July 6, 2017 / 5:10 PM / 6 months ago

Bulgaria's Fibank sounding out potential investors, CEO says

SOFIA (Reuters) - First Investment Bank (Fibank), Bulgaria’s third biggest lender, is sounding out potential investors about options that could include taking a stake in the bank, striking a strategic partnership or providing capital to boost growth, its CEO said.

Nedelcho Nedelchev told Reuters Fibank had contacted global investors with a history of funding financial institutions, but declined to provide names or a timeframe for the process in which it is being advised by Citi (C.N).

“At the moment we are in the middle of the so-called market sounding, meaning we have contacted a certain circle of investors. We are in talks with them and we receive feedback on what kind of interest they might have,” he said.

“We are looking at the three options for the time being. When we get the full picture of the investors’ interest we will decide how to proceed,” he added.

Strong profits last year allowed Fibank 5F4.BB to meet central bank recommendations for it to raise about 206 million levs (92.73 million pounds) in additional capital following an asset quality review in 2016.

Its Common Equity Tier 1 (CET 1) ratio - a key measure of financial strength - rose to 13.4 percent in the first quarter from 12 percent at the end of 2016. But it is below the Bulgarian banking system average of 20.9 percent at the end of March, and Fibank has a relatively high stock of non-performing loans.

The lender, with total assets of 8.9 billion levs at the March, ranks second in corporate lending in the European Union’s poorest country, and plans to boost retail lending to match its strong retail deposit base, Nedelchev said.

On Tuesday, credit rating agency Moody’s assigned B1 long-term local and foreign currency deposit ratings to Fibank, saying its deposit funding base and strong liquidity was balanced by moderate capital buffers and high bad loans.

Nedelchev said he believed so-called non-performing exposures (NPEs) peaked in the first quarter and preliminary data showed their ratio to gross loans had eased to 23.5 percent in the second quarter from 26 percent at the end of March.

    “In the second quarter, we have a reduction following write offs of fully provisioned loans (and) improvement of business, meaning people starting to service their loans and de-risking,” he said.

    “Our plan is for these loans to keep decreasing by 10 to 20 percent per year”.

    Nedelchev said the bank’s NPEs did not require additional capital because it had already made adequate provisions and the loans were backed by collateral.

    The International Monetary Fund has warned the level of NPEs remains a risk for Bulgaria and the central bank has said it is considering measures to further reduce them.

    Fibank is controlled by Bulgarian businessmen Tzeko Minev and Ivaylo Mutafchiev, each with 42.5 percent stakes. The rest is floated on the Bulgarian stock exchange.

    Reporting by Tsvetelia Tsolova; Editing by Mark Potter

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