Non-performing loans to non-bank companies have fallen by almost 40% only a year, according to BNB data. Thus, for the first time in years, bad loans are less than 10 percent of the portfolios. Sales of overdue payables are strongly influenced by this, according to the Central Bank.
Data includes all non-bank lending companies or so-called fast and commodity loans, leasing, non-bank mortgage loans, including those for business. At the end of December, they had only 8.6% non-performing loans. In terms of value, they have fallen to BGN 210.5 million, which is almost doubled by the end of 2016. Looking at the end of 2018, the decline is 38.5% and is the result of a sustained trend of years – reducing bad loans in portfolios, mainly due to sales to companies specializing in collecting them. In the first half of 2016 bad loans from non-bank companies fell below the psychological limit of 20% and have not stopped the decline ever since.
Last year, receivables were sold for a total of 94.5 million leva, of which 20% was only in the fourth quarter. Then was the record deal for Bulgaria between the Receivables Collection Agency (ASB), part of the Norwegian B2Holding, and Unicredit Bulbank. Under the agreement, the bank sold receivables of nearly BGN 500 million and this has a significant impact on the market for overdue debts.
The reasons for lending companies to sell so active portfolios of overdue loans are clearing the balance sheets and a desire to return capital back with which they can lend new loans. The more the overdue time increases, the less the probability of collecting the entire debt is reduced. This significantly lowers the price at which this loan can be sold, while bad credit in the portfolio means “closing” money that would otherwise be in the economy.
Debt Collection Agency
At the end of December, all claims on non-bank companies amounted to BGN 2,446 billion, which represents 2.3% of Bulgaria’s GDP. For the last three months of the year there is a slight increase – by 0.5%.
More than BGN 1 billion of loans granted by non-bank companies have a maturity of over five years, BNB statistics show. Their annual growth is less than 2%, but a relative share of all receivables increases by more than 5 percentage points to almost 44%. Long-term loans with a maturity of over five years are increasing in times when households and businesses have a sense of financial stability that they expect to continue in the future.
The biggest decrease is in loans with a term between one and five years – in 2018 they have dropped by nearly 16%. Loans for up to one year also declined – 12 per cent on an annual basis. However, for the last three months of last year, they have increased by 2.5%, so they almost reach 500 million leva.
Household loans decreased by 12% a year and already are under BGN 2 billion. Most of them remain consumer and in the last quarter there is a minimal increase in housing loans. The explanation is simple – bank lending is growing, so more consumers are targeting them at the expense of non-bank. Less than a little over 8 per cent is the annual decline in non-financial corporations. They include all manufacturing, commercial and service companies.