August 31 (SeeNews) - The amount of non-performing loan (NPL) portfolios sold by Bulgarian banks in the first half of 2016 surged nearly three times on the year to 609 million levs, the Association of Collection Agencies in Bulgaria (ACABG) said on Wednesday.
"Since a year ago, they [banks] seek to clean up bad debt, as the stress tests further motivated their actions and they stepped actively towards selling, instead of just collecting their bad debts," Rayna Mitkova, chairman of non-profit ACABG said in a press release.
The total volume of NPLs sold to debt collection agencies rose 11% on the year to 1.11 billion levs at end-June.
Banks are responsible for 53% of the total NPLs submitted for collection, followed by telecommunications and utility companies, with 16% and 15%, respectively.
The most dynamic change has been noticed in the insurance sector, which is preparing for stress tests later this year. During the first half, insurers accounted for nearly 7% of the total NPLs sold to debt collectors, as until now they have rarely exceeded 1%, AKABG said.
In the intercompany lending segment, NPLs sold to debt collectors grew 20% on the year to 89 million levs in January-June.
"We see a drop by nearly 8% of insolvencies in the country but the indebtedness of companies remains high at a rate of 210%," Milena Videnova, vice president of AKABG said.
Companies from the trade sector account for 25% of all cases of insolvency, followed by the construction and real estate firms with 15%, Videnova added.
She pointed out high levels of indebtedness, poor liquidity management, and fewer funding opportunities as the main reasons for the financial difficulties.
AKABG expects by the end of 2016, the country's banks and financial institutions to focus further on the sale of debt and on the sale of new types of loans - secured and corporate loans.
In August, Bulgaria's central bank said that the asset quality review (AQR) and stress tests of Bulgarian banks showed the capital adequacy of each bank after potential adjustments from AQR remains above the minimum regulatory requirements.
In December, Bulgaria should publish the pension and insurance companies' stress test results. Also at the end of this year and the beginning of 2017, the International Monetary Fund (IMF) and the World Bank will conduct an assessment of Bulgaria's financial sector.