Ekaterina Kirilova, Head of Marketing and Segments Department, UniCredit Bulbank

Forecasts for 2013:

This year again households will most probably remain cautious in their financial decisions and consumer behaviour in a setting of high unemployment, slow income growth, low pensions, high food prices and a passive real estate market.

Although the high interest rates on deposits and savings accounts, which banks applied in the past few years, now remain in the past, there will be hardly any drastic reduction in the first months of this year – rather a gradual reduction down to the normal pre-crisis interest rates. Of course, individual promotional offers and campaigns of separate banks are still possible.

The expectation for the savings of the population to continue growing also in 2013 will most probably materialize, yet at a slower pace than last year. To a certain degree there could be an impact also by the introduction of the tax on the income from interests on fixed-term deposits and savings accounts, but this tax is unlikely to result in a loss of interest of individuals and households, as this still remains the most secure and relatively profitable way of saving.

2012 Summary:

Considering the economic situation in the country and globally, the cautiousness of the households with regard to riskier solutions for saving and investments was logical. All in all, deposits kept their dominant role in choosing a product for short-term and mid-term saving, reaching a record high of 33.36 billion Bulgarian leva as of the end of October.

Since the beginning of 2012, the savings of the population have increased by nearly 2.5 billion Bulgarian leva, representing a growth of 8% in the last 10 months of 2012 and 12.7% compared to the same period in 2011. The growth rate of the deposit base was gaining momentum until the end of July 2012, when only for a month households managed to save in banks 412 million Bulgarian leva, after which noticing a steady slowdown (in comparison, in October the amount of saved funds was only 87 million Bulgarian leva).

In spite of the growth in the savings of the population we could hardly say that Bulgarians now have a higher living standard. The average household in Bulgaria does not hold huge deposits. Statistics prove this point – around 75% of the deposits of Bulgarians are for amounts up to 1 000 Bulgarian leva. At the same time, according to BNB data the number of individuals with deposits above 1 million Bulgarian leva is only 625.

Big deposits in banks are predominantly funds from real estate sales, dividends, etc. The share of deposits opened with funds generated by the business in Bulgaria is not small. Much more beneficial is to deposit money in a bank, which brings better annual return and no risk, than reinvesting these funds in a new business, production or financial assets in times of unstable economic environment. The fear from the crisis, the unsecure future and potential loss of income make people wary and more conservative in consumption. The saved funds from postponed consumption are directed to various bank products with attractive interest rates.

It is interesting that last year depositors more and more opted for deposits with longer terms. A logical explanation behind this is the offering by banks of higher interest rates on long-term deposits in order to ensure resources for a longer period of time.

Taking into account also the trend from the past few months of falling interest rates on deposits, customers are trying to avail themselves of the good offers for a longer period of time. On the other hand, this long-term saving might be read as a signal for the intentions of the population over the next months, namely a continuing postponement of consumption.

More information for media:

UniCredit Bulbank, Identity & Communications Department

Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Ekaterina Ancheva, Phone: + 359 2 9264 963, flbufsjob/bodifwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch