The merger of United Bulgarian Bank and Raiffeisenbank Bulgaria will be the first of its kind in more than two years and most likely there will be others in the next 1-2 years. In other words – before Bulgaria’s entry into the eurozone, which at the earliest, but not so realistic, would happen in 2024, the Bulgarian banking market will witness more banking associations.
And if in the US bank takeovers and mergers are common, and customers find out about them with a new letter in the e-mail only after all approvals from regulators and when the deal is fully finalized, in Bulgaria things are not so. A bank merger on the Bulgarian market cannot go unnoticed even months before a real unification, and for the clients here the bank is the personification of a personal fortress, in which almost all savings accumulated over the years are often put, and which is first sought in need of financing. .
What will change for customers?
In the last ten years we have witnessed many mergers of banks in Bulgaria and
we saw that there is nothing scary and complicated in this “, commented for Economic.bg the financial consultant Tihomir Toshev.
The trend of consolidation of the banking sector is a fact all over the world, and not only in Bulgaria, where banks are already a lot for the relatively small market. Even after the purchase of Societe Generale Expressbank by DSK Bank and Piraeus Bank by Postbank, the country remains the number one bank per capita.
Purely operational, the mergers are well planned and organized, and the clients of one financial institution will receive information about their new bank accounts, as well as that the products they use have been transferred to the new bank.
The only inconvenience would be for people who are used to working directly with a certain bank office and a specific employee, as usually in mergers a certain percentage of bank branches are closed. However, World Bank statistics show that Bulgaria is among the countries record holders in the largest number of bank branches in the world by 2020 – 60.25 branches per 100 thousand people. In France, for example, the ratio is significantly lower – 33, in Belgium – 30, and in Germany – less than 10.
The competition remains high
According to initial estimates, the merger of UBB and Raiffeisenbank will rank second in terms of assets – after Unicredit and before DSK Bank. UBB’s calculations are not definite, as banking transactions are typically accompanied by revaluations of assets and other factors. Although banks in Bulgaria will decrease by one, ie. the choice will shrink, competition to attract customers and improve products and services will remain high – as it has been for many years.
Naturally, every bank wants to be number 1 or in the top 3 in terms of assets and customers. Thanks to this competition, we have both mortgages and consumer loans, close to the average European level, “explains Toshev.
A report by Economic.bg in the European Central Bank and the Bulgarian National Bank shows that for September the average interest rates on housing loans in some euro area member states – Greece, Ireland and Cyprus, are close or even higher than the average for Bulgaria – 2.68 %. Of course, some banks also offer lower rates, especially in response to various conditions, such as pension insurance in a particular company, salary transfer in the same bank, availability of a credit card, online banking and insurance.
In the digitalization segment, competition will also continue as the pandemic speeds up the process.
In full force we can say that the processes of digitalization of the banking business are intensifying and a large number of customers have switched to online banking, “said Toshev, expecting even more customers to focus on remote banking, which is, among other things, cheaper to the services in the bank office.
The banking system is becoming even more stable
After the merger of UBB and Raiffeisenbank, 3/4 of the assets in the banking system will be concentrated in the top 5 banks – Unicredit, UBB + Raiffeisenbank, DSK Bank, Postbank and First Investment Bank. The remaining 25% will be divided into 20 banks and branches. However, this is not a problem for the system, because banks with more assets are more resilient to market problems and such consolidation ensures greater stability of banking groups.
There are always enough small banks in each market, which are more flexible, sometimes more aggressive, which regulate the market well enough and always give a large enough choice to the clients “, Toshev explains.
The very fact that the owner of UBB – KBC Group, takes a similar step and initiates the largest banking transaction in Bulgaria worth 1.15 billion euros means that the group considers Central and Eastern Europe as its key market for growth. The bank has already arrived
close to the first market position in the Czech Republic and this deal brings it closer to the same position in Bulgaria, “said Philip Richards, senior banking analyst at Bloomberg Intelligence.
He added that the deal will create potential for optimizing KBC’s costs in Bulgaria. It entered the country in 2007 with a majority stake in Eibank, and subsequently acquired DZI, UBB, as well as NN’s business in Bulgaria.
In parallel with the consolidation of its position here, KBC is leaving Ireland, where until recently the CEO was Peter Ruben, who took this post in Bulgaria two months ago. The Irish Times points out that the sale of the loan portfolio of over 10 billion euros will finance the purchase of Raiffeisenbank in Bulgaria.
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