Petia Dimitrova: The Eurozone Accession is a strategic goal that will be the key goal for banks in 2024


Mrs. Dimitrova, as Chairperson of the Association of Banks in Bulgaria, would you like to share the strategic goal for banks in 2024?
Undoubtedly, one of the key objectives facing the banking sector and the Bulgarian economy as a whole, which will also mark the work of banks in 2024 is the preparations for our country’s accession to the Eurozone with an indicative date of 1 January 2025. The banking sector is among the most prepared for full membership, and this is conditioned by the fact that our country has already been part of the Banking Union since October 2020. The banking system in Bulgaria is stable, liquid, very well capitalised and with declining levels of bad loans, and all indicators in it are above the European average. Bulgaria’s accession to the Eurozone and the second most used currency in the world is a long-awaited process that will positively affect our economy and will be a driver for accelerating reforms, increasing prosperity and reaching European standards of living.
Banks will cooperate with our extensive expertise in this process to proceed smoothly – especially in connection with the implementation of the physical exchange of money. It is important for us to adopt the laws relating to the euro as soon as possible so that we can meet their requirements and prepare information systems.
Another direction that will be in our focus is preparing the economy for a greener and more digital future. This requires that banks continue to improve their cost-effectiveness and refocus their business models on sustainability and longer-term value creation. This requires further progress in integrating climate-related and environmental risks into our existing risk management strategies and processes.
An integral and very important part of the strategy for the development of the sector is following the principles of good environmental, social and corporate governance (ESG), which are becoming an increasingly important part of the business model of any large organisation. We, the banks, like any other companies, need to take care of the planet by controlling our environmental impact and reducing harmful emissions, taking care of our employees and their labour rights, but also the balance between professional and private life, suppliers, customers, health and safety, ensuring transparent management, compliance with the legislation, internal control and adequate pay.

What challenges has the banking sector faced in 2023 and what lies ahead?
Among the main factors that have shaped the direction of the sector globally, I would like to highlight the combination of high interest rates, rising regulatory requirements, declining, but still high inflation, climate change and geopolitical tensions.
Inflation and the fight against inflation by central banks around the world remains a major challenge for the financial sector. Central banks have generally slowed down the rate of increase of the key interest rates, but the risk of new increases has not yet passed, with the most optimistic projections being that we can expect a reversal in the second half of 2024.
The slowing global economy will be a challenge for the banking industry in 2024. The ability of banks to generate revenue and manage costs will be tested in new and demanding ways.

We are already seeing an increase in interest rates. What are your predictions – will this continue to happen?
Yes, we are definitely in a cycle of rising interest rates. Over the past year, major central banks have raised interest rates several times in an attempt to curb inflation. Bulgaria cannot stay isolated from these global developments, although we are not yet part of the euro area. The first to feel this were companies because a great number of their loans are floating and tied to market indexes such as Euribor and LEONIA Plus.
In Bulgaria, the increase in interest rates on loans is much slower and to a more limited extent than in the other countries of Western Europe. The main reason for the slower increase in lending rates is that the Bulgarian banking system is highly liquid, and deposit prices remain low.
Interest rates on new corporate loans in BGN are 4.3% as of October 2023, and in the last year and a half have risen by less than 2 percentage points. At the same time, the ECB’s key interest rate increased by 4 percentage points over the same period, and the values of the Euribor indexes increased even more.
The interest rates on mortgage loans in BGN have practically remained unchanged in the last two years at around 2.6%, which makes Bulgaria one of the countries with the lowest interest rates on these types of loans. Consumer credit rates have risen relatively modestly – by about 1 percentage point in the last year and a half, and are around 8.6%. This, coupled with the good economic situation in the country and the rising real incomes of the population, has led to record credit growth, especially for households. From the beginning of the year to the end of October, the growth of mortgage loans already exceeds the entire record year 2022 – over 2.5 billion leva or 17% year-on-year growth. Consumer loans are almost the same as for the whole of 2022, over 1.6 billion leva or in other words 10% growth. Corporate lending also remains very strong with nearly BGN 5 billion or about 12% year-on-year growth.

What have been the leading trends in the banking and financial sector that you could highlight?
The exponential development of new technologies and the merging of multiple trends will continue to influence the way we, banks, operate and serve customers’ needs. In 2024, AI-based algorithms will gain momentum in analysing huge amounts of data to identify models and optimise investment decisions that will improve customer experience and improve operational efficiency.
The convergence of industry, embedded finance, open data, the digitalisation of money, decarbonisation, digital identity and cyber-risks – I expect all these factors to have an increasing impact in 2024.
With growing concerns about climate change, sustainable investment will continue to gain momentum in 2024. Investors are increasingly looking for opportunities that are in line with the environmental, social and governance principles I spoke about earlier. I believe that, as a result, companies with imposed sustainability practices and a positive impact on society will attract more funding and enjoy a competitive advantage.
On the other hand, turbulent developments in the financial sector are challenging regulators to create a favorable environment, while ensuring consumer protection and systemic stability. In 2024, we can expect the regulatory environment to adapt to emerging technologies and business models, and governments to work towards a balance between promoting innovation and protecting against potential risks associated with new financial products and services.

Although the conversation revolves around the banking sphere as a whole, I can’t help but ask you specifically about the path of Postbank during the year.
I can categorically say that we are sending off a very successful year, during which a new member joined our family after the acquisition of the BNP branch “Paribas Personal Finance”; the brand “PB Personal Finance” since June is officially part of Postbank. Joining the new brand is not only part of the strategic development of Postbank as a systemic bank for the market, offering innovations and personalised financial solutions for the convenience of its customers, but also of key importance for the Eurobank group, expanding its activities in significant regional markets.
As Ambassador of “PB Personal Finance” we chose one of the most successful tennis players in the world rankings Grigor Dimitrov, because in his face we recognise qualities that describe us too – professional attitude and perseverance of efforts, sustainability of performance over the years, but, at the same time, he is young and dynamic, extremely flexible and different from everyone with his performance.
Just a few months after the merger, we reported high results and strengthened our leading position in the consumer lending market with the supply of financial products to over 1.2 million customers and the provision of BGN 6.9 billion in loans to households. The BNB data is eloquent and shows that we hold 38% of the market for drawn credit card limits in Bulgaria, accounting for a turnover of BGN 7 billion for credit and debit cards for 2023.
I would like to mention to your readers our latest program “Priority by Postbank” with the special participation of actor Kalin Vrachanski as its face. The financial solution provides a combination of complex banking services for convenient and secure daily banking, digital and savings products, as well as additional preferential conditions related to the bank’s credit offers. The leading role of Kalin Vrachanski as one of the most beloved and popular Bulgarian actors in the campaign of the new program once again testifies to the idea of its exclusivity and places an exceptional focus on the client and the desire of Postbank to provide an impeccable user experience.

What is your wish on the occasion of December 6th, Banker’s Day?
St. Nicholas the Wonderworker – Archbishop of Myra, is the patron saint of fishermen, sailors, travelers, merchants and bankers. That is why I would like to congratulate everyone – all the namesakes of Saint Nicolas who celebrate their Name Day, as well as those who celebrate their professional holiday. May their names bring joy and happiness to them!
To all colleagues in our sector and to the employees of Postbank, I wish health, above all. May they continue to achieve professional success, high results and financial achievements.