Banking in Macedonia

Global Banking & Finance Review interviewed  Mr. Vladimir Eftimoski,  CEO of Stopanska banka a.d. Bitola about the banking sector in Macedonia.

What are some of the main challenges and opportunities that the banking sector in Macedonia is facing?

The economic and financial turbulence on global level have their own influence over the situation in Macedonia and are, of course, one of the key challenges which the Macedonian banks are coping with. In conditions of uncertainty, all the positions in the work are placed in frames which should respond to the risks which may be imposed to the banks. In that regard, one should take into consideration the decreased economic activity, the worsened financial results of part of the business sector and the need of bigger liquidity.

In fact, from a macro-economic aspect, it is clear that all financial subjects should follow the directions dictated by the economy and the financial situation in the country. The Macedonian economy is highly dependent on the occurrences in the Eurozone because it is our greatest trading partner. Therefore, in the past several years, including 2015, the key exterior factor whose impact was reflected on the domestic economic situation was the global economic and financial crisis. In the Q4 of 2014 there was a difficult recovery of the economic activity (the annual growth rate of the GDP in the Eurozone was 0.9%), the industrial production slowed down, and the inflation rate was negative for the first time since 2009 and was -0.2%. This situation, as you know, continued in the first half of 2009 when the GDP growth rate in the Eurozone was 0.4% in Q1 i.e. 1% on annual basis. With regard to the inflation, there is an evident mild improvement, so the data for June show annual growth of 0.2%. However, the inflation rate is still the main objective of the ECB and the programme for quantitative facilitation continues and will be implemented by the ECB until the end of September 2016.

In Macedonia the numbers show an increase of the GDP in Q4 of 2015 of 2.7% and an average negative annual inflation rate of -0.3%. In the first half of 2015 the economic results show that the worsened economic trend continues. The average annual inflation rate was maintained on the level of 2015 and it was -0.3%. The GDP growth rate has also not marked any significant changes, so in Q2 of 2015 it was 2.6%.

I would like to underline that it is good that in such an economic situation the Macedonian banking sector has continue the trend of stability and has increased the level of liquidity. This enabled monetary loosening by decreasing the basic interest rate of 3.50% to 3.25% which was maintained in 2015. The additional changes implemented into the monetary policy is stimulating the growth of loans and have provided support for the private sector in conditions of decrease foreign demand which influenced the limitation of the growth in the domestic economy. The final product which we received was the increase of the assets at the level of the banking system by 8.33%, a growth of gross loans to non-financial subjects by 9.22%, increase in the deposits of the non-financial subjects by 10.67% and increase of the capital and reserves by 3.97% compared to the previous year. In that context more concrete challenges and opportunities are defined and these are the challenges which the banks in Macedonia are facing – how to use the increased liquidity in order to support the business and the economy. In that line, Stopanska banka a.d. Bitola marks a growth in the loan placement by 5.13% in the first semester of 2015 whereas the deposits of non-financial subjects were kept on the stable level achieved in 2014. The capital and reserves are increased by 12.99% which is a signal for an increased degree of capitalization of the bank.

Being the leader in the banking services for the population, what do you think, which were the initiatives that contributed for your success?

Even in this period which was difficult for the global and domestic economic surroundings, Stopanska banka a.d. Bitola has successfully completed 2014 with 187.26 million MK Denars in profits i.e. 3.04 million EUR, after the taxation and calculated pursuant to the IFRS. This is three times more compared to the profits in 2013. This result owes to several factors. First, in 2014 we had bigger net incomes from interest by 161.45% compared to 2013. In the same period we increased the incomes of accumulated and written off interest receivables in accordance with the agreement for liabilities settlement with a value of 4 million EUR.

In the past year, the Bank invested all its funds and resources to improve the quality of the services it offers to its clients through analysis of their needs, and with the purpose of creating an offer of services and products pursuant to the specific needs of each client. As a result of these efforts, in 2014 the Bank increased the number of clients, the scope of crediting and the works in the payment system. All these initiatives, together with good expenditure management, have positively reflected on the net incomes of commissions and compensations which were increased by 10.99% compared to 2013. In this period the net incomes of rate-exchange differences mark an increase of 12.87 million MK Denars and are bigger than 2013 by 70.03%.

The remaining incomes of the activities are doubled compared to the ones accomplished in 2013. This increase mainly owes to the profit made from the sale of part of the property. This position includes the incomes of investments in shares of investment funds, as a more profitable alternative compared to the investment in long-term national securities out of which in 2014 the Bank has gained an amount of 1.46 million MK Denars.

The number of employees was increased as a result of the increased number of clients and the increased activity in 2014. The Bank expanded its network of branches and ATMs which cause increase of the expenses for employees by 15.08%, the remaining expenditures of the activity were increased by 20.31% whereas the depreciation was higher by 16.27%. In the first semester for 2015 the trend of growth of the Bank continues, and so the expenses for the employees mark an increase of 13.22%; the remaining expenditures of the activity are increased by 6.04% whereas the depreciation is higher by 13.22%. In parallel with the increased scope of clients the Bank was also active in line of expanding the network of branches and ATMs. In that line, annually, the network of branches was increased by 26.67% in 2014, while the ATM coverage on the territory of Macedonia marks a growth of 41.18%.

When it comes to the increase of the clients base, the contribution of new clients – individuals is especially important – compared to 2013 it was 6.16%, a trend which continues in the first semester of 2015 with an increase of 1.07%. The positive changes within the clients’ base additionally contributed to the increase of 49.76% of the gross loan portfolio of individuals in 2014 compared to 2013 i.e. a growth of 6.92% in the first semester of 2015. The growth of gross loan portfolio of individuals positively reflected on the net incomes of interests which in 2014 were bigger by 192.94% compared to 2013 i.e. 269.59% in the first six months of 2015 compared to the same period in 2014. Having in mind the conditions of the economy in the country, I am especially glad to underline the support which the Bank is giving to the individuals by approving self-employment loans, a project realized in cooperation with the appropriate competent institutions in Macedonia. Moreover, there is an appropriate growth within the incomes of commissions from individuals which were increased by 9.40% in 2014/2013. The growth on this position in the first semester of 2015 compared to the first semester in 2014 was 7.10%.

I reckon that this growth is mostly owing to the unique approach which we as a Bank have towards our clients and is a result of the commitment of each of our employees towards every existing or new client. The fulfilment of the requests and meeting the needs of our clients are our obligation! Namely, every individual who accesses as a new client in our Bank with the very act of signing becomes our highly appreciated client who receives highly qualitative and professional services.

Which unique products and services were created as a direct response to the needs and desires of the clients?

In the past period the Bank is recognized as a stable and secure financial institution. The professional working and the good reputation have contributed to the growth of the deposits of the individuals, an increased number of loans and reinforcement of the market position.

Working with clients (individuals) is in the primary focus of Stopanska banka a.d. Bitola. The objective of the Bank is to provide maximum support to the individuals with an acceptable and reliable business idea when adopting the financial decisions referring to providing additional funds with low interests, as well as long-term loans. We offer friendly advice when investing their surplus of funds in specially created deposit products, which are, of course, in line with the prudent risk management.

The unique approach which we as a Bank have created towards our clients contributes for each client to be able to get all necessary information and to meet their needs in one place which is a special advantage, taking into consideration the dynamics of the contemporary living. The professional relations and the qualitative service towards every client are our single obligation.

The Bank is continuously working and investing its funds and resources to improve the quality of the performed services, makes analysis of the client when preparing the offer and works on the engineering of new competitive products and services which will be fully responsive and in accordance with the needs and nature of the population.

In this part I would like to emphasize that this is a permanent and inevitable process. During 2014 as a result of the agility and flexibility, the conditions and prices of the products and services of Stopanska banka Bitola were continuously harmonized with the conditions on the market, the needs of the clients and the competition.

The technology plays an important part in the banking. How did Stopanska banka a.d. Bitola cope with the challenges of the development of information technology?

The continuous progress and application of information technology in the everyday life imposes a need of expanded palette of products and services coming from the banks in electronic form and will be user-friendly for the business people who have less and less free time. The industries which desire to be more competitive and easily available for their clients will need to adjust to these changes. The adjustment includes creation and application of innovative, easily available and automated processes and solutions in the everyday life, with an increased saving of the direct use of human capital.

 Stopanska banka a.d. Bitola during this and in the past year has implemented several activities and projects for development and upgrade of the applicative systems in line of implementation of the regulatory terms, meeting the mandatory standards and regulations of the Bank and the recommendations given by the audit; achieving competitive advantages; rationalization and optimization of the business processes and harmonization within the frames of the Bank; upgrade of the IT infrastructure (system, communication, data base, as well as security information). These changes and improvements of the existing IT systems have enabled conditions for efficient monitoring of the market and the scope of the work and easy adjustment of the Bank to the changes in the organization and regulation.

The bank is permanently expanding its ATMs network, as well as their upgrade with new services. This is one of the two banks in Macedonia which have started the M-payment project. This was initiated towards the end of 2014 and we expect it to be finalized towards the end of this year.

The relations with the clients play an important part in the banking. What are the initiatives you included in order for the clients to continue getting on their disposal the best services?

The clients are always in the focus of the bank. During its existence Stopanska banka Bitola managed to establish close connections to its clients. The maintenance and deepening of these relations is a primary objective of the Bank. This is recorded in its heritage, tradition, culture, as well as in its future working. In order to achieve a higher level of services for the clients, the Bank managed to upgrade its internal educational programmes and the training programmes in cooperation and with the support from external companies specialized for training. In that line, in 2014 the Bank started an intensive realization of the project for talent management by organizing and implementation of unified professional assessment of the leading personnel and preparatory activities of the bank for implementation of a new system for monitoring and assessment of the performances of the employees by defining the objectives.

The more significant internal trainings in the bank include: seminars for the new employees, trainings for the organizational culture and professional behaviour, covering the ongoing changes of the legal regulation and current trends regarding the news in the offer of products and services, improvement of soft-skills of the employees, as well as experts’ training for internal transfer of know-how in different areas in the banking. The relations of the Bank with the clients are based on contemporary approach in the human resources management. The maintenance and reinforcement of the human capacities is done with appropriate engagement of employees, valuation of their performances and results, promotion and upgrade, systematic approach towards accomplishing professional specialization and training of the employees. These are the main tasks and activities in the field of personnel management of the Bank.

At the same time, our employees are always timely acquainted with all aspects and details around the new services and products which the Bank is placing on the market, all in order to provide qualitative and timely service to the clients.

Do you have any ongoing projects which you would like to share with us?

Following the world trends of globalization which are present not only in the finance sector, but also in all other sectors of the economy, we are aware that Macedonia, being a small open economy, will not be bypassed by these processes. In Macedonia and the region there are several banking brands which additionally put pressure on the competition, but also over the fast tempo of the globalization. Being aware of this unstoppable process, and led by the experience of the managing team of the Bank, we are intensively working on being well prepared to tackle these processes. As for myself, in my 17 years of banking experience, gained in international banking trends, I have passed through these processes and I know their importance.

It is a fact that in the moment the world economy and the finance sector are still in a global crisis which slows down this process. Here we can see our biggest advantage, to be sufficiently fast and flexible, in order to use this vacuum period for reorganization and consolidation in order to attract a foreign strategic partner who would be interested in presence of the Macedonian market. The most optimistic expectations are that the financial markets, especially the market of capital will start recovering towards the end of 2017. The consolidation process, cleaning out the bad placements and reorganization started in 2013, which resulted in excellent achievements in 2014. We plan to use 2015 and the following two years for more efficient acting on the domestic and foreign markets in order to attract a foreign strategic partner. Knowing the deliberation and reservations which the investors have, this process would be a gradual one: First, by attracting a credit line with a longer repayment period; then, in the form of subordinated debt to make efficient use of the time for them to meet the Bank and its processes. In the end, our primary objective i.e. primary project is our complete consolidation and reorganization which will enable us to function as a modern bank which will be able to compete with the world banking trends in line of attracting foreign financial strategic partners.

In which way is Stopanska banka a.d. Bitola providing support for the socio-economic development in Macedonia?

One of the strategic objectives determined with the business policy and the development plan of the Bank is to take consistent care for the social good. In accordance with this strategic determination, the Bank in 2014 was constantly and actively included in the different projects and activities of public and social nature.

  • In 2014 the Bank continued its long-term tradition with humane character to help the protégés in the Primary School “Gjorgji Sugarev” in Bitola;
  • Stopanska banka a.d. Bitola donated funds for construction of the temple “Ss. Konstantin and Elena” in Skopje;
  • Stopanska banka a.d. Bitola supported the International youth art-festival “Bitola – an open city”;
  • The bank sponsored the equipping of the city pool “Atina Bojadzi” in Ohrid;
  • The bank gave donation to the Association of children with autism and the children with Asperger’s Syndrome.

We are especially proud of the cooperation which the Bank has with the Association of children with autism and Asperger’s syndrome because the constant support which we are providing is promoting and animating their creativity and talents through adaptation of their drawings and other pieces of art into the marketing materials of the Bank.

Unlike the other banks in Macedonia, Stopanska banka a.d. Bitola has its head-quarters beyond the capital. This is a great advantage, but of course, and a big responsibility for the bank to aid the local economic development in the South-West region of Macedonia. With its projects and plans, the Bank is actively included in supporting the small and medium businesses, and of course, the agriculture sector, which is one of the main activities of the population in this region.

The activities of public and social nature have continued in 2015 when the Bank was included in providing help for the flooded areas in the Pelagonija region. Furthermore, the support which the bank is providing to the development of the culture and sports is not lagging behind.

What are your future plans for development?

If I say that we should grow, because we are a medium bank on the level of the banking sector in Macedonia, this will not be the most precise definition of the plan for development of Stopanska banka a.d. Bitola. Our objective is to continue the trend for growth of the crediting scope in healthy and sustainable business projects, which will improve the economic position of Macedonia. Our goal is to gain bigger trust within the clients and to use it, in order to increase the overall capital of the Bank which will be placed into the function of the business. These are the more general goals, but they are presented in details in several business plans and policies of the Bank, which are very ambitious.

In the very end, I would conclude that a given banking and financial system does not recognize small or big, but good or bad, successful or unsuccessful. Therefore, our primary goal is to be good and successful, and of course, to always improve and upgrade in all segments of our work, such as relations with clients, the offer of products and services, relations towards the community, etc. In any case, we must not forget the investments in the employees and managers.

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