Bulgarian Banking Overview: Profitability and Asset Quality Strengthen Ahead of Euro Adoption

Morningstar DBRS has released a commentary analysing the Bulgarian banking sector.

Key highlights include:
-- The Bulgarian banking industry is dominated by subsidiaries of foreign banks, with the five largest banks controlling the majority of the sector.
-- In 2024, the Sector demonstrated sound performance, with strong profitability and good asset quality. Our 2025 outlook for the Bulgarian banking sector is largely stable, mainly due to sound economic growth prospects.
-- In our view, the adoption of the euro will be a credit positive for the Bulgarian banks in the medium term, as it would largely eliminate foreign currency risk, and boost funding position by having stronger access to eurozone capital markets.

"We expect the Bulgarian banks' profitability in 2025 to remain strong, backed by solid loan quality, largely due to sound economic growth as well as strong demand," said Halil Senturk, Assistant Vice President, European Financial Institution Ratings, Morningstar DBRS. "Relatively high loan growth could pose a medium-term risk for asset quality, but the Bulgarian Banks have significant profitability and capital buffers for potential credit risks," he added.