The Bulgarian deposit market exhausted its capacity to provide liquidity for local lenders as recession strengthened its grip on the economy, the latest figures from the Bulgarian National Bank showed.

Deposits attracted from individuals in the third quarter stood at 641.6 million leva, a quarterly increase of 2.8 per cent, compared to 1.3 billion leva and 6.2 per cent quarterly increase in the same period of last year.

UniCredit Bulbank chief executive Levon Hampartzoumian said there was limited room for growth and it has been been exhausted already.

Competition between financial institutions heated in the middle of 2008, when funding from their foreign parent groups dried up and international markets were in the middle of the credit crunch. The all-out battle for customers’ savings continued into the first months of this year but interest rates have hardly risen over the first nine months of the year. As a result, banks have been inundated with resources that could prompt them to ease up internal lending restrictions.

Bankers said that lenders already had a wider range of options to attract resources from abroad, tapping not only parent companies but also credit lines from international financial institutions, such as the European Bank for Reconstruction and Development and the European Investment Bank. This will be enough to meet the softened demand for credit at the moment, said Petar Andronov, chief executive of Cibank, the local banking unit of Belgian group KBC.

Bankers forecast that stale demand for funding will force them to cut back deposit interest rates to offset the high interest paid on attracted resources. The turnaround would be slow but would help spur economic activity, analysts said.

Source: Dnevnik