Bulbank, the largest Bulgarian bank, reports positive results with 18% of growth in profit as a result of further development of its commercial operations.

The Annual Meeting of the Shareholders approved the results of the Bank, showing BGN 93 million profit after tax, representing 18% increase compared with 2002. Total revenues are up by 10% to BGN 174 million from BGN 158 million a year earlier. The results of Bulbank are audited by PriceWaterHouseCoopers.

The bank reports improvement by all profitability and efficiency measures: ROA increases by 0.5 pp to 3.4% (2.9% in 2002), ROE is 18% with 1.8 pp increase from 16.2% for previous year and cost/income reaches 38.2%.

The shareholders voted BGN 65 million dividend for 2003, representing BGN 0.39 dividend per share, up 8% from BGN 0.36 last year.

The AGM chose KPMG Bulgaria as 2004 external auditor of the bank. Mr. Franco Benincasa was released as member of the Supervisory Board of Bulbank upon his request and was replaced by Mr. Marcello Arlotto.

Marcello Arlotto

Mr. Arlotto joins UniCredito in 1977, after covering several different positions in 1999 Mr. Arlotto became responsible for small- and medium-size enterprises products and services within UniCredit Group. As of April 2003 Marcello Arlotto is responsible for the Service Models for Retail Banking in the UCI New Europe Division. Mr. Arlotto appointment will make available to Bulbank significant experience and competences in the area of retail banking and in particular of small businesses were Bulbank intends to develop aggressively in 2004. Mr. Arlotto is also a member of the Supervisory Board of Xelion Bank in Poland.

OVERVIEW OF ACTIVITIES IN YEAR 2003

Financial results

Bulbank generated BGN 174 million total revenues, up 10% compared with 2002. Net interest income is the main revenue contributor with 56% of total revenues as a result of significant increase of lending activity and of a positive domestic macroeconomic environment. Fee income is growing 9% mainly due to the increased number of transactions and new products launched. Costs were tightly controlled. Operating income totals BGN 107 million, up 12.8% against 2002. Bulbank results were positively supported by successful sale of non-core assets and by write-back of provisions, totaling BGN 15 million in 2003 due to successful work-out.

Commercial banking, which has been the main revenue contributor and the absolute focus for development of the bank, generated BGN 124 million revenues in 2003 representing 71% of total revenues. Bulbank has launched several commercial initiatives and pursued consistent development policy over the year. As a result the customer base increased with 65 000 new clients, up 24% compared to 2002.

Balance sheet

The balance sheet total reaches BGN 2,837 million, up 4.2% compared with 2002 and 10.4% at a fixed exchange rate. The structure of assets changed significantly. The loan portfolio experienced 63% growth reaching BGN 917 million on a gross basis, thus reaching a share of 31% in total assets. Loans to deposit ratio increased to 42% from 28% and 18% in 2002 and 2001, respectively. This development was driven by strong commercial focus, supported by fast growth of the local lending market and improved investment opportunities. Securities portfolio also expanded by 21%, thus increasing its share in total assets to 33%.

Customer deposits increased by 6.2% or BGN 128 million to BGN 2,178 million. However, ignoring the negative impact of USD depreciation, they grow by 14.3% or nearly BGN 300 million. Shareholders' equity amounts to BGN 559 million, up 9%, bringing the equity ratio up to 20%. The capital adequacy remains strong with Tier 1 capital ratio over 20%.

Development

A new centralised information system was implemented, providing adequate infrastructure for enhanced service quality, risk control, productivity improvement and support to the commercial activity. Core retail product portfolio establishment was completed. New personal investment products like mutual funds, structured deposits and life insurance, were successfully launched for the first time in Bulgarian market. Pure credit cards were issued.

Additional sales-force was established, trained and allocated with portfolios of clients to provide all of Bulbank' clients with a clear reference contact and significantly improve the service quality. A new commercial organisation model, with dedicated structure to serve different segments of clients, was launched as a pilot in Sofia and is currently rolled-out in the country fostering greater customer focus. Human resource policy, an area of particular focus, was further developed.

Outlook

The plans for 2004 target significant growth in commercial revenues leveraging on wider product range, stronger focus on clients need and service quality. For this purpose the new commercial model of the Bank will be completed in the first half of the year, including establishment of eight regional centres. Internet-based banking will be launched by the end of first half of the year, adding to Bulbank established strength in electronic banking.

Leasing products are offered since March 2004 from UniCredit Leasing, 100% owned by Bulbank. A specialised personal credit centre has already opened in February. A separate private banking centre is operational since the beginning of the year. New products for small business, including tailor made current account packages and new simplified lending product will be launched in May 2004. Selected new points of sales will be opened during the year. The risk management system will transform in order to respond to the growing loan portfolio and to the challenges of the Basle Accord II capital adequacy requirements. An Organisational Structure department and change management process will be established to facilitate further development.