INTERIM ACTIVITY REPORT

OF BULGARIAN-AMERICAN CREDIT BANK AD ON A CONSOLIDATED BASIS FOR THE FIRST

HALF OT 2020

SOFIA, 30 JULY 2020

General information

In the first half of 2020, Bulgarian American Credit Bank AD (BACB, the Bank) continued to pursue its main strategic goals related to its development as a universal bank offering a full range of banking services aimed at the green economy, including financing of small and medium-sized enterprises, and expanding retail banking services by offering various products in the field of consumer lending and transaction banking. The Bank strives to meet customer needs by providing a comprehensive range of services through modern banking technology and, as a result, expanding its customer base.

Economic review

External environment

The COVID-19 pandemic has caused a sharp deterioration in global development prospects, as reflected in the Eurosystem experts' macroeconomic projections of June 2020. The COVID-19 pandemic has paralysed the global economy, and the measures to curb the spread of the virus by governments around the world have been a major factor in the recent sharp decline in the economic activity. A number of countries have recently begun to loosen restrictive measures, but this process is likely to be very gradual. Economic activity, especially in emerging economies, has been negatively affected by the sharp decline in the prices of raw materials, the tighter financing conditions and the significant capital outflows. The incoming data confirm that the adverse effects of restrictive measures on the economy will be sharp and profound. In view of these severe global shocks, the Eurosystem experts' macroeconomic projections of June 2020 forecast that the real GDP (excluding the Eurozone) will shrink by 4.0% this year. This contraction will be at a faster rate and on a larger scale than that observed during the Great Depression. After the sharp contraction in the first two quarters of 2020, the global activity is expected to begin to recover in the third quarter and increase by 6.0% and 3.9% in 2020 and 2022, respectively. The world trade will be more severely affected, as the disruptions in logistics and the closed borders exacerbate the impact. Despite the sharp deterioration in the outlook for the global economic development, which is reflected in the June projection, the risks associated with this outlook still tend to be overestimated. Most importantly, the impact of the pandemic may be stronger and longer lasting than currently expected.

In Q1 2020, the real GDP of the Eurozone decreased by 3.8% compared to the previous quarter, and the incoming data show a further significant contraction in the real GDP in Q2. The recent data on economic indicators and the results of the observations confirm the assessment of a sharp contraction in the Eurozone economy and a rapid deterioration in labour market conditions. The coronavirus pandemic and the necessary restrictive measures have seriously affected both the manufacturing industry and the services sector, affecting the productive capacity of the Eurozine economy and the domestic demand. This assessment was broadly reflected in the Eurosystem experts' macroeconomic projections of June 2020. In the baseline scenario, the annual real GDP is expected to decline by 8.7% in 2020 and increase by 5.2% in 2021 and by 3.3% in 2022. Compared to the ECB experts' macroeconomic projections of March 2020, the real GDP growth forecasts have been revised significantly downwards - by 9.5 p.p. for 2020, and upwards by 3.9 p.p. for 2021 and by 1.9 p.p. for 2022.

According to the preliminary estimate by Eurostat, the annual HICP inflation in the Eurozone decreased to 0.1% in May from 0.3% in April, mainly due to lower energy inflation. Based on the current and the futures oil prices, the total inflation is likely to decline further in the coming months and remain low until the end of the year. In the medium term, the weaker demand will put downward pressure on inflation, which will only be partially offset by the upward pressure related to supply constraints. The market indicators of long-term inflation expectations remained low. While the indicators of the observations of inflation expectations declined in the short and medium term, the long-term expectations were less affected. This assessment is also reflected in the Eurosystem experts' macroeconomic projections of June 2020, which forecast annual HICP inflation of 0.3% in 2020, 0.8% in 2021 and 1.3% in 2022 in the baseline scenario. Compared to the ECB experts' macroeconomic projections of March 2020, the HICP inflation forecasts have been revised downwards by 0.8 p.p. for 2020, by 0.6 p.p. for 2021 and by 0.3 p.p. for 2022. The annual HICP inflation (excluding energy and food) is expected to be 0.8% in 2020, 0.7% in 2021 and 0.9% in 2022.

In this context, on 4 June 2020 the ECB's Governing Council decided to adopt a package of monetary policy measures to support the continued large-scale monetary stimulus needed to bring inflation steadily closer to levels below but close to 2% in the medium term, which corresponds to his mandate.

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For its part, on 26 May the European Commission presented a comprehensive recovery plan for Europe, the implementation of which will mobilize the full potential of the EU budget. The plan will help to overcome the economic and social consequences of the coronavirus pandemic, drive European recovery and preserve and create jobs. On 21 July 2020, EU leaders agreed on this recovery plan and the multiannual financial framework for the period 2021- 2027.

Bulgaria

Bulgaria's GDP grew by 2.9% on an annual basis in Q4 and according to the revised data for the first three quarters of the year the growth for the whole 2019 reached 3.4%, mainly driven by household consumption. This positive five- year trend will be interrupted this year, with the European Commission forecasting a 7% decline for the whole year 2020. For the next year 2021, the expectations are for a rapid recovery of 6%. After the historically low level of unemployment, which reached 4.2% in 2019, by the end of 2020 it is expected to bounce to 7%, and in 2021 - 5.75%.

BACB - business presentation

As at 30.06.2020, the total loan portfolio of the Bank grew by 4.66% net, or by BGN 47.511 million, compared to the end of the preceding year 2019. The total newly granted loans increased by BGN 50.631 million net or +5.56%, and the companies by segment accounted for an increase by BGN 21.185 million net or +2.71%, while for the individuals it is by BGN 29.4464 million or +22.75%. The old legacy portfolio in the part of legal entities decreased by BGN - 5.252 million or -11.11%, and that of individuals increased by BGN 1.253 million or 27.22%. At the same time, the problem loans decreased by -0.22% or BGN -316 thousand.

The following initiatives have also helped to extend credit operations to business customers:

  • The Bank, jointly with BDB, supported 62 SMEs with a total of over 1,550 employees under the FORWARD Program for financing micro, small and medium-sized businesses.
  • Since 2018, the Bank has signed an agreement with Bulgarian Development Bank AD for financing of small and medium-sized enterprises with guarantee facility and counter- guarantees under the COSME Program of the European Investment Fund with the support of the European Fund for Strategic Investments - COSME+ Program in the amount of EUR 10,000,000. As at 30.06.2020, BACB AD has supported 103 enterprises with over 1,470 employees, with loans amounting to over BGN 15,447,417.29.
  • As at 30 June 2020, 9 new guarantees have been agreed under the guarantee scheme of the Municipal Small and Medium-Sized Enterprise Guarantee Fund (MSMEGF) for BGN 266,765. The total agreed guarantee portfolio under the scheme amounts to BGN 730,952, and the total value of loans granted under this scheme amounts to BGN 2,456,469.50.
  • As at 30 June 2020, the total value of the loans granted under the MSMEGF guarantee scheme for innovative enterprises and start-ups amounts to BGN 200,000.
  • New Guarantee Support Instrument has been agreed aimed at reducing the negative effects of the distribution of Covid-19 on self-employed persons, micro, small and medium-sized enterprises in the area of Sofia Municipality. 6 SMEs have been supported under the Program
  • Guarantee agreement with NGF EAD, Ministry of Agriculture and Food and Executive Agency for Fisheries and Aquaculture aimed to guarantee loans to companies in the Fisheries Sector with a guaranteed amount of up to BGN 800,000.
  • The work of BACB AD under a guarantee scheme to facilitate SMEs' access to finance by commercial banks through a Risk Sharing Scheme of the National Guarantee Fund EAD and the Ministry of Agriculture and Food as at 30 June 2020. The total active guarantees are 24 amounting to BGN 6,068,546.63 or loans with principals amounting to BGN 12,137,093.26.
  • Guarantee program with NGF EAD to support SMEs in 2019 for guaranteeing loans to small and medium-sized enterprises, and as at 30.06.2020 there are 26 supported loans with the amount of BGN 12,541,051.70 with amount of the guarantees of BGN 4,522,150.14. Under this program, 26 SMEs have been supported with a total of over 386 employees with a total assets of BGN 116,806,000.
  • As regards the Guarantee Scheme of the COSME Program, NGF and the European Fund for Strategic Investments (EFSI) agreed to extend the term of the scheme by 3 years or until 31.12.2022 - as at 30.06.2020 there are total of 26 active loans of BGN 12,541,015.70 with guarantees amounting to BGN 4,522,150.14. Under this program, 26 SMEs have been supported with a total of over 386 employees with a total assets of BGN 116,806,000.
  • A new guarantee scheme has been agreed for the purchase of SMEs affected by the crisis with Covid-19 jointly with BDB AD. The amount of the scheme comes to BGN 26,000,000, guarantees in the amount of 80%. From the beginning of the scheme 01.06.2020 to 30.06.2020 there are 8 loans in the amount of BGN 1,442,000 granted to companies with a total of over 166 employees and total assets of BGN 12,647,000. For one month, BACB AD received over 650 requests for loans under the program from new customers

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In terms of lending, BACB is working actively to continue the diversification of the loan portfolio by increasing the share of loans to Individuals and MEs and increasing cross sales both between customer segments and BACB's non-credit products and services to borrowers of the Bank. The following activities in this regard are reflected in the result:

  • A payment product for maritime transport workers was successfully developed and an advertising campaign was conducted among those practising this profession.
  • The Bank continues the promotion on the market of its innovative product for individuals - fast consumer loan "BACB Express", offered at specialized points of sale in the big Mall-type shopping centers.
  • The Bank continues to apply a paperless process for granting the fast consumer loan "BACB Express", whereby all documents are signed with a digital certificate.
  • The Bank improved its conditions on consumer and mortgage loans for high-income customers, which helped to boost growth and maintain the very good quality of the retail loan portfolio.
  • We have successfully conducted an online and Facebook advertising campaign for Innovative Credit Products, a revolving consumer loan under the slogan "Good things are at small interest rates" and a mortgage loan for "Tomorrow".
  • BACB is actively working on student loans under the Undergraduate and Graduate Student Loans Act, with a total state guarantee limit of BGN 3,000,000. In 2019, the MES loan scheme allows BACB AD to expand and strengthen its cooperation with government institutions in the country, as well as to attract new customers - natural persons - undergraduate and graduate students in accordance with the Bank's development strategy.
  • The Bank actively participates in the renegotiation of loans to Individuals under the BDB program related to COVID -19 in accordance with BNB guidelines.
  • BACB was the first bank to sign an agreement and grant the first loans under the program of the Bulgarian Development Bank to support small businesses affected by COVID 19

In its quest to be closer to the customers - natural persons and to offer them first class service, BACB has developed the opportunity to open the deposit "Everything is Right" online. The Bank also updated the Online Deposit product by setting preferential terms and conditions for its new customers. The promotional offer for opening a current account without a service fee for 12 months using a debit card exempted from withdrawal charges for all ATMs on the territory of the country for the same period.

Transactional business

For Q2 2020 the Bank demonstrated a slight decrease in transfers and documentary transactions compared to the same period of 2019 and compared to Q1 2020. The main reason is the declared state of emergency in the country due to the coronavirus.

Compared to the same period last year, transfers have decreased in number by 1% and have increased in volume by 61%. Compared to Q1 2020, transfers has decreased in number by 2% and have increased in volume by 10%. In the first half of 2020, transfers increased in number by 7% and in volume by 64% compared to the same period in 2019.

In the second quarter of 2020, documentary transactions decreased in number by 42% compared to the same period last year and by 12% compared to Q1 2020. In the first half of 2020, documentary operations decreased in number by 23% and increased in volume by 811% compared to the same period in 2019.

The decline in business had an impact on the fees and commissions collected on payment transactions. In Q2 2020 they reached BGN 1.3 million, which is a decrease by 24% compared to those collected for the same period in 2019 and a decrease by 15% compared to those collected for Q1 2020. In Q1 2020 the collected fees and commissions reached BGN 5.3 million, which represents 10% decrease compared to the same period in 2019.

The Bank has successfully completed the project to migrate cards to the new standards for online payment security and is the first Bulgarian bank to offer two-factor authentication for online bank card payments. The work on the project to migrate virtual POS terminals to the requirements for two-factor authentication for online card payments continues. The Bank has already developed a network of 30 ATMs operating in the new host environment of BORICA, whereby by the end of Q2 a total of 561 POS terminals are active. A total of 21,170 debit cards and 2,517 credit cards are active as at 30.06.3030, which is an increase by 15.66% compared to the results as at the end of 30.06.2020. At the end of the quarter, a gradual recovery of the activity of the POS terminals serviced by BACB has been recorded and the expectations for the next quarter are for increased active consumption both due to the recovering tourist season and due to the growing demand for POS terminals by merchants who have not used this type of payment activity yet.

During the period, the preparations for the commissioning of the new BACB online and mobile banking applications continue. Despite the challenges, two complete versions of the Internet and mobile banking applications were successfully installed and tested, and preparations were made for employee migration as a pilot project to launch new online banking.

OVERVIEW OF THE ACTIVITIES IN Q2 2020

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Selected indicators and ratios

31.12.2019

30.06.2019

30.06.2020

Change

BGN '000 and %

06.2020 /

(audited)

(unaudited)

(unaudited)

06.2019

Total assets

Loans (net value)

Borrowed funds

Equity

Net interest income

Net income from fees and commissions

Loans/borrowed funds

Liquid Coverage Ratio (LCR)

Capital adequacy

1 678 519

1 460 365

1 673 613

14.60%

1 022 026

939 407

1 070 084

13.91%

1 452 682

1 241 528

1 445 788

16.45%

200 773

192 261

206 341

7.32%

40 106

18 591

20 516

10.35%

9 993

4 543

4 140

-8.87%

70.35%

75.67%

74.01%

179.14%

270.48%

145.40%

15.39%

16.61%

18.48%

Active operations

As at 30.06.2020, the Group's assets amounted to BGN 1 673 613 thousand, as compared to the 2019 audited data, showing an decrease of BGN 4.9 million or a fall of 0.3%.

At the end of Q2 2020, the Group recorded an increase in the loan portfolio at a book value of BGN 46.1 million or 4.2% reaching BGN 1 157.3 million compared to the volume at the end of 2019. The accumulated credit losses and impairments on loans under IFRS 9 amounted to BGN 87.2 million and provided coverage of 7.5% of the loan portfolio with a volume of BGN 89.2 million at the end of 2019, a coverage of 8% and an average level for the banking system of 5.3% at the end of Q1 2020. At the end of Q2 2020, impairments on loans increased by almost BGN 2 million or 2.2%.

As at 30.06.2020 the net loan portfolio amounted to BGN 1 070.1 million and formed a 63.9% share of total assets. The loan portfolio includes receivables under finance leases for BGN 29 662 thousand at book value of BGN 25 140 thousand at the end of the previous year.

In the Q2 2020, the Group granted new loans amounting to BGN 227.9 million and the amount of repaid loans for the same period was BGN 187.9 million including BGN 4.3 million written off receivables.

As at 30.06.2020, overdue loans over 90 days represented 13.4% of the total loans at book value, compared to the reported 12.1% as at 31.12.2019.

The share of non-performing loans is above the average for the banking system with a continuing steady downward trend. The main reason for the higher share is the sectoral orientation of the Bank - financing of projects in the construction and real estate sector before the global financial crisis. The loan policy applied in recent years and at the moment is focusing on poorly cyclical and promising economic sectors, aiming at effective diversification both in terms of sectoral positioning and size and timing so as to provide a sustainable basis for development and limit the impact of individual exposures in a given industry. As a result and due to the revitalization in the construction and real estate sectors, the negative effects gradually diminished in 2017 and the share of non-performing loans decreased by more than 7 percentage points and in 2018 by 6 new percentage points, and from the beginning of Y2019 by 3.4 percentage points (on a separate basis). To improve the quality of the loan portfolio, continuous control of problem loans is carried out and adequate procedures for their management are applied. The regular internal analyses developed and complex stress tests help timely assess the effects of a possible deterioration of the business environment on the bank's portfolio.

As at 30.06.2020, the debt and equity financial assets held measured at fair value through other comprehensive income amounted to BGN 64.2 million or 3.8% of the total assets compared to BGN 69.7 million and 4.2% share at the end of 2019. The portfolio consists of 80.3% first-rate government securities of the Republic of Bulgaria, 11.98% corporate bonds and 7.72 % equity instruments. In the first half of 2020, a net decrease of BGN 8.4 million was reported, due to an issue of government securities with a maturity of BGN 1 million, purchase of two issues of

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government securities with a nominal value of BGN 8 million and sale of corporate bonds with a nominal value of EUR 4.5 million and BGN 4.8 million. The equity instruments of BGN 4.9 million (end of 2019 - BGN 2 million) include equity interest in a special investment vehicle of BGN 637 thousand at book value (unchanged from the end of the previous year), equity shareholding of Class C preference shares of Visa Inc.'s capital amounting to BGN 1 300 thousand (end of 2019 - BGN 1 282 thousand) and interest in BSE of BGN 85 thousand (31.12.2019 - BGN 97 thousand). The Bank invested in shares of two payment service companies totaled BGN 2 934 thousand during the quarter. (Fire AD - BGN 978 thousand and Paynetics AD - BGN 1 956 thousand).

The portfolio of debt instruments measured at amortized cost comprises bonds of the Bulgarian government with fixed payments and maturity. In Q2 2020, the portfolio was supplemented with three issues of foreign government bonds - two of the United States and one of Germany, which contributed to reporting an increase of 1.2 times to BGN 49.4 million compared to BGN 22.1 million at the end of 2019. The share of total assets reached 3% as at 30 June 2020 compared to 1.3% at the end of 2019.

As of 30 June 2020 BACB has 3 subsidiaries subject to consolidation - BACB Finance EAD, BACB Trade EAD and

"Paytech" OOD which are subject to consolidation.

The Bank participates in a joint venture with the largest shareholder in BACB - CIESAEF AD, in which they hold 50% of the registered capital. As at 30.06.2020 the investments of the Group in joint ventures amount to BGN 370 thousand compared to the end of Y 2019 BGN 192 thousand.

As at 30.06.2020 the receivables from banks amounted to BGN 88.6 million including BGN 5 147 thousand on a repo deal and accounted for a share of 5.3% of total assets compared to BGN 150.3 million and a share of 9% at the end of 2019. The reported decrease of 41% as compared to the end of 2019 is formed by decrease both in sight deposits and in fixed-term deposits.

Cash in hand and cash with the central bank decreased by 2% to BGN 258.3 million at the end of Q2 2020, compared to BGN 263.7 million at the end of 2019, but its share in total assets decrease from 15.7% to 15.4 %. The main reason for the reported decline in Q22020 is the decrease in current account balances with the BNB.

Tangible and intangible fixed assets held by the Group increased slightly by BGN 142 thousand and reach BGN 18.3 million incl. of assets held for use under IFRS 16 to BGN 6.3 million compared to the end of 2019 by book value to BGN 18.1 million, and their share in total assets remains unchanged - 1.1%.

As at 30.06.2020, the assets acquired and classified as "assets held for sale" and "investment property" amounted to BGN 104.9 million or 6.3% of total assets compared to BGN 108.3 million and 6.5% at 31.12.2019. During the reporting period, "investment properties" of BGN 2 993 thousand and "assets held for sale" of BGN 451 thousand were sold.

The Bank set up and operates a specialized department for the realization of the acquired assets, as well as for the organization and administration of the accompanying activities.

Liabilities

As at 30.06.2020 and as at 31.12.2019 the Group does not recorded borrowed funds from banks.

The funds borrowed from companies and individuals decreased by BGN 4.8 million during Q22020 to BGN 1 405.6 million as at 30.06.2020 or 95.8% of total liabilities compared to BGN 1 410.4 million and 95.4% at the end of 2019. The reported decrease is formed net by the decrease in the borrowings from companies by BGN 10.7 million (financial institutions, private, state-owned enterprises and budget organizations) and the increase in the borrowings from individuals by BGN 5.9 million.

The payables on the credit facility provided by the Bulgarian Development Bank (BDB) under the "NAPRED" and "COSME+" programs for targeted financing of micro, small and medium-sized business of an agreed amount of BGN 35 million and EUR 10 million are reported in the item "other borrowed funds". As at 30.06.2020 the long-term funding from BDB amounts to BGN 40.2 million or 2.7% of total liabilities compared to BGN 42.2 million at the end of 2019 and 2.9% share.

Equity

No changes in the fixed capital were reported during Q2 2020.

As at 30.06.2020 the item "Reserves and retained earnings" has increased by the profit (unaudited) generated during the first quarter of Y 2020 (unaudited) of BGN 6 639 thousand.

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The item "Revaluation reserves" includes the changes in the fair value of debt and equity instruments carried at fair value in other comprehensive income amounting to BGN 380 thousand and BGN 684 thousand, respectively, during the reporting period, as well as the revaluation reserve formed on the buildings owned by the Bank and used in its operations amounting to BGN 4 602 thousand. A decrease of BGN 1 071 thousand was reported during Q2 2020 resulting from the negative change in the fair value of debt instruments by BGN 1 068 thousand and of the equity instruments by BGN 3 thousand.

Review of the financial position as at 30 June 2020

The Group ended the Q2 2020 with a positive financial result after tax of BGN 6 639 thousand compared to the profit reported for the same period in 2019 amounting to BGN 6 563 thousand or an increase by 1.2%.

The comparison of earnings from core business (interest income) for both periods shows an increase by BGN 1 443 thousand to BGN 23 864 thousand. The income from lending operations accounted for the major share of 96.9% in the interest income. The reported income from interbank deposits amounted to BGN 160 thousand compared to BGN 608 thousand for the same period of the previous year. The interest income from security portfolios held recorded an increase by BGN 28.5 thousand for the Q2 2020 and amounted to BGN 588 thousand as at 30.06.2020. As at 30.06.2020 the interest expenses are down by BGN 482 thousand compared to the same period of 2019 and amount to BGN 3 348 thousand compared to BGN 3 830 thousand one year ago.

As at 30.06.2020 the net interest income amounted to BGN 20 516 thousand or by BGN 1 925 thousand more than the reported at the end of June 2019.

The net fees and commissions income decreased by BGN 403 thousand compared to 30.06.2019 and amounted to BGN 4 140 thousand or 16.1% of the Group's total operating income, with a share of 18.9% as at 30.06.2019. The reported decline is a result of the restrictive measures imposed in connection with the COVID-19 pandemic the scope, duration and adverse effects of which are not yet predictable.

As at 30.06.2020, a loss from financial assets measured at fair value through other comprehensive income of BGN 24 thousand was realized compared to gain BGN 5 thousand for the same period of the prior year.

As at 30.06.2020 the administrative expenses and personnel expenses increased by BGN 161 thousand compared to the same period of the prior year. The depreciation and amortisation expenses increased by BGN 188 thousand compared to the same period of the prior year, formed by an increase in depreciation expenses for tangible and intangible assets by BGN 108 thousand and an increase in the depreciation expense of assets held for use under IFRS 16 by BGN 80 thousand.

The expenses on impairment of financial assets increased by BGN 854 thousand.

The expenses on the Bulgarian Deposit Insurance Fund (BDIF) and the Bank Restructuring Fund (BRF) amounted to BGN 3 121 thousand compared to BGN 2 233 thousand as at 30.06.2019.

Liquidity and financing of the operations

The Bank follows the principles of diversification of sources of financing and optimization of interest expenses in pursuance of the strategy for securing its liquidity needs.

At the end of Q2 2020 the Bank maintained a stable deposit base despite reporting a slight decrease in customer deposits by 0.3% compared to 31.12.2019. The Bank's active deposit activity contributed to a reduction in its dependence on external financing. The Bank continues to realize successful deposit-taking of natural persons from Germany and Spain.

The ratio of gross customer loans to customer deposits is 82.3% as at 30.06.2020.

The liquidity position of the Bank remains strong as the liquid assets (cash in hand and deposits in accounts with the BNB, short-termloans and advances to banks and liquid government securities) amount to BGN 409.9 million. The ratio of these liquid assets to the total deposits (of customers and banks) as at 30.06.2020 comes to 28.35%.

During the period from the end of 2019 to 30.06.2020, the portfolio value of debt instruments measured at fair value through OCI of the Bank recorded a decrease by 12.4% to BGN 59.3 million (2019: BGN 67.7 million). Cash with BNB, in hand and with banks decreased by BGN 66.9 million. During the reporting period a net decrease of BGN

8.4 million was reported, due to an issue of government securities with a maturity of BGN 1 million, purchase of two issues of government securities with a nominal value of BGN 8 million and sale of corporate bonds with a nominal value of EUR 4.5 million and BGN 4.8 million.

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Since the beginning of 2020, new investments in government securities of BGN 35.3 million have been made in the portfolios "held for the collection of contractual cash flows" and "held for the collection of contractual cash flows and sale".

As at 30 june 2020, the Bank's government securities portfolio is with a book value of BGN 101 million (2019: BGN

  1. million), allocated to the portfolio "held for the collection of contractual cash flow and sale" with a book value of BGN 51.6 million, and in the portfolio "held for the collection of contractual cash flows" with a book value of BGN
  1. million.

Unrealized profits and losses from the revaluation of debt instruments at fair value in other comprehensive income were deferred in a revaluation reserve, net of tax. In the period when the asset is derecognized, the revaluation result is included in the profit or loss for that period. Since the beginning of 2020, a net loss of BGN 24 thousand was reported in relation to the completed investments. Interest income from debt instruments at fair value in OCI is currently recognized in profit or loss and for the period from 01.01.2020 to 30.06.2020 it amounted to BGN 443 thousand.

Capital resources

In Q2 2020, the Group reported equity adequate to the risk profile and asset quality and sufficient to meet the strategic objectives and implement the plan for the current year. As at 30.06.2020 the Group reported total capital adequacy ratio of 18.48% and Tier 1 capital adequacy ratio on a separate basis of 18.48%, well above the required minimum of 8% and 6%.

Information on the main risks faced by the Group is contained in the Annual Management Report for 2019 provided to the FSC and the public and is available on the Bank's website.

Corporate events and information under Art.7 of Regulation (EC) No 596/2014 of the European Parliament and of the Council on the Market Abuse and Annex 9 of Ordinance No 2 of the Financial Supervision Commission (FSC)

  1. On 30 January 2020, BACB published its preliminary unaudited separate and consolidated financial statements as at 31.12.2019, together with the relevant interim activity reports and a letter to the shareholders;
  2. On 20 March 2020 BACB published its audited consolidated and separate annual financial statements for 2019, together with information on the Bank's financial result for 2019 on a consolidated and separate basis. The detailed information and the full text of the statements are also available on the BACB AD website;
  3. On 20 March 2020 BACB published the call notice to convene a regular General Meeting of Shareholders and the proposed agenda for the General Meeting of Shareholders called on 22 April 2020 at 11:00 in Sofia at the headquarters of BACB AD, at 2, Slavyanska Str.
    The agenda, the minutes and the materials related to the agenda of the meeting are also available on the Bank's website.
  4. On 30 April 2020, BACB published its preliminary unaudited separate and consolidated financial statements as at 31.03.2020, together with the relevant interim activity reports and a letter to the shareholders;
  5. On 17 April 2020 BCRA - Credit Rating Agency" AD published information about confirming the ratings assigned to BACB, as follows:
    • Long-termrating at BB-, outlook at "Stable", short-term rating at B;
    • National-scalelong-term rating at BB+ (BG), outlook at "Stable", National-scaleshort-term rating at B (BG);

Financial strength rating

Primary Rating

Updated Rating

27 July, 2016

17 April 2020

Long-term rating

В

BB-

Outlook

Stable

Stable

Short-term rating

В

B

National-scalelong-term rating

В+ (BG)

BB+ (BG)

Outlook

Stable

Stable

National-scaleshort-term rating

В (BG)

B (BG)

In the process of assigning the ratings BCRA uses the methodology which is officially adopted for assigning bank financial strength ratings (https://www.bcra-bg.com/bg/methodologies)

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According to the published text, for the period Bulgarian-American Credit Bank continues to report improvement in the activities and in the results. Acceleration for some of the parameters is reported, in addition to the consolidation of their positive trends.

The stable improvement in the portfolio quality, maintain and increase of the profit accumulated and the parameters for profitability, while maintaining stable capital adequacy and liquidity may have additional positive influence on the "Bulgarian-American Credit Bank" ratings.

In negative direction, additional deterioration of the loan portfolio quality and significant decrease of the levels of the capital adequacy and liquidity parameters of the Bank as a result of the negative effects of the COVID 19 pandemic on the Bank's clients may influence

The complete text of the report is available on the "BCRA-Credit Rating Agency" AD web site: https://www.bcra-bg.com/bg/ratings/bacb-rating

  1. On 22 April 2020 BACB published information that in relation with the State of emergency imposed in Bulgaria pursuant to the Bulgarian Parliament's decision dated 13 March 2020 and in compliance with Order No. RD-01-124/ 13.03.2020 of the Minister of Healthcare for imposing of anti-epidemic measures against the spread of COVID-19, and restriction and banning for holding of any kind of mass events, the Annual General Meeting of the Shareholders of BACB, convened for 22 April 2020, at 11:00 a.m., was not held due to lack of the required as per the BACB By- laws and art 227 of the Commercial Act minimum quorum of the share capital. At the prior announced opening hour and place for holding of the General Meeting of the Shareholders no shareholders representing at least 50% (fifty per cent) plus one share of the BACB share capital were present (in person or by proxy). This way the requirement of art. 30 (1) of the BACB By-laws, in connection to art .227 of the Commercial Act, for holding a legitimate session of the General Meeting of Shareholders was not met, namely - at the session of the General Meeting of the Shareholders at least fifty per cent (50%) plus one share of the registered capital to be present.
    The failure of shareholders guarantying the minimum required quorum to be present at the meeting is due to and in connection with the orders of the government bodies of the Republic of Bulgaria and specifically in compliance with item 5 of Order No. RD-01-124/ 13.03.2020 of the Minister of Healthcare ordering the seizure of holding any kind of mass events in the country.
    BACB Management and Supervisory bodies will undertake the respective actions regarding the organization and holding of the BACB Annual General Meeting of the Shareholders, which will be entirely consistent with all relevant developments of the situation in Bulgaria related to the taken by the government bodies' anti-epidemic measures against the spread of COVID-19 and related to the physical holding of mass events with presence of groups of people. The use of the possibilities for holding GMS sessions by electronic means, provided by law, is also taken in consideration within the forms permitted by law and in strict compliance with the procedure as per the Public Offering of Securities Act.
  2. Bulgarian-AmericanCredit Bank published information that on 07 May 2020, at 11.00 a.m. - the new date and hour, indicated by the Call Notice of the Annual BACB General Meeting of the Shareholders for holding of a meeting under art. 227 (3) of the Commercial Act, the meeting of the General Meeting of the Shareholders was not held, because at the prior announced opening hour and place for holding of the General Meeting of the Shareholders under art. 227 (3) of the Commercial Act none of the BACB shareholders were present (in person or by proxy).
    The absence and non-participations of the shareholders on the new date, indicated under art. 227 (3) of the Commercial Act is related to the State of emergency imposed in Bulgaria, continuing up to 13 May 2020, pursuant to the Bulgarian Parliament's decisions, the implementation of the anti-epidemic measures against the spread of COVID-19 and the provisions of the orders of the government bodies, specifically item 5 of Order No. RD-01-124/ 13.03.2020 of the Minister of Healthcare ordering the seizure of holding any kind of mass events in the country.
    BACB Management and Supervisory bodies will undertake the respective actions regarding the organization and holding of the BACB Annual General Meeting of the Shareholders subject to the statutory deadlines of the Act on Measures and Actions during the State of Emergency declared by the Bulgarian Parliament on 13 March 2020 and taking into account the development of the situation regarding the anti-epidemic measures implemented in the country.

Additional information for the first half of 2020 (Art. 33 (1) (7) of Ordinance No 2 of the Financial Supervision Commission on the prospectuses for public offering and admission to trading on a regulated securities market and for the disclosure of information by public companies and other issuers of securities)

  1. The Group applies in 2020 consistently the accounting policy disclosed in the 2019 audited consolidated financial statements, considering the adoption of new or amended standards, effective for annual periods beginning on or after 1 January 2020, as disclosed in the last audited financial statements Y2019.
  2. In the Bank's economic group, a change was made within the reporting period, resulting in the acquisition in October 2019 of 500,000 company shares representing 50% of the capital of the subsidiary of BACB AD Paytech OOD, respectively - BACB AD is the sole owner of the capital of Paytech EOOD.
  3. No organizational changes were made.
  4. The Bank does not publish forecasts of its results.
  5. Data on persons holding directly or indirectly at least 5% of the votes at the General Meeting of

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Shareholders as at 30.06.2020 and changes in the votes held by the persons as at 31.03.2020 are as follows:

According to: (1) Book of Shareholders kept by Central Depository AD; (2) Data of the received notifications for disclosure of shareholding under Art.145 and Art.146 of POSA; and (3) Power of Attorney submitted to the General Meeting to Shareholders and their accompanying instruments of incorporation of shareholders as at 30.06.2020, the shareholders of BACB AD, holding directly and/or indirectly (under Art.146 of POSA) 5 or more than 5 per cent of the voting shares of the Bank are as follows:

Shareholder

Number of shares

Percentage of votes

Number of

Percentage of votes

held (directly and

at the General

shares held

at the General

indirectly) as at

Meeting of

(directly and

Meeting of

30.06.2020

Shareholders as at

indirectly) as at

Shareholders as at

30.06.2020

31.03.2020

31.03.2020

CSIF AD

15 199 133

61,56%

15 199 133

61,56%

Tsvetelina Borislavova

Karagyozova - the

15 199 133

61,56%

15 199 133

61,56%

person exercising

control over the direct

shareholder CSIF AD

(holding 99.99% of the

shares of CSIF AD)

LTBI Holdings LLC

8 814 402

35,70%

8 814 402

35,70%

6. Data on the shares held by the members of the management and supervisory bodies of the Bank as at 30.06.2020 and on the changes that occurred as at 31.03.2020.

The following table contains information on the members of the management and supervisory bodies of the Bank holding its shares.

Name

Member of

Number of

Percentage

Number of

Percentage of

management or

shares held

of votes at

shares held

votes at the

supervisory

(directly and

the General

(directly and

General

body

indirectly) as

Meeting of

indirectly) as

Meeting of

at 30.06.2020

Shareholders

at 31.03.2020

Shareholders

as at

as at

30.06.2020

31.03.2020

Silvia Kirilova

Management

1,600

0.006%

1,600

0.006%

Board

  1. The Bank is not a party to pending legal, administrative or arbitration proceedings concerning debts or receivables in the amount of 10 and more than 10 per cent of its own capital.
    In relation to its normal activity and in particular, with the active management of the classified loans portfolio, the Bank is a party to enforcement and insolvency proceedings against debtors for collection of overdue receivables.
  2. Data of the loans granted by the Bank, guarantees provided or liabilities assumed jointly to one person or to its subsidiary, including to related parties.

BACB AD is a bank and its core business is to provide loans and accept deposits. The BACB's interim financial statements, annual financial statements and prospectuses contain detailed information on its loan portfolio, large exposures and asset quality of the Bank.

LARGE TRANSACTIONS ENTERED INTO WITH RELATED PARTIES

9

"Related parties" are those persons where one of them is capable of controlling or exerting significant influence over the other one in making financial and business activity decisions in compliance with the applicable accounting standards.

1. Related party transactions entered into during the reporting period that have materially affected the financial position or performance during that period.

The Bank enters into transactions with related party only as part of its ordinary banking operations. These transactions are performed under conditions that would be customary in transactions between unrelated parties and involve the provision of loans, the acceptance of deposits and securities transactions.

2. Changes in related party transactions disclosed in the annual report that have a material impact on the financial position or performance of the Bank in the first half of 2020.

More detailed information, if applicable, is contained in the Related Party Transactions section of the Accounting Policies and Selected Explanatory Notes as at 30.06.2020

Bulgarian-American Credit Bank AD

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Bulgarian American Credit Bank AD published this content on 30 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2020 19:45:09 UTC