Debt Collection Agency expects slight rise in Bulgarian NPLs from H2'24

The potential credit portfolio risks for European banks, underlined by ten consecutive interest rate increases by the European Central Bank (ECB), could worsen the credit stock in Bulgaria in the medium term, DCA said in a forecast based on an analysis of macroeconomic data, the dynamics of lending in Bulgaria and Europe, and the management of banks' credit portfolios.

However, in the next twelve months the sector is seen to remain stable. Consumers and businesses will not yet feel the trickle effects of the sharp interest rate increases and rising debt servicing costs in Europe, compounded by the economic slowdown and high inflation, according to DCA.

"At present, the share of overdue loans is at a record low, with a large number of people in employment and overall salaries still increasing," Dimitar Bonchev, chairman of DCA's board of directors, said.

The share of NPLs in the Bulgarian banking sector remains above the EU average, at 3.81% in September, according to central bank data. NPLs in Europe were below 2% of the total European loan stock as of end-June, according to ECB data cited by DCA.

The volume of accounts receivable proposed for sale in Bulgaria decreased to 507 million levs ($282.8 million/259.2 million euro) last year from 1.34 billion levs in 2021, DCA data show.

The company's investments in new portfolios in the first ten months of 2023 more than doubled compared to the same period in 2022 as it strives to return to a leading market position following the completion of its takeover by DCA Management in October.

DCA had a portfolio exceeding 1.62 billion levs as of last month.

(1 euro = 1.95583 levs)