BULGARIA, a land at the crossroads LATEST REPORT April 29th, 2002

Bulgaria The Gateway to Eastern Europe BULBANK Manager: Mr.Chavdar KANTCHEV, Chairman of the Board of Directors and Chief Executive Contact: BULGARIA (Head Office) Sofia 1000 7, Sveta Nedelya Square BULGARIA swithboard-9841 1111 International Payments Department 9841 2328, fax 9841 2449; Treasury Dept.tel.- 9841 2560, fax 981 9171 Custodial Services -tel.9841 2420, fax 988 4636. Telex: 22031 SWIFT: BFTBBGSF e-mail: info@sof.bulbank.bg Web site : www.bulbank.bg Documentary Operation Department: Phone: (359 2) 849 328 Fax: (359 2) 849 449 Treasury Department: Phone: (359 2) 849 560 Fax: (359 2) 981 9171 Correspondent Banking Department: Phone: (359 2) 849 282 Fax: (359 2) 9884636 ; 988 5370 UNITED KINGDOM Representative: Georgi Georgiev Address: 1 Gracechurch str. London, EC3V ODD United Kingdom Phone: (44 171) 626 18 88 Fax: (44 171) 626 22 33 Telex: 886 928 GERMANY Representative: Antony Tonev Address: 21 Grosse Bochenheimer str. 60313 Frankfurt / Main Germany Phone: (49 69) 283 247 Fax: (49 69) 282 157 Telex: 413 586 AUSTRIA Representative: Zdravko Milev Address: Karntner Ring 5-7 / 305 1010 Wien Austria Phone: (431) 513 31 82 Fax: (431) 513 318 275 Telex: 115 728 STRATEGY Message from the chairman Branch banking Business development Financial highlights. MESSAGE FROM THE CHAIRMAN AND CEO Bulbank is closing its books for 1997 with truly impressive results. We may likewise be closing an entire chapter in the history of the bank. The turnaround of Bulbank undertaken by management in the early 90s has been successfully completed. We have built an extensive and profitable franchise, streamlined the operational management and focused on a few core activities to sustain the bottom-line. This may be as far as one can possibly push under the current structure of state shareholding. We as management are well aware of a number of key areas at the bank micro-level that are in need of a complete overhaul if this bank is to survive and prosper in the emerging global financial environment. There are substantial cost savings to be made by merging activities and providing adequate IT support which remain largely untapped for lack of a proper incentive structure. We look forward to our impending privatisation to provide fresh impetus to support our vision of reengineering Bulbank into a modern European financial institution in the region. Failing this, and against the backdrop of existing regulatory risk, Bulbank would be falling victim to its own success. While it would take a rare man to sell the cow he regularly milks, it does not take much brains to milk it out to extinction. Chavdar Kantchev Chairman and Chief Executive Officer Branch banking Bulbank proceeded to implement its programme for building up a strong retail distribution following the Stara Zagora and Bourgas commercial banks take-over in 1994. At the end of 1997 the branch net work consisted of 36 offices run by 1,146 employees. Eight new branches and two sub-branches opened for business. The bank’s presence spread over the northern part of the country. The balance sheet total of branches rose to BgL 781 billion or 32% of the bank’s total assets. Return on assets was at the satisfactory 5%. The consolidated loan portfolio of branches soared five fold to BgL 41 billion. Its quality considerably improved with the past-due amounts falling from 21% to14% compared with 1996. The overall amount of delinquencies pay-outs and right-offs over the year alone exceeded BgL 2.6 billion. Regardless of some ease, the limitations on branches’ independent asset management were kept. Three new branches and seven sub-branches were added during the first five months of 1998. Another five offices in the country are scheduled to start up. Given the changing environment the model of branch banking is planned to be adequately shaped . Business development Bulbank continues its record setting reporting. This was not only a year of profitable growth, but likewise of intense preparation for enhancing the product profile and quality of the onternal systems by focusing them towards greater efficiencies and customer satisfaction. The internal risk control tightened. The bank proved its vitality and ability to exploit the available opportunities while working in a complex and highly volatile environment. Net profit increases 8 times to BgL 358 billion compared with 1996. Return on assets rose from 9.1% to 10.2%. Return on equity reached the record 154.9%. Earnings per share gained BgL 14,717 to BgL 23,650. Net interest spread widened to 44.5% in BgL and 3.1% in foreign currency. Aiming for higher profitability and risk diversification the policies maintained over the last few years were slightly eased which resulted in some rise in the asset quality ratio to 34.7%. Another significant proportion of the outstanding settlement balances with the state amounting up to the record 41.8%. Tier 1 capital ratio rose to 44.9%. The capital/asset ratio increased some 10 points to 15.6%. Working in a highly volatile domedtic and international environment Bulbank efficiently exploited its sound financial standing and market opportunities. The cash liquidity ratio,i.e. cash in hand to deposits, was kept at around 2.6% during the last quarter while maintained around 7.7% for the whole year. The year 1997 saw another operational growth. Commercial balance sheet total, exclusive of pretransition settlements with the state, increased in BgL and US$ as well. Attracted deposites grew 63.3% in real terms. Another 10 new domestic offices were opened for business. The turnover of trading and cash servicing operations rocketed. The number of customers and staff grew. The bank’s market share, as a percentage of the consolidated assets of those banks operating in Bulgariq, rose from 21% at the end 1996 to some 30%. Bulbank strengthened its position as the most powerful financial institution in the country. Its performance was appraised by the external analysts who raised the bank’s international credit ratings. FINANCIAL HIGHLIGHTS FROM BULBANK’S ANNUAL REPORT 1997 (BgL in millions, except otherwise stated) see table All financials above, except for those of 1993, are stated according to IAS FINANCIAL HIGHLIGHTS FROM BULBANK’S ANNUAL REPORT 1997 (BgL in millions, except otherwise stated) 1997 1996 1995 1994 1993 Key figures Net profit 357,697 45,033 3,059 12,028 8 Shareholders 418,637 69,252 24,754 22,387 11,494 Total assets 2,682,613 1,165,749 219,733 274,432 434,555 EPS(in Bg L) 23,650 8,933 607 9,544 7 Income Net interest income 73,858 19,735 2,992 3,759 1,055 Net securities income 248,971 31,213 1,419 385 293 Net foreign exhange operations income 108,507 51,955 2,041 3,489 640 Net fee and commission income ' 15,198 1,354 481 2,307 259 Gross operating income 451,925 106,140 7,172 9,937 2,248 Expenses Operating expenses 26,473 3,533 918 490 305 Personnel expenses 11,899 1,125 383 211 131 General administrative expenses 14,574 2,408 534 279 174 Depreciation 1,000 89 47 29 17 Provisions for bad and doubtful debts 41,072 28,568 515 1,363 1,146 Tax 238,465 28,799 3,295 311 165 Ratios (%) Return on average asssets (ROA) 10.2 9.1 1.0 3.5 0.0 Return on average equity (ROE) 154.9 99.8 12.8 69.8 0.1 Capital / Asset ratio 15.6 5.9 11.3 8.2 2.7 BIS total capital ratio 41.8 27.2 28.6 15.1 7.1 BIS tier 1 capital ratio 44.9 28.2 29.4 15.7 4.5 Risk weighted assets / Total assets ratio 34.7 21.1 38.4 52.0 61.7 Cost / Income ratio 5.9 3.3 12.8 4.9 13.6 Resources ( number ) Offices 37 27 25 23 3 Employees 1,829 1,504 1,266 1,074 627 Exchange rate at year-end(BgL per US$1) 1,776.5 487.35 70.704 66.015 32.711 Read on © World INvestment NEws, 1998. This is the electronic edition of the special country report on Bulgaria published in FORBES Magazine's November 30th issue. Developed by AgenciaE.Tv