Q1,2020 FIRST INVESTMENT BANK CONFIDENTIAL
Table of contents Section 1 Macro environment 3 Section 2 Banking system overview 10 Section 3 Fibank profile 15 Section 4 2020 Q1 Results and profitability 28 Section 5 Management and corporate governance 37 Section 6 Capitalization & leverage 40 Section 7 Funding and liquidity 45 Section 8 Appendix 48 2 CONFIDENTIAL
• SECTION 1 MACRO ENVIRONMENT 3
Country profile • Full name: Republic of Bulgaria • Memberships: European Union (since 2007), NATO (since 2004) Population: 7.2 M • • Capital: Sofia • Area: 110,994 sq km (42,855 sq miles) • Official language: Bulgarian • Traditional religion: Orthodox Christianity ROMANIA Monetary unit: Bulgarian Lev (plural: Levs, • code: BGN) • A currency board arrangement was established in 1997 through the Bulgarian National Bank Act. SERBIA • Fixed Exchange rate: EUR 1 = BGN 1.95583 (BGN 1 EUR 0.51) • Main tax rates: BULGARIA • corporate tax rate of 10%; BLACK KOS. Sofia • personal income tax rate of 10%; SEA • Value Added Tax Act (VAT) rate of 20%; MACE- • Main exports: Ferrous and non-ferrous DONIA metals, petrol products, foods and drinks, textiles, machines and equipment ALB. • Payment Systems: RINGS, TARGET2 BNB, BISERA, BISERA7EUR, BORICA, SEPA, ESROT, CENTRAL DEPOSITARY GREECE TURKEY Source: National Statistical Institute, Bulgarian National Bank, Ministry of Finance 4 CONFIDENTIAL
Bulgarian economy had strong results over past few years with high growth and low unemployment INFLATION & KEY DRIVERS OF BULGARIAN GDP UNEMPLOYMENT THE BULGARIAN GROWTH ABOVE EU DECREASED SINCE 2012 ECONOMY AVERAGE In q4, 2019, the country's economy • HICP & Unemployment GDP real growth (%, 2012-2018) reported a real annual growth rate of 3.7% (%, 2013-2019) for the period (2011: 3.1%), influenced by the improving external environment on a global scale, as well as the growing economic activity in the countries of the European Union. The main driver of the economy was private consumption growing by 5.7% for Q4 (2018: 6.9%), due to 3.7 higher internal demand and positive 3.1 dynamics in the labor market; The unemployment rate declined to • 4.1% at the end of q4 2019, driven by employment in trade, agriculture, 2.5% hospitality industry and education; 2.3% The current account remained positive, • at the amount of BGN 4 862 М , or 8,2% of GDP in q4, 2019. 2019 2018 2018 2019 Source: International Monetary Fund; European Commission; Bulgarian Ministry of Finance; National Statistical Institute; Bulgarian National Bank 5
Going forward, the economy is expected to continue strong growth anywhere between ~3-4% p.a. GDP GROWTH EXPECTED UNEMPLOYMENT EXPECTED TO CONTINUE AT TO FURTHER DECREASE & KEY DRIVERS OF THE ATTRACTIVE LEVELS INFLATION TO INCREASE BULGARIAN ECONOMY GDP real growth HICP & Unemployment (%, 2016-2021F) (%, 2016-2021F) Future GDP growth is hovering • around 3-4% being driven by strong net exports and private consumption. The positive outlook is also supported by expected acceleration of EU funds absorption Unemployment rate is expected to • continue the decline from previous years, but at a lower pace. The trend is driven by the recovery in domestic demand The inflation rate is expected to • gradually increase to 1.8% in 2021 due to strong domestic demand, higher prices for utilities and recovering energy prices Source: International Monetary Fund; European Commission; Economist Intelligence Unit; Bulgarian Ministry of Finance 6 CONFIDENTIAL
Bulgarian Economic Overview Macroeconomic indicators 2014 2015 2016 2017 2018 2019 Q1, 2020 EUR M 42, 824 45,675.2 48,619.8 52,309.2 56,086.2 60,674.5 13,076 GDP Growth, % 1.8 4.0 3.8 3.5 3.1 3.4 2.4 EUR M 530.6 55.1 1 550.9 1 825.0 773.7 2 452.3 439.2 Current account % of GDP 0.1 0.1 3.2 3.5 1.4 4.0 0.7 EUR M 347 2,000.9 927.2 1,618.9 1,027.9 1,092.4 130.8 FDI % of GDP 0.8 4.4 1.9 3.1 1.8 1.8 0.2 Budget deficit/ surplus % of GDP (5.4) (1.7) 0.2 1.1 1.0 1.2 -1.0 Growth of Real GDP, Consumption and Investments Bulgaria Current Ratings Date Outlook Rating Positive Baa2 30 August 2019 Positive BBB- 11 November 2019 Positive BBB 21 February 2020 Source: Bulgarian National Bank, National Statistical Institute, Ministry of Finance 7
Macro environment: Key indicators historic development Indicators 2014 2015 2016 2017 2018 2019 Q1, 2020 Gross domestic product (BGN million) 107, 925 118,669 25,575 83,634 88,571 94,130 98,361 Gross domestic product, real growth (%) 1.3 3.6 3.9 3.6 3.1 3.4 2.4 - Consumption, real growth (%) 2.2 3.8 3.3 4.5 5.0 6.4 4.1 - Gross fixed capital formation, real (6.6) 3.8 10.2 5.3 -40 3.4 2.7 growth (%) Export (% of GDP) 47.5 51.5 49.5 48.0 66.3 49.2 48.0 Inflation at period-end (%) 0.1 2.8 2.7 3.8 3.0 (0.9) (0.4) Average annual inflation (%) 2.8 (1.4) (0.1) (0.8) 2.1 42.1 3.2 Unemployment (%) 10.7 10.0 8.0 7.1 6.1 3.7 6.7 Current account (% of GDP) 0.1 3.2 3.5 1.4 4.0 0.7 1.2 Trade balance (% of GDP) (6.5) (5.8) (2.0) (1.5) (4.1) (0.5) (0.3) Foreign exchange reserves of BNB (EUR 20,285.4 23,898.5 23,662.1 25,072.2 24,835.6 26 502.7 16,534 million) Foreign direct investments (% of GDP) 0.8 4.4 1.9 3.1 1.8 1.8 0.2 Gross external debt (% of GDP) 91.9 60.3 56.2 20.4 74.1 71.3 65.4 Public debt (% of GDP) 15.3 13.2 14.9 12.1 10.9 10.2 21.0 Consolidated budget balance (% of GDP) (3.7) (2.8) 1.6 0.8 - 2.9 0.9 Exchange rate of USD (BGN for USD 1) 1.61 1.79 1.86 1.63 1.71 1.74 1.79 Source: National Statistical Institute, Bulgarian National Bank, Ministry of Finance 8 CONFIDENTIAL
Mid-term macro forecast MACRO ASSUMPTIONS FAVOURABLE MACRO ENVIRONMENT 2018-2021F IN THE MID TERM (2019-2022F) ▪ Positive assumptions of the economic development during the Forecast 2019, Ministry Q1, of Finance 2019 2021F 2022F period 2019-2022; 2020 ▪ Stable growth in GDP to slow down in q1, 2020 & then to gradually increase exceeding 2.4% y/o/y; GDP real growth, % 3,4 2,4 3,3 3,3 ▪ The consumption will accelerate its growth up to 4.1% y/o/y - consumption 5,7 4,1 4,5 3,7 until q1, 2020; - investment 1,9 1,2 3,7 5,8 ▪ The growth will slow down to 3.7% y/o/y in 2021; ▪ FDI are expected to remain stable around 2.4% of GDP; - exports - 0,4 1,9 2,5 2,5 ▪ Full production capacity in the business; - imports 0,2 1,2 4,2 3,8 ▪ Additional increase in the share of goods with a high value Unemployment, % 4,4 4,6 4,0 4,0 added; Average HICP, % ▪ Recovery of the labor market; 2,5 2,4 2,2 2,1 ▪ Reduction in unemployment rate down to 4.0% in 2021; Current account, % of GDP 5,2 0,7 3,2 2,5 ▪ Strong fiscal position; Trade balance, % of GDP -2,7 -0,3 -4,2 -4,7 ▪ Increased activity on the real estate market of residential and FDI, % of GDP 2,4 0,2 2,6 2,5 office space; M3 aggregate 8,4 8,2 8,3 8,3 ▪ Augmentation of public investments; ▪ Acceleration in the absorption of EU funds; Loans to corporates 5,9 6,8 8,1 8,3 ▪ Expected completion of important infrastructure projects. Loans to individuals 9,8 8,8 8,4 8,2 9 CONFIDENTIAL
• SECTION 2 BANKING SECTOR OVERVIEW 10
Sector prospects: gradual increase in loan demand, on- going consolidation & new upward interest rate cycle. BNB FORECAST 2019-2022 TOTAL TOTAL NET Annual rate of change 2019 2020f LOANS DEPOSITS PROFIT Claims on non-government sector 4.9% 5.6% Deposits, Net profit, Loans, - claims on non-financial corporations 4.6% 6.1% BGNb BGNM BGNb +8.6% +7.9% - claims on households 5.2% 4.3% +5.3% -0.2% 91,9 +7.7% Deposits of the non-government sector 6.8% 7.2% +42.9% 84,6 78,4 60,8 1 675 1 678 In the 2018 – 2019 period funds attracted from the non- ▪ 57,7 government sector in the banking system are expected 53,6 to grow further, though at lower than the average 2016 rates, driven by the projected acceleration of private consumption and, correspondingly, by a slight decrease 1 174 in the savings rate , as well as by the expectations of comparatively strong demand for currency in circulation. The expectations of retaining deposit rates at the attained low levels will also contribute to the foreseen trends regarding funds attracted from corporations and households in the banking system. The recovery of private consumption and investment amid ▪ relatively low lending rates will be a factor stimulating demand for loans from the non-government sector . Progressively improving economic activity is also expected to be a factor behind banks’ increasing lending risk appetite. The expectations of gradually accelerating credit growth correspond to the assumption of retaining positive trends in new loans to the private sector which Net profit have occurred since the second quarter of 2019. Source: BNB Economic Review 4/2019 11 CONFIDENTIAL
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