Bloomberg News

Raiffeisen Bulgaria Sees No Impact From Austrian Lending Rules

November 25, 2011

Nov. 25 (Bloomberg) -- Raiffeisen Bank International AG’s Bulgarian unit will not be “seriously affected” by a decision of Austrian regulators to curb new loans in central and eastern Europe as it is profitable and has enough funding.

“We have operated so far in the business model, which is envisaged in the new Austrian regulations,” Momchil Andreev, executive director of Raiffeisen’s Bulgarian subsidiary, said in a phone interview in Sofia today. “Our credit portfolio is financed by local deposits and long-term credit lines from international financial institutions.”

Austria is restricting new loan business to 1.1 times the deposits and wholesale funding that Raiffeisen, Erste Group Bank AG, and UniCredit SpA’s Bank Austria AG’s local units in eastern Europe are able to raise on their own, Austrian regulators said on Nov. 21. This would limit their ability to fund credit growth with loans from the parent company.

Raiffeisen Chief Financial Officer Martin Gruell said yesterday that Bulgaria and Slovenia are the two countries where Raiffeisen doesn’t meet the rules yet. The loan-to-deposit ratio in Bulgaria was 1.38 at the end of the third quarter, the Vienna-based bank said. This ratio only includes customer deposits, while the central bank under its new rules also counts long-term funding from other sources.

Poorest EU Country

Raiffeisenbank Bulgaria, the fourth-biggest lender in Bulgaria in terms of assets, has increased lending by 8 percent in 2010, while deposits rose 6 percent and it controls 9 percent of the Bulgarian market, Andreev said. Its clients rose by 15 percent in the past two years bringing the total to 750,000 people, he said.

Bulgaria, the European Union’s poorest country in terms of economic output per capita, weathered the global crisis without borrowing from international lenders. The country aims to narrow this year’s budget gap to 2 percent of gross domestic product and 1.5 percent in 2012 to contain the impact of the euro area’s sovereign-debt crisis. The gap was 3.9 percent in 2010.

“Our operation here is profitable and the Bulgarian market is among the primary for the group,” Andreev said. “We plan to continue working here.”

Andreev saw demand for lending decline as the euro area’s sovereign-debt crisis cuts demand for Bulgarian exports.

“The euro crisis will affect demand for lending among the companies which exported to the EU and drove the economic recovery in 2011,” he said.

The EU cut Bulgaria’s 2012 economic growth forecast to 2.3 percent from previous 3 percent.

--With assistance from Boris Groendahl in Vienna. Editors: Zoe Schneeweiss, James M. Gomez

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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