Mumbai: Axis Bank Ltd, India’s third largest private sector bank by assets, is reducing dependence on large and medium companies as it seeks to cash in on an increase in individual lending opportunities in smaller towns.

The bank has set a target of increasing its retail loan portfolio to 30% of total loans, up from 21% at the end of September.

A file photo of Axis Bank, Barakhambha Road, New Delhi branch

Currently, large and mid-corporate loans make up for 55% of the bank’s loan book, which it expects to reduce in the next three years.

“In the short term, business will continue to be challenging but the long-term trend continues to be strong. The growth will come from smaller cities with metros continuing to grow,” said Jairam Sridharan, senior vice-president and head consumer lending and payments at Axis Bank.

The bank’s retail loan portfolio stood at Rs29,343 crore, or 21% of its total loan book of Rs1.4 trillion at the end of the September quarter.

Retail is one of the pillars of Axis’ vision 2015, which was adopted by Shikha Sharma after she took over as managing director and chief executive officer in April 2009.

Currently, half of the bank’s 1,200 branches are in smaller towns.

The bank also has 85 offices that do not take deposits but process loans in small towns such as Bhavnagar, Belgaum, Jhansi and Rohtak across India.

Shridharan said low penetration of home and car loans and card transactions in such towns makes it a big opportunity for banks.

“Residential real estate growth is taking a breather and so are domestic car sales. Card growth is now positive after two years of negative growth. But it is the tier-II and (tier-) III towns that are showing tremendous growth potential,” Sridharan said.

According to him, only 55% of the bank’s business currently comes from top eight cities compared to 75% three year ago.

Axis Bank’s strategy is similar to that of its larger rival HDFC Bank Ltd, which has steadily increased its retail book to exactly 50% of its loans by aggressively disbursing retail loans, feeding demand from the rural market.

HDFC Bank had lent an average of about Rs5,000 crore every month of the first quarter of fiscal 2012 to finance personal loans, commercial vehicles, auto and two-wheeler loans, which helped the bank’s retail business grow 30% year-on-year.

Axis Bank has seen a 26% compounded annual growth rate in retail loans since financial year 2007-08, giving it the confidence to increase its loan portfolio.

Currently, HDFC Bank has the largest retail portfolio after it overtook a cautious ICICI Bank Ltd, which had 60% of its loans coming from retail at one point.

Murli Gopal, research analyst at Brics Securities Ltd, said banks are focusing on retail to diversify their books in a tough economic scenario.

“Corporate loans are risky because they tend to be lumpy and one large delinquency in a scenario like this can have a negative impact. In retail, there is no such risk unless there is a systemic issue,” he said. India’s economy grew at 6.9% in the September quarter, the lowest since quarter ended June 2009.

However, banks have to have better underwriting methods before giving out these smaller ticket loans, Gopal said.

Sridharan said Axis Bank is aware of the risk management needed in selling these loans and it will follow a “conservative” policy in this regard.

“When the economy is slowing down, corporate loan demand also slows, so this is a good time to diversify for Axis which is still better placed than other private sector banks like Yes Bank Ltd who have a high dependance on corporate loans,” said Gopal, who has a ‘buy’ rating on the stock.

Axis Bank’s stock ended at Rs1,029 apiece on Monday, up 2.38% on BSE while the 30-share benchmark Sensex was at 16,805 points, down 0.25%. Local markets were closed on Tuesday.

joel.r@livemint.com

–>

Lending at PNC Bank, especially to business borrowers, has risen significantly this year, CEO James Rohr told analysts Tuesday.

New business loans increased by about $3.6 billion in the three-month period ended Sept 30 compared to previous quarter ended June 30 said Rohr, CEO of bank parent PNC Financial Services Group. Consumer loans increased by about $500 million.

We continue to see loan growth, said Rohr at the Goldman Sachs Financial Services conference in New York. He noted commercial real estate lending also has risen in recent weeks.

PNC wrote more business loans last quarter than originally planned, he said, and is experiencing growth in all of its 33 markets and across various industries. The bank also is on track to pick up some 1,200 new business borrowers in 2011, compared with an initial target of 1,000.

Plan to Mitigate Law School Student Loans Proposed by Yale Professors

Posted by Shannon Rasberry on Dec 6, 2011 in Student Loan Debt | 0 comments

As the debate over extreme student loan debt and the value of US law schools continues, two Yale Law School professors have proposed an idea they think will help reduce the number of struggling law school graduates. Law schools, the professors say, should pay underperforming students to drop out.

The idea, spurred by an overwhelming number of law school graduates who are entering a shrinking job market with six-figure debt from student loans, as well as allegations that many law schools deliberately inflate job data to make student loans seem affordable, is the brainchild of Ian Ayres and Akhil Reed Amar. The pair, in an article for Slate, said that law schools should seriously consider rebating half of a student’s first-year tuition if he or she decides to quit after the first year.

“A half-tuition rebate splits the loss of an aborted legal career between the school and the student. Each has skin in the game, so students will not go to law school lightly, and law schools will have better incentives not to admit students likely to fail,” the professors write.

The proposal comes as the debate over legal-education reform intensifies. In August, separate lawsuits were filed against New York Law school and Thomas M. Cooley Law School over allegations that the schools violated consumer protection laws by purposefully posting inflated employment data that mislead students about job prospects after graduation. A third law school, the Thomas Jefferson School of Law, was also sued over similar allegations.

Additionally, law schools have received public rebukes from federal lawmakers for their practices, while other law professors have come out with statistical analyses and assessments of just how risky a law school investment is. “Law school is a very risky (and expensive) investment; it should not be entered into lightly,” said Paul L. Caron, a professor at the University of Cincinnati College of Law.

Plan: Student Loans Should be Borrowed Based on Comprehensive Jobs Information

Ayres and Amar called for law schools to provide applicants with more comprehensive information about post-graduation employment instead of just reporting the percentage who are employed nine months after graduation. The professors said that laws schools should instead release employment data, including graduates’ annual salaries, for the first 10years after graduation, which matches the standard repayment period for federal student loans. The pair also said that law schools should break down the bar-passage rates for graduates based on grades and admission test scores and require students who are less than 50percent likely to pass the bar within three years of graduation to sign a special waiver (“Law School Not Working Out?” The Chronicle of Higher Education, Nov.29, 2011).

“Theres a psychological tendency to double down on a bad debt,” Amar said in an interview. Paying students to drop out “lets you walk away and not feel like a loser. Its your choice, but we want you to be fully informed.”

Michael A. Olivas, a professor of law at the University of Houston and president of the Association of American Law Schools, agreed that some schools game the system, but suggested that law schools “cant have all the worlds economic woes laid at our feet.” While law firms are hiring fewer lawyers, Olivas said that there are still plenty of opportunities in the market for law-school graduates.

“Most of these students are going to find their way if theyre willing to be flexible and to look more broadly,” Olivas said. “Not everyone is going to practice law in the traditional sense, and I dont think thats necessarily a bad thing.”

For:

The debt from student loans of current college students has recently surpassed $1 trillion and is continuing to climb.

The amount is larger than the credit card debt of the nation.

Tuition prices for secondary educational institutions are at an all time high.

Across the United States, both former students and current students are rejoicing over President Obamas new law that was recently passed by Congress.

This law will allow students to only have 10 percent of discretionary income annually to eligible borrowers.

In addition, this law will help the remainder of a former students debt eliminated after 20 years.

In addition to decreasing interest rates and lowering the number of years required for a loan to be paid off, this program offers individuals who spend 10 or more years in public service positions to have their loans forgiven at the ten year mark.

This cuts the time it would have taken for the loan to be forgiven without this law in half.

This program to help consolidate the debt acquired through student loans is absolutely a step in the right direction to helping these desperate students begin their lives without the overwhelming pressure of outrageously high monthly payments.

It is common for most students to believe that the higher degrees one earns, the higher paying jobs they can get.

As so many students are realizing, as they attain these higher, more expensive levels of education, the higher pay is just

not materializing.

As it is now, students hoping to earn higher degrees must do so with the understanding that whatever money they earn as a result of the education will go straight back into paying for that education, leaving them without the means to really begin their life as

a professional.

While speaking to the students of Colorado University in Denver, he stated, I know youre hearing stories from friends and classmates and siblings who are struggling to find work and youre wondering whats in store for your future. And I know that can be scaryhellip; This is something Michelle and I know about firsthand. Ive been in your shoes.

He went on to discuss that education is of the utmost importance in this country and stated we want you in school. But we shouldnt saddle you with debt when youre starting off.

What this program will do for those students, although it will not completely remove the strain, is lessen the day-to-day worry and struggle regarding their debt so that they can continue to build on what their education has given them.

The vast majority of college students will benefit from Obamas student loan plan.

Against:

Obamas plan to consolidate student loans and decrease the interest rates is nothing to praise.

The plans impact will only save students between $4 and $8 a month and wont help those students who are already suffering from debt.

Its no news to anyone that one of the many long-term issues that the U.S. economy faces is the debt acquired through student loans.

As the cost of education has drastically risen over the years and continues to rise, incomes remain the same.

A study by the New York Bureau of Economic Analysis found that student loans have increased by 511 percent since 1999, but meanwhile disposable income has only increased by 73 percent.

This plan would provide students who are taking out loans in the future with more manageable payments.

Although it will not benefit those who have already taken out loans in recent years, after all, arent the students who are in debt now the inspiration for this legislation?

So does it seem fair that they cannot reap any benefits from this new program?

The presidents program does not benefit students who took out loans prior to 2008 and who do not plan on taking out any future loans.

This alone cuts out a large percentage of the students who are suffering right now.

Even if you are included in the students who have oppressively high debt to pay off as a result of student loans, dont count on this helping you out at all if those loans were private.

Since this money is being funded by the federal government with money borrowed from the government, where will the remainder of the debt that has been forgiven come from?

Who is going to make up for that money?

It cant just disappear, so it will leave the government at a greater deficit rather than individual students with their

own debt which does not help anyone at all.

According to an analysis by finaid.org, that was based on the Department of Education data, the average students debt after attaining their bachelors degree coupled with this program would only save them approximately $4.75 to $7.75 per month.

The savings are clearly not an adjustment that will save the economy or greatly lessen the overwhelming debt.

This program excludes those students whose debt was the driver for the creation of the program in the first place.

It will barely scratch the surface of the average students debt from month to month, this program seems to be gaining greater hype than its worth.

In the last few months, Obama has announced two initiatives regarding student loans which he plans to execute in spite of our Congressional political process. One of them is a special consolidation for students in repayment of loans who have at least one loan under the old program, back when we had lender choice, and at least one in the Diect Loan program. This consolidation will be available from January through June 2012. Those special, lucky people will be contacted by the Department of Education and given the option to consolidate. Under this program, the loans retain their separate terms and conditions, and the borrower receives a 0.25% reduction in interest.

The second initiative is the Pay As You Go program. Obama has introduced this completely unoriginal idea as his own. This is actually the Income Based Repayment program, repackaged especially for you with a brand new name. The Income Based Repayment plan was signed into law by President Bush in 2007. Borrowers who sign up for this repayment program pay 15% of their income above the poverty line for their family size, per year, divided into monthly payments. After 25 years of payments, the balance is forgiven. In 2014, this program is scheduled for a change: 10% of the borrowers income above the poverty line and forgiveness after 20 years of payments. Sound familiar? It should. This is the exact terms of the new Pay As You Go program.

Germany Won’t Block Bundesbank IMF Loans, Merkel Ally Says
December 13, 2011, 9:54 AM EST

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More From Businessweek

• European Finance Ministers to Discuss Crisis as Confidence Wanes
• Belgium’s Rating Cut 2 Levels by Moody’s on Contagion Risk
• Juncker Expects EU to Meet Deadline on Channeling Loans to IMF
• Bundesbank Sees No ‘Urgent Need’ for Decision on IMF Loan
• Draghi Says There’s No ‘Savior’ for Countries That Won’t Act

By Brian Parkin

(Updates with Bundesbank comment in seventh paragraph, Merkel in ninth. For more debt-crisis news, click on EXT4.)

Dec. 5 (Bloomberg) — German Chancellor Angela Merkel’s government won’t stand in the way of Bundesbank help to fight the debt crisis by means of loans channeled through the International Monetary Fund, a senior Merkel ally said.

Germany is keen for the IMF to adopt a “decisive role” in combating the crisis alongside the European rescue fund, Michael Meister, the parliamentary finance spokesman for Merkel’s Christian Democratic Union, said today in a telephone interview.

“If the IMF says it needs more money, then it’s up to the Bundesbank to decide this in Germany’s case,” he said. “It’s not for lawmakers nor Frau Merkel’s government to decide or to interfere.” Lawmakers “would have a problem if political pressure was openly brought to bear on the bank, not with its decision.”

Merkel and French President Nicolas Sarkozy agreed at a meeting in Paris today to press fellow leaders at a Dec. 8-9 European Union summit to lock in tighter economic cooperation as a first step to snuff out the crisis now in its third year.

Euro-area finance ministers gave the go-ahead last week for work on a proposal to recycle central bank loans through the IMF that may deliver as much as 200 billion euros ($269 billion) to fight the crisis, two people familiar with the negotiations said.

‘Bigger Role’

“We’d be really pleased to have the IMF take on a bigger role,” Meister said. “We as Germans have always sought a decisive role for the IMF in fighting this crisis.”

The Bundesbank may be prepared to make loans to the IMF to combat the crisis, the Die Welt newspaper reported today, citing a November letter from the central bank’s president, Jens Weidmann, to German Deputy Finance Minister Joerg Asmussen. Article 123 of European rules regulating the single currency bans central banks from directly funneling cash to states to plug deficits, Die Welt said.

A spokeswoman for the Bundesbank declined to comment on the Die Welt report or on Meister’s opinion.

The need for a fresh anti-crisis measures became apparent as the effort to boost the 440 billion-euro European Financial Stability Facility to 1 trillion euros fell short. Central bank loans may be linked to adoption of tougher budget policing and tighter economic ties as espoused by Merkel and Sarkozy.

‘Sensible Combination’

“I believe that with the EFSF we have quite enough — maybe not as much money as some want, but we do have 250 billion euros there, we have a lot more flexibility,” Merkel told reporters in Paris today. “This money should also be used in a sensible combination with the IMF, if it is needed. So we are not standing here without any solution.”

Merkel has been at the forefront of efforts to strive for “fiscal union” through European treaty changes to create automatic, court-enforced sanctions on euro members that breach limits of 3 percent of gross domestic product on deficits and 60 percent of GDP on debt.

The chancellor also led the charge for private bondholders to automatically share in any losses under the permanent rescue fund from 2013, the European Stability Mechanism. While talks are ongoing about possible changes to the ESM, there are “very good reasons” for including clauses that force the private sector to share in any losses, Merkel said Dec. 2

Meister stepped up German resistance to watering down the private-sector involvement, saying there is an “urgent need” to move to a compulsory role from voluntary involvement as with Greece.

“We need to give markets very clear information on pricing in risks when buying new euro region sovereign bonds,” Meister said. “That’s where collective action clauses come in and with them clear procedure for investors in case a sovereign state should face insolvency. This should not be changed, that is our position.”

–With assistance from James G. Neuger in Brussels. Editors: Alan Crawford, Andrew Atkinson

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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READER DISCUSSION

By Anne McCaslin Parker
annep@smu.edu

Most seniors approaching graduation in May are excited. However, it is a time of financial worry. As if trying to find a job and figuring out how they will support themselves are not enough, some are about to face an even larger financial burden–paying back student loans.

“The big problem is that people do not pay attention to how much they are borrowing and it all adds up,” said Marcia Miller, associate director of financial aid for Southern Methodist University. “For a lot of students, they basically have got the price of a car that they are having to pay back.”

Student loans have become one of the most common forms of debt. Many students are not aware of how important it is that they pay back their loans in a timely matter. Unlike other loans, if one files for bankruptcy after college, student loans never go away. You will be stuck with them for forever.

After a usual six-month grace period, students are responsible to start paying the principle and interest on loans faithfully, every single month, until they are entirely paid back. According to Miller as of 2012, there will no longer be a grace period. While this is a hefty responsibility for some, many students are willing to take it to get the education they feel is the best for them.

Nick Cains, a senior at SMU, has taken out several loans each year in addition to scholarships and school grants. “I am thankful for the six month grace period and I think it will be okay once I do not have to worry about homework and extracurricular activities so I can focus on working and paying these back as soon as possible,” he said.

In contrast, some students do not think the responsibility of having to pay back loans after college is worth it. SMU student Baxter Finkbohner says that if her parents were not able to afford SMU tuition, she would have stayed at her in-state school and gone to college for a much cheaper price. “I would absolutely hate approaching graduation with anticipation of having to pay back loans while looking for a job,” she said. “I am very fortunate that I am not in this situation.”

If a student misses a payment on a loan, the loan goes into delinquency and the lender will most likely charge late fees. You are considered delinquent on your loan as soon as you miss a payment until you make all up-to-date payments. If the student does not pay in at least 270 days, the loan is considered a default. In this case, the loan agreement has been violated and the servicer has the ability to request immediate payment in full.

In September, the US Department of Education revealed a sharp increase in the percent of students who default on college loans. The number of people with education-related loan defaults rose to 8.8 percent in 2010, up from 7 percent in 2008. This is only a conservative estimate because it doesn’t consider the number of students in danger of defaulting over the next few years. Defaulting on a loan can cause long term negative consequences in regards to a student’s financial future. If The servicer may take your tax refunds or government benefits, or garnish your wages and it doesn’t have to go to court first because a loan contract has been violated. Defaulting can damage credit ratings, affecting your ability to rent a house or an apartment, get a job, applying for future financial aid or qualifying for any other type of loan. If you miss payments or default, the unpaid interest and default fees get added to your original loan balance, which will end up making the debt considerably larger. “If a student defaults on a loan then they can never borrow money for educational purposes again until the loan(s) are no longer in default,” says Miller. “So, if you are planning to go to graduate school, it is important to keep your loans current.”

If students plan to utilize loans to pay for college, it is important that they plan early for repayment to avoid those problems.

Tips to help students avoid default:

1. Seek out scholarships and/or grants. Before you apply for a loan, see if you qualify for a scholarship or grant that is offered from your school.

2. Understand your loan. Read the fine print. Make sure you know what rights and responsibilities the loan entails and the particular terms of your loan before you take one out. Know what the repayment obligation is and what the repayment options are. Make sure you keep records regarding your loan and of any forms that you sign.

3. Graduate! Students who have a college degree are less likely to have problems paying back their student loans because most have jobs.

4. Borrow as little as possible. It is important that you only borrow the amount that you need for college expenses and be careful to only borrow what you can expect to be able to repay. Default rates will increase if you over-borrow.

5. Call your servicer immediately at the first sign of financial trouble. If you are having problems or can not make a payment, seek help to see if there are any financing options avaliable for you. They may agree to a reduced-payment plan or to allow a temporary suspension of payments. By postponing payments, you can get short-term relief from making payments until your financial situation improves, while still maintaining your good credit. Miller says, “They want to work with you and may also be able to provide you information about deferments, forbearance, and graduated payment.” Both deferments (your repayment and interest accrual are frozen during economic hardship) and forbearances (repayments are frozen, but interest continues to accrue) allow you to temporarily stop making payments if you meet certain guidelines.

6. Notify your lender or server immediately if you have any changes that could affect the repayment of your loan. It is important to let them know if you have a change of address, phone number, or name, or if you transfer schools.

7. If you are able, make extra payments. Try making 13 payments a year instead of 12. It will make your loan balance diminish faster and will reduce the amount of interest you pay over the life of the loan.

8. Create and maintain a budget that is within your monthly income. Working throughout school may reduce debt. Depending on your situation, if you’re able to work, it may help pay for many of the costs.

9. Consider making nominal student loan payments while in school. This could help to reduce the amount you owe after graduation.

10. MOST IMPORTANTLY–Make your loan payments on time.

“I got really lucky going to a school where I have the opportunity to receive scholarships and grants,” said Cains. “I think it is really important to find a school that will provide this I would not have gotten a tenth as far as I have if they had not helped me out, but I still have loans to pay off.”

Miller’s biggest advice to her students at SMU is, “Do not stick your head in the sand and act like it is going away.”

ATLANTA, Dec. 6, 2011 —

ATLANTA, Dec. 6, 2011 /PRNewswire-USNewswire/ –#xA0;The US Small Business Administration announces today that federal economic injury disaster loans are available to small businesses, small agricultural cooperatives, small businesses engaged in aquaculture and most private non-profit organizations of all sizes located in Pike, Susquehanna and Wayne counties in Pennsylvania as a result of the effects of Hurricane Irene and Tropical Storm Lee that occurred from Aug. 27 through Sept. 15, 2011.

(Logo: http://photos.prnewswire.com/prnh/20110909/DC65875LOGO)

These counties are eligible because they are contiguous to one or more primary counties in New York.#xA0; The Small Business Administration recognizes that disasters do not usually stop at county or state lines. For that reason, counties adjacent to primary counties named in the declaration are included, said Frank Skaggs, director of SBAs Field Operations Center East in Atlanta.

When the Secretary of Agriculture issues a disaster declaration to help farmers recover from damages and losses to crops, the Small Business Administration issues a declaration to assist eligible entities affected by the same disaster, said Skaggs.

Under this declaration, the SBAs Economic Injury Disaster Loan program is available to eligible farm-related and nonfarm-related entities that suffered financial losses as a direct result of this disaster. With the exception of aquacultural enterprises, agricultural producers, farmers and ranchers are not eligible to apply to SBA.

Loan amounts can be up to $2 million, with interest rates of 3 percent for non-profit organizations and 4 percent for small businesses.#xA0; Terms can be up to 30 years.#xA0; The SBA determines eligibility based on the size of the applicant, type of activity and its financial resources.#xA0; The agency sets loan amounts and terms based on each applicants financial condition.#xA0; These working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.#xA0; The loans are not intended to replace lost sales or profits.

Disaster loan information and application forms may be obtained by calling the SBAs Customer Service Center at 800-659-2955 (800-877-8339 for the deaf and hard-of-hearing) or by sending an email to disastercustomerservice@sba.gov.#xA0; Loan applications can be downloaded from the SBAs website at www.sba.gov.#xA0; Completed applications should be mailed to: US Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.

Those affected by the disaster may also apply for disaster loans electronically from SBAs website at https://disasterloan.sba.gov/ela/.

Completed loan applications must be returned to SBA no later than July 18, 2012.

For more information about the SBAs Disaster Loan Program, visit our website at www.sba.gov.

Contact: Mark IhenachoPhone:#xA0; 404-331-0333

SOURCE US Small Business Administration

BERLIN (Reuters) – The Federal Reserve, along with the 17 euro zone national central banks, may help provide the International Monetary Fund with funds that could be used to aid debt-ridden states, a German newspaper said.

Die Welt cited sources close to the negotiations as saying the euro zone central banks could pay at least 100 billion euros ($134.2 billion) into a special fund that could be used for programs for nations struggling to control their debts.

Also other central banks, for example the US Federal Reserve, are apparently prepared to finance a part of the costs, the paper said in an advance copy of an article to appear on Monday.

Treasury Secretary Timothy Geithner may discuss the idea in the coming weeks when he visits Europe, the paper said.

Officials had said on Saturday that talks on the size of loans from euro zone central banks were starting at a technical level after finance ministers from the currency union gave the go-ahead to explore the idea.

The idea is for the IMF to be able to match the new firepower of the euro zone bailout fund, which is being leveraged.

One senior euro zone official has said that no amount had been discussed at the political level.

The euro zone wants to boost the IMFs resources so the fund could provide a credible backstop if Spain and Italy were to need an emergency loan program.

Geithner is to hold talks with several European leaders in the coming week and is set to urge them to take decisive action at an EU summit aimed at preventing the euro zone debt crisis spiraling out of control.

A Treasury official said on Friday that the United States was not planning to make bilateral loans to the IMF and the lenders resources were adequate. (Writing by Madeline Chambers; Editing by Dale Hudson)

Bulgaria’s increasing bad loans are
covered by high provisions and capital and the bank system is
“performing well” amid faltering economic recovery, central
bank Governor Ivan Iskrov said.

Bulgaria’s banking system generates profit, which provides
“additional capital buffers,” Iskrov said in a speech in Sofia
today. Loans more than 90 days past due rose to around 14
percent of total lending at the end of September, he said. The
capital adequacy ratio of the banking system is 18 percent and
the liquidity ratio is 26 percent, while deposits increased 13
percent in year in October, he said.

“With these indicators Bulgaria’s banks are among the few
in the European Union that didn’t have to be bailed out with
taxpayers’ money,” Iskrov said. “The central bank’s
conservative supervision policy encouraged banks to accumulate
adequate capital and liquidity buffers. The bank system is
performing well.”

Bulgaria, the EU’s poorest country in terms of economic
output per capita, weathered the global crisis without borrowing
from international lenders. The country aims to narrow next
year’s budget gap to 1.35 percent of gross domestic product from
2 percent this year, in an effort to contain the impact from the
euro area’s sovereign debt crisis.

Slowing Growth

Bulgaria’s credit demand will decline next year as economic
recovery slows, Iskrov said. The EU cut Bulgaria’s 2012 economic
growth forecast to 2.3 percent from 3.6 percent, while the
government calculated next year’s budget on a 1 percent growth
assumption to compensate for declining exports to the EU. The
economy expanded 1.6 percent in the third quarter from a year
earlier, the statistics office said today.

EU-based lenders control 85 percent of banking assets in
the Balkan nation. The five biggest banks are UniCredit Bulbank;
DSK Bank, a unit of OTP Bank Nyrt. (OTP), Hungary’s largest bank;
United Bulgarian Bank, owned by National Bank of Greece SA (ETE);
Raiffeisenbank Bulgaria and Eurobank EFG Bulgaria.

The market share of Bulgarian-based banks may continue
increasing next year as foreign lenders restructure their
ownership in the region, Iskrov said.

To contact the reporter responsible for this story:
Elizabeth Konstantinova at
ekonstantino@bloomberg.net

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

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