The banking system in Bulgaria in 2024 – facts and figures

In 2024, Bulgarian economy increased its growth compared to the previous year, performing significantly above the average levels for the EU and the euro area. Despite the lower inflation and external shocks internationally, the Bulgarian economy continues to grow in 2024, supported by the albeit weaker performance of exports, the continued increase in incomes and increased consumption. The stronger performance of the economy also has a positive impact on the results and activities of the banking sector. The past year was characterized by higher impairment costs and a decrease in accrued provisions, increased lending rates and improved results of the banking sector.

As of December 31, 2024, 23 banks operate in Bulgaria, six of which are branches of foreign banks. The total amount of assets of the banking system increased by 11.4% to BGN 191,61 billion (EUR 97,97 billion) compared to 2023.

Source: BNB

The share of loans and advances in total assets increased from 60.0% to 61,2% at the end of December 2024. The share of cash decreased to 17,8% from 21,1% and that of securities portfolios increased from 15.1% to 17.3%.

Deposits attracted by banks continue to grow. At the end of December 2024, the total amount of deposits in the banking system reached BGN 163.0 billion (80.9% of the estimated GDP), marking an annual growth of 10.6%. Confidence in the banking system remains stable amid a high propensity to save on the part of households, which hold around two-thirds of deposits in the banking system (56.6% at the end of December 2024).

In 2024, the banking sector continued to maintain a solid capital position, maintaining capital adequacy and liquidity coverage ratios well above systemic and local regulatory requirements, as well as the European bank average.

At the end of 2024, the Common Equity Tier 1 (CET 1) ratio for the entire banking system was 21.03%, and the total capital adequacy ratio was 22.70%. The capital adequacy indicators of banks in Bulgaria are above the average levels for the European banks, which, according to ECB data, at the end of the third quarter of 2024 are 15.72%, for CET 1 and 19.81% for total capital adequacy.

The Liquidity Coverage Ratio (LCR) was 241.0% compared to 246.7% at the end of 2023. According to the ECB data, at the end of September 2024 the liquidity coverage ratio for banks participating in the Single Supervisory Mechanism stood at 158.5%.

The five largest banks according to the classification of the “Banking Supervision” department of the BNB (the so-called first group of banks) form 76.8% of the total assets in the banking system, remaining at the level of the end of 2023. As of December 31, 2024, the market share of banks in the second group remained at the level of 20.7%, and those of the third group, which includes branches of foreign banks, remained at the level of 2.5%.

Source: BNB, own calculations

The amount of non-performing loans continued to decrease in 2024 as well. As of December 31, 2024, the volume of non-performing loans (overdue over 90 days; excluding central banks and credit institutions) fell to BGN 2.16 billion (EUR 1.1 billion), or up to 1.79% as a share.

At the end of 2024, the coverage rate of gross non-performing loans and advances in the Bulgarian banking system is at the level of 86.20%. According to the latest data from the EBA, the coverage rate for the European banks was 41.60% at the end of the third quarter of 2024.

Despite the economic challenges related to the uncertain international situation, including in the vicinity of Bulgaria, the banking sector remained stable and maintained a solid capital and liquidity position. The main trends for the banking sector in 2024 are still continuing accelerated processes of digitization of banking products and services, as well as the banks’ preparation for the euro adoption.

The banks’ net interest income increased by 14.7% on an annual basis (with growth of 50.4% on an annual basis at the end of 2023) and as of December 2024 amounted to BGN 5.6 billion (EUR 2.85 billion) against the background of the increased credit activity during the year. At the end of 2024, net income from fees and commissions rose by 9.9% on an annual basis (with growth of 3.1% at the end of 2023) to BGN 1.6 billion (EUR 828 million). As of December 31, 2024, the net profit of the banking system was BGN 3.695 billion (EUR 1.89 billion), compared to BGN 3.416 billion (EUR 1.75 billion) a year earlier.

In 2024, economic activity faced weaker external demand, moderate price increases, and falling interest rates in the euro area. However, private consumption continued to expand, supported by the good performance of the labor market, as well as by increased consumer confidence, declining inflation, and high credit activity, which is a determinant of the activity and results of the banking sector. The financial result of the banking system was influenced by the double-digit growth in the amount of loans in all business segments, which was reflected in net interest income and net fee and commission income, the initiated increase in interest rates on some loans, and the slower rate of increase in interest rates on deposits, as well as higher impairment charges.

Source: BNB, own calculations

As of December 31, 2024, the level of the return on assets (ROA) indicator decreased to 2.07%, compared to 2.11% – a level reported as of December 31, 2023 Return on equity (ROE) decreases to 17.3% from 18.5% for the same period.

Source: BNB, own calculations

In the past year 2024, there has been a gradual increase in the average interest rates on newly agreed deposits. The average interest rate on deposits with agreed maturity for households in BGN increased by 12 basis points from 0.95% at the end of 2023 to 1.07%. Deposits in EUR recorded an increase of 8 basis points from 1.41% to 1.49%. The average interest rate on newly agreed deposits with agreed maturity for non-financial corporations increased from 2.25% to 2.46% for deposits in BGN and decreased from 2.88% to 2.03% for those in EUR.

Source: BNB

As of the end of December 2024, the annual percentage rate of charge (APR), which includes all fees and commissions related to the loan in addition to the interest, decreased from 2.86% at the end of 2023 to 2.82% for housing loans in BGN and from 2.95% to 2.87% for those in EUR. The APR level for consumer loans in BGN is 10.68% and 4.58% for those in EUR (from 10.14% and 3.86%, respectively, at the end of last year). The average interest rates on newly granted loans to non-financial corporations decreased from 4.55% to 4.47% for those in BGN, and for those in EUR decreased from 5.85% to 5.01%.

Source: BNB

The number of regulations and regulatory requirements also affect the performance of the banking sector.

From the beginning of 2024, the global minimum corporate tax of 15%, to which multinational companies are subject, came into force, as recommended by the OECD. It significantly increased the tax costs of banks in our country.

As of October 1, 2024, the BNB introduced additional requirements for credit standards indicators when granting and renegotiating loans secured by residential real estate.

In 2024 six banks have been designated by the BNB as domestic systemically important banks (O-SIIs), with O-SIIs buffer levels in the range of 0.50%-1%. As of January 1, 2024, the countercyclical capital buffer remains at 2%, after being increased by the BNB as of October 1, 2023. These changes had an impact on the capital indicators of the banking sector over the past year.