts to BGN146.6mn. The lender will also continue to diversify and de-risk its portfolio, intensify the process of sale of its non-core, fixed (foreclosed) assets, and raise additional external capital by April 2017.

Investbank is Bulgaria’s 12th largest lender. The planned action and measures by the bank include support from shareholders through increasing the share capital by BGN20mn in April 2017. There will be no distribution of dividends.

The lender noted that exposures repaid by June 30 resulted in a BGN39mn reduction of AQR adjustments. The additionally accrued balance sheet provisions amount to BGN13.7mn in January-July.

Another measure is reduction of risk exposures and implementation of the credit portfolio recovery plan. Investbank also plans to further cut administrative costs, sell foreclosed assets, continue to maintain high liquidity levels and develop an internal model for collective provisions.

Related Articles

EU asks CEE to comment on Russian gas promises

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns. Visegrad and the Baltic ... more

EBRD says 2016 net profit was around €1bn

The European Bank for Reconstruction and Development (EBRD) said it made a net profit of around €1bn in 2016, up by a quarter from the €802mn it made in ... more

New Bulgarian government reports irregularities in defence contracts

A check on public procurement under Bulgaria’s previous centre-right government has revealed dozens of violations in the defence ministry, caretaker Prime Minister Ognyan Gerdzhikov said on ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss