Financial Market Development in Bulgaria - Capital GfK Bulgaria Custom Research Financial Market Development in Bulgaria Antonia Gogova October 30th 2007 Hypothetical reasons for taking

GfK Bulgaria October 30th 2007Custom Research Financial Market Development in Bulgaria Antonia Gogova

Financial Market Development in BulgariaAntonia Gogova, Research Manager, GfK Bulgaria

FMR Conference, Sofia, October 30th 2007

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October 30th 2007GfK Bulgaria Custom Research Financial Market Development in Bulgaria Antonia Gogova

Probably some of you are wondering…

Why did we decide to conduct this FMR conference now…?


Agenda

1 Selected Economic Indicatiors

2 Financial Products and Services Usage

3 Public Attitudes towards Financial Institutions

4 Summary


Selected Economic Indicators1

5


Purchasing Power Index 2006 by Districts

Administrative Territorial Divisions of the Republic of Bulgaria – 28 DistrictsPurchase Power of the Districts compared to the average level for the country

Source: GfK Marktforschung GmbH

6


Purchasing power comparison in EuropeYear 2006

Parity of purchasing power (Austria=100)

100

89

80

69 67 6662

58

50 5047

44 42 41 40

3229 27 26

22 22 22 21

A G E CY GR SLO CZ P H EST SK LT PL LV HR RUS RO BG TR UA BA SER* MAC

Austria = 100

Source: WIIW, February 2006 *Without Montenegro

7


Unemployment Rate – Bulgaria Inflation Rate – Bulgaria

17,5

16,5

15,7

14,914,3

13,7

12,111,5

19,1 19,3 19,0 19,1

18,317,7

17,4 17,2 17,0 17,2

17,7 17,918,6 18,518,1

18,3 18,217,8

17,6 17,6 17,4 17,4

16,716,3

13,0 12,8 12,9 13,213,213,5

14,514,2

13,713,2

12,612,2 12,1 11,9 11,7 11,8 11,9

12,2

13,1 13,112,7

11,1 11,0 10,8 10,5 10,4 10,4 10,7

11,7 11,510,8

10,29,6

9,2 9,0 8,78,4 8,4

8,7 9,19,7 9,5

8,98,4

7,87,4 7,3

I II III IV V VI VII VIII IX X XI XII

2001

2002

2003

2004

2005

2006

2007

Yearly

17.9%

16.3%

13.5%

12.2%

11.5%

9.6%

Unemployment Rate (%)

Inflation Rate / Consumer Price Index

6,57,3

3,8

5,6

11,3

4,83,9

6,3

2000 2001 2002 2003 2004 2005 2006 1HY 2007

Source: National Statistical Institute, Ministry of Labour and Social Policy, National Employment Agency

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Average net wages development

Average net wages, in BGN

225 240 258 273 292324

355384

2000 2001 2002 2003 2004 2005 2006 1HY'07

Net wage and salary annual real growth rate, in %; Growth rate trendline

1,3

6,9 7,3 6,1 7,010,7 9,5

16,7

2000 2001 2002 2003 2004 2005 2006 1HY'07

Source: National Statistical Institute


Financial Products and Services Usage2

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Banked Population in Bulgaria – Trends

Percent of the people using at least one bank

21,6

25,3

33,4

37,339,2

43,3

2002 2003 2004 2005 2006 Jan-Sept 2007

Source: FMDS 2002-2007Base: 1000; population 15 years and above; data in %

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Banked population 2006 – Country Comparison

100 100 98

8581 81

74 7471 69

62 62

48

39

Germany** Slovenia Austria Croatia Czech Rep. Slovakia Ukraine** Hungary Russia* Serbia Poland BosniaHerze-govina

Romania Bulgaria

** Base: years 18+ Source: FMDS 2006; population 15 years and above; data in % * Base: years 16+

12


Insured population 2006 (household insurance) – Country Comparison

95 93

87

7876

70 70

53

33

28

20

118

4

Germany** Austria Slovenia Slovakia Czech Rep. Hungary Croatia Poland Bulgaria Romania Russia* Serbia Ukraine** BosniaHerzegovina

* Base: years 16+** Base: 18+

third party insurance, green card & other types e.g.travel insurance or provision for pension with national subsidy are not included

Source: IMDS 2006; population 15 years and above; data in %

13


Insured population 2006 (personal insurance) – Country Comparison

77

6563

5755

51

32

21

1612 11

9 9 8

Slovenia Slovakia Austria Czech Rep. Germany** Poland Hungary Croatia Serbia Russia* Bulgaria Romania Ukraine** BosniaHerzegovina

* Base: years 16+** Base: 18+

Source: IMDS 2006; population 15 years and above; data in %


SavingsA

15


Saving products penetration in Bulgaria – Trends

12 1214

12 12

2002 2003 2004 2005 2006


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Saving products penetration 2006 – Country comparison

81

73

56 55

39

29

2017

12 129 8

4 4

0

10

20

30

40

50

60

70

80

90

100

Germany** Austria Czech Rep. Slovakia Slovenia Croatia Russia* Hungary Bosnia-Herzegovina

Bulgaria Poland Romania Serbia Ukraine**

* Base: years 16+ ** Base: years 18+ Source: FMDS 2006; population 15 years and above; data in %

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Probability to save in the next 12 months Will your household be able to save money within the next 12 months?

6,2%

60,2%

26,4%

7,2%

Yes No Uncertain Don't know

Source: GfK Mood Barometer 2007Base: 1000; population 15 years and above

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Reasons for savingThere are different reasons for saving and investing money. What are your reasons for that? Why do you personally save or invest money?

23,2%

16,4%

12,4%

9,2%

9,1%

9,0%

4,2%

2,7%

51,9%

For cases of emergency

For my children

For the family

For repairs

So that I'll be able to affordsomething later

For large purchases, suchas house, appartment, car

For pension insurances

No special reason

Do not save/ do not havethe possibilty to save

Source: FMDS September 2007Base: 1000; population 15 years and above


CreditsB

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Credits penetration in Bulgaria – Trends

4 56 8

9

2002 2003 2004 2005 2006


21


Credits penetration 2006 – Country comparison

2927 26

2220 19 18 16

13 12 11 10 9 8

0

10

20

30

40

50

60

70

80

90

100

Croatia Slovenia Germany** Hungary Russia* Austria Romania BosniaHerzegovina

Ukraine** Serbia Poland Slovakia Bulgaria Czech Rep.


22


Attitudes towards the credit

29,6%

28,9%

25,1%

3,0%

13,5%

I could manage withouttaking credits

I don't like being in debt,thus I do not take credits

I take credits only whenit is necessary

I live "on credit"

Could not estimate

Source: FMDS September 2007 Base: 1000; population 15 years and above

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Behaviour towards taking creditWhat action would you make in case you need money you currently don’t have?

49,0%

28,3%

27,8%

14,4%

7,0%

I would ask my relativesfor credit

I would go to the bank

I would ask my friends

I would try to save

I would use my savings

Still the relatives are the most preferred alternative when taking a credit; however, the banks are on the second place – becoming much modern and practical source for the financial needs of the people.

Source: FMDS September 2007 Base: 1000; population 15 years and above

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Hypothetical reasons for taking creditThere are different reasons for taking credits. Would you tell what would be the reasons for you to take credit?

48,5%

22,3%

21,6%

19,0%

18,8%

16,2%

10,3%

5,5%

2,2%

0,4%

For medical treatment

For purchasing house/ land/ appartment

For my children

For household equipment /appliences, techniqueetc./

For repairs

For purchasing a car

For furniture

For holidays/ escursions

For purchasing villa

For purchasing valuables /art, porcelain etc./



Payment CardsC

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Awareness of payment cards in Bulgaria

Source: GfK Credit Card Monitor 2007 Base: 1000; population 15 years and above

49,2%

47,6%

41,9%

32,8%

24,6%

22,6%

16,7%

14,3%

10,9%

6,6%

5,9%

3,3%

1,0%

24,8%

24,2%

22,9%

1,8%

8,1%

7,0%

3,8%

2,6%

2,0%

Maestro

Borica

Visa

American Express

Mastercard/ Eurocard

EuroLine

Transcard

Raicard

Credo

Diners

Market

Open Door

JCB

Aided awareness

Spontaneous awareness

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Payment cards penetration in Bulgaria – Trends

6

12

21

2426

2002 2003 2004 2005 2006


28


Credit cards penetration 2006 – Country comparison

80

69

63

5452

50

38 38

27 26 2623 23

0

10

20

30

40

50

60

70

80

90

100

Austria Croatia Slovenia Czech Rep. Hungary Slovakia Serbia Ukraine** Bulgaria BosniaHerzegovina

Poland Russia* Romania



Public Attitudes towards Financial Institutions3

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Association with banks and insurance companies Associations with banks Associations with insurance companies

38,3%

18,2%

11,3%

A lot ofmoney

Credits/loans

Deposit/savings

23,8%

15,2%

9,6%

Insurance

Security /trust

Fraud/mafia/

pyramid

Mainly neutral associations related to the activity of the banks

Associations with the activity of the insurance companies; still negative connotation


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Trust in the financial institutions

56,3%

38,1%

4,9%

13,6%

10,3%

18,7%

6,5%

26,8%

38,4%

47,2%

41,6%

38,5%

40,6%

38,3%

16,9%

23,4%

47,9%

44,9%

51,2%

40,7%

55,2%

Banks

Insurance companies

Financial houses

Insurance brokers

Leasing houses

Pension companies

Investment funds

Have trust

Do not have trust

Don't know/ don'tknow the activity

The low awareness of the activity of the institutions lead to lower trust (in the case of the investment funds, financial houses). Most probably still “suffering” the stereotypes related to the pyramids and financial frauds in the past.


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Top 5 reasons for choosing a bank

33,6%

32,4%

24,1%

19,2%

18,7%

Because the bank hasgood reputation

Because the bank wasrecommended to me

Because the bankattracted me as a client

Because the bank is solidand trustworthy

Because the bank offersgood servicing

Source: FMDS September 2007Base: bank clients; population 15 years and above


Summary4

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Summary

Stable economical situation in the country: decreasing level of the unemployment, increasing level of the salaries.

Constantly increasing share of bank customers; anyway, still the lowest level of banking population compared to other CEE countries.

Higher share of insurance companies clients compared to some CEE countries (f.e. Romania, Ukraine, Bosnia).

Stable levels of the savings penetration within the last 5 years; increasing level of the credits usage.

Rapid development of the payment cards (debit and credit) usage.

Saving reasons of the population: for cases of emergency, for the children.

The banks are the most trusted financial institutions.

The good reputation and the recommendation are the main drivers to become a client of a bank.


Thank you for your attention!

GfK. Growth from Knowledge

Documents

Financial Market Development in Bulgaria - Capital GfK Bulgaria Custom Research Financial Market Development in Bulgaria Antonia Gogova October 30th 2007 Hypothetical reasons for taking