Omani investor takes 25 percent in Bulgaria Investbank

The chief executive of Oman’s Shanfari Group of Companies has stepped in to bail out Bulgaria’s Investbank, buying a 25% stake in the lender in return for 50 million levs ($31.5 million).

Bulgaria’s central bank had asked Investbank, majority controlled by local company Festa Holding, to boost its capital by 50 million levs to ensure its proper operation as the quality of its assets worsened. The deal gave Adil Said al Shanfari, chief executive and vice president of the Omani group, a minority stake in the bank. “The central bank allowed al Shanfari to acquire 29.76 million shares in the bank, which will increase its capital by 24.93%,” Deputy Governor Rumen Simeonov said. “With this, the bank meets the requirements of the central bank’s supervision for the time being,” he said.

The bank, with assets worth 1.29 billion levs, saw its net loss more than double on an annual basis at the end of June to 16.5 million levs, mainly due to a rise in provisions, central bank data showed. Bad loans have been rising since the global crisis hit the Balkan country in 2009, putting a brake on strong economic expansion and deflating a real estate and construction boom. In the second quarter, they reached 16.9% of total credit.

Banking in Bulgaria, the EU’s poorest country by income per head, has lagged behind swift development of lenders elsewhere in Eastern Europe which has generated huge profits for Italy’s Unicredit and Austria’s Raiffeisen among others. The room for development that remains in the sector means mid-sized lenders are often attractive propositions.

The central bank says that despite that spike, the Bulgarian banking system as a whole is profitable and in good health with a capital adequacy of 16.7%, above its threshold of 12%.

Source: Reuters