site.btaEIB Survey Finds "Volatile" Credit Conditions in Bulgaria

"Credit conditions are volatile in Bulgaria. Credit demand has picked up in the last six months, but supply has sharply deteriorated. Demand is expected to continue improving, while supply may return to a more neutral position," the European Investment Bank (EIB) concluded in a Central, Eastern and South-Eastern Europe (CESEE) Bank Lending Survey for the first half of 2025, published on its website.

The survey is conducted semiannually and covers some 15 international banking groups and 85 local subsidiaries or stand-alone local banks which, combined, represent over 50% of the banking assets in most countries of Central Eastern and South-Eastern Europe.

The survey found that all international banking groups assess the market potential of their Bulgarian operations as medium or high. All respondents see profitability from their Bulgarian operations as equal or higher than at the group level.

In Bulgaria, credit demand has picked up following a protracted deceleration and is in line with developments in the region. Demand is driven by the household sector. This improvement is likely to continue over the next six months, the EIB said.

Credit supply conditions, which indicate banks' willingness to extend credit to their clients, have sharply deteriorated over the last six months due to a tightening in the mortgage segment and large corporates. Nevertheless, supply conditions are expected to return to a more neutral position in the next six months, according to the survey.

As far as access to funding is concerned, it has been improving in Bulgaria and is expected to continue improving in the next six months.

The EIB finds that non-performing loans ratios have been stable across segments over the past six months but expects them to deteriorate in the next period.

At the parent bank level, CESEE banking groups consider Bulgaria’s market potential to be medium (25%) or high (75%). Profitability remains high compared to the parent bank, and market positioning of all subsidiaries is either satisfactory or optimal.

At the local bank/subsidiary level, credit demand has picked up and is expected to continue improving over the next six months, in line with the rest of the region. Credit demand is driven by SMEs and the retail sector. These two segments are expected to underpin credit demand over the next six months. Consumer confidence has been the main positive contributor to credit demand and is expected to remain so, the survey finds.

Credit supply has deteriorated sharply over the past six months but banks expect a quick reversal in the next six months. Supply conditions for house purchases and large corporates have been driving the slump.

Changes in local regulations, market and outlook have negatively affected supply conditions. The global market outlook is expected to add to this negative effect over the next six months, the EIB reports.

Funding conditions have improved and are expected to continue improving, following a multiannual trend. Both corporate and retail funding contribute to this trend, the survey also concludes.