Bulgaria's banking sector produced a 402 million leva profit in July 2010 but the 50 million leva increase was accompanied by a persistent credit squeeze and portfolios continued to deteriorate.

Bulgarian National Bank (BNB) data showed that banks' profit in July 2010 was 36.2 per cent less than in July 2009.

For the six months, there was a drop of 29.3 per cent compared with the same period of 2009. The monthly increase at the time was 81.3 million leva, rising from 53 million leva in May from April.

The contraction in banks’ profit stems from the continuing growth in classified loans, which jacks up provisions and write-offs. The latter totalled 113 million leva in July, up 19.9 per cent in June and 35 per cent on July 2009.

At the same time, lenders’ financial and operational expenses soared by 17.1 per cent and are enough to cover all operations expenses and accumulate buffers, according to BNB.

Revenue from fees and commissions alone swelled by 18.5 per cent to 477.6 million leva over the month.

Meanwhile, bad loans crept up at a faster pace of 5.7 per cent to 5.8 billion leva in July compared with 3.5 per cent to 6.2 billion leva on a monthly basis at the end of the second quarter.

In July, lenders’ loan portfolio increased by 0.5 per cent entirely on the back of the business segment. In the retail sector, a 0.2 per cent rise in housing mortgages was offset by a 0.2 per cent fall in consumer loans, reaching 9.1 billion leva and 9.5 billion leva, respectively.

Deposits also remained almost flat, with business deposits increasing by two per cent and household and individual deposits gaining 0.5 per cent. The combined deposit portfolio of Bulgarian banks was 71 billion leva at the end of July.

Source: Dnevnik.bg