According to the Bulgarian National Bank (BNB) total loans stood at BGN 49,837bn in July 2009, down 0.3% m/m but up 8.2% y/y. Deposits, on the other hand, increased moderately (+0.6% m/m and 2.9% y/y), driven by retail sector (up 1.3% m/m and 9.5% y/y).Bulgaria´s loans-to-deposits ratio decreased to 132% in July, from 134% the month before. Asset quality continued to deteriorate, with overdue loans rising to 4.8% in July versus 3.1% in 1Q09 and 2.4% at the end of 2008. The deterioration in the quality of loans was visible in both retail and corporate loans. Overdue loans in Bulgaria´s retail sector advanced from 3.2% at the end of 2008 to 5.7% in July 2009, while overdue loans in the corporate sector rose from 2.0% to 4.4% in the period.
Asset quality continued to deteriorate in July, which is negative but expected. Bulgaria´s corporate sector has been hit by the economic downturn and the credit crisis, thus further deterioration seems inevitable. We do not expect the statistical release to have any trading impact.