Global inflationary trends and the economic situation in Bulgaria are the factors, which will drive the movement of interest rates in the country this year, according to Levon Hampartzoumian, CEO of UniCredit Bulbank.

"These are two competing processes, which go in different directions and we will have to wait and see what will come up," Levon Hampartzoumian said.

He pointed out that an eventual economic recovery will make the credit much more affordable, no matter what its price, and will cut the number of non-performing loans.

"Affordability is much more important than the absolute value of the interest rates," he said.

Most loans in Bulgaria are collateralized, giving banks the option to recover losses through bankruptcies of indebted companies or asset sales, said Hampartzoumian.

"Up to this moment the level of provisions based on non-performing loans in the banking system is affecting the profits of the banks, but not at an alarmingly high level," he said.

UniCredit Bulbank, part of the UniCredit Group, is the largest bank in the system with a market share of around 16% in banking system assets.

The five biggest banks are UniCredit Bulbank; DSK Bank, a unit of OTP Bank Nyrt., Hungary's largest bank; United Bulgarian Bank, owned by the National Bank of Greece SA; Raiffeisenbank Bulgaria and Eurobank EFG Bulgaria.

Greek banks control about 28% of banks' total assets in Bulgaria.

"Greek banks' risk appetite is now much lower compared to the years before the crisis. It is my belief that since these banks are still part of the conservatively regulated Bulgarian banking system, they still represent an asset for the Greek owners," commented Hampartzoumian.

Amid fears that the Bulgarian banks are more susceptible to possible shocks caused by Greek banks' funding, he forecast that these will go through a process of consolidation or conservatism, but ruled out dramatic problems for the Bulgarian environment.

novinite.com