• Deposits are maintaining their leading position in financial assets;

• Mortgage loans are winning a share at the expense of consumer loans in terms of liabilities.

Bulgarian households will carry on increasing their wealth despite the difficulties caused by the global financial crisis. In the short term, in 2010 and 2011, the trend from the previous year will be sustained for a more balanced growth of financial assets (deposits, securities investments, pension funds, etc., as well as liabilities (mortgage and consumer loans, credit cards). The optimistic forecasts from the last report of UniCredit Group, regarding the household wealth in the Central and Eastern Europe region with a focus on Bulgaria, were presented today by Milen Kasabov, senior economist at UniCredit Bulbank.

According to the analysis, in Bulgaria, unlike the developed countries, the trend persists of the main part of the total household wealth (around 87% as of Q3, 2009) to consist in real estates. „This can be explained with the traditional inclination for investments and savings in real estates, as well as the very low level of development of the capital markets and the quite limited market offering of alternative forms of savings and investments”, explained Kasabov. The expectations of UniCredit’s economists are that in the near future the ownership of real estates will continue to have a determining role in the overall condition of the households in our country but

financial assets will be growing notably and will gradually be getting a still greater share,

although this process will most probably continue at a slower rate.

In the financial assets structure, deposits will continue growing at a relatively good rate in result of the good profitability, which they offer. In the next two years, they are likely to preserve their high share of nearly three fourths of all household financial assets, states the analysis of UniCredit Group in its part focused on Bulgaria. „Securities underwent a significant downturn as a result of the capital markets’ collapse in 2008 and the subsequent slower recovery of our domestic market. In the future, securities will still have a high potential but their recovery may be slower”, reckons Kasabov. At the same time, pension funds assets remained relatively stable and they promise the highest growth in the next few years thanks to the guaranteed incomes each year, their low base, and the more conservative investment policy because of the restrictions on investments in riskier facilities. Namely the more limited share of facility savings, related to price movements on the capital markets, has in fact protected the households from a more significant decrease in wealth compared to other countries during the crisis year, 2009, when the assets of Bulgarian households shrunk by 6.5%.

As a reason for the growth of Bulgarian household wealth in the future, though at growth rates lower than before, the economists of UniCredit Group point to the significantly smaller penetration of financial assets into Bulgaria compared to other CEE countries, which presents an opportunity for a longer-term trend of a solid financial wealth increase.

For sure, however, the growth of assets, as well as of liabilities, in the future will be far from the turbulent levels during the period between 2000 and 2007 (30% average growth of assets and 54% growth of liabilities). Again unlike this period,

in the next two years assets will be growing faster than liabilities.

„In terms of financial liabilities, a substantial increase was reported in the past few years, significantly overtaking the increase in assets, which was not stable or favourable in the long run. In 2009, this tendency changed and the expectations are that it will persist in the next two years with financial assets growing a little faster than the liabilities of the households”, forecasted Kasabov.

In the liabilities’ structure a marked growth is observed of mortgage loans, which keep winning a share at the expense of consumption-related loans.

This trend will be sustained although the change in the liabilities' structure will not be so dynamic in the next two years. In fact, in result of the consumption boom witnessed in our country in the past few years, the penetration of consumer financing compared to the Gross Domestic Product got closer to the levels in developed countries. The expectations are that the recovery of the consumption of consumer durables and the financing related to it will take a longer time. On the other hand,

mortgage loans will keep rising,

although at a slower rate in the next two years because of its being a longer-term loan, its yet smaller rate of penetration and the preference of Bulgarian households for savings and investments in real estates.

For contacts:

UniCredit Bulbank, PR and Corporate Identity

Victoria Blajeva, Tel: 02/9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Ekaterina Ancheva, Tel: 02/9264 963, flbufsjob/bodifwbAvojdsfejuhspvq/ch