BULGARIA Foreign investors at the root of banking sector growth

After the severe financial crisis that Bulgaria experienced in 1996, banking sector reforms focused on consolidation and privatization; subsequent closure of 18 troubled banks has helped to restore confidence in the banking sector and privatization has proceeded smoothly. All banks except the State and Savings Bank (which is slated for privatization this year) have been either sold or are well on their way to being privatized. Today, the largest Bulgarian banks in terms of assets are Bulbank, State and Savings Bank, and United Bulgarian Bank.

Bulgaria sold 93% of Bulbank to Italy’s Unicredito and 5% to Germany’s Allianz AG in 2000. Bulbank’s net profit rose by 83% and accounted for 60% of the Bulgarian banking system’s profit that same year. The bank also controlled 25% of consolidated assets, 25% of deposits and 9% of loans. Executive Director Luigi Lovaglio states, “our goal is to replace these extraordinary figures with sustainable ones coming mainly from commercial business.” With regard to the Bulgarian economy, Mr. Lovaglio adds, “Bulgaria will continue to be one of the fastest-growing economies in Central and Eastern Europe. In general the conditions for new investments in Bulgaria are quite positive because of its financial stability, strong expectations in terms of economic growth and improving legislation.”

Elana, a leading Bulgarian brokerage firm, was established in 1991 and was one of the co-founders of the First Bulgarian Stock Exchange, predecessor to the current Bulgarian Stock Exchange-Sofia. The company’s three main focuses include brokerage activities, investment banking and corporate finance, and asset management. In July 2000, Elana successfully completed the first IPO in Bulgaria. The privatization of over 3,000 companies in the country has opened the market of mergers and post-privatization corporate restructuring and Elana believes that this will be the most successful market in Bulgaria for the next few years. On the role of American investors in Bulgaria, CEO Kamen Kolchev states, “there is a lot of opportunity for big investors in Bulgaria now because we have finalized privatization and a great many of these operations will merge. In the second wave of investments in Bulgaria, there will be a lot of room for global players.”