CURRENT BANKING TRENDS IN MACEDONIA

Global Banking & Finance Review spoke with Mr. Vladimir Eftimoski,  CEO of Stopanska banka a.d. Bitola to find out the current banking trends in Macedonia.

What are the current trends you see taking place in the banking sector in Macedonia? What are the challenges and opportunities? 

Mr. Vladimir Eftimoski

Macedonian economy is in a specific and complex condition. Early parliamentary elections have been delayed twice so far and for a moment the political crisis overflew the banking system resulting in withdrawal of part of the retail deposits. What is positive and perspective is that retail clients relatively fast recognized that the banking system in the country is safe and stable, thus the deposit return process commenced, even increasing the scope before the crisis. Unfortunately in the beginning the will and responsibility of those who should have surpassed the political crisis was missing, but is now finally resolved by dialogue and arrangement. Other trends in the banking sector mainly depended on amendments to a range of regulations which directly and indirectly caused changes in the banking market. Starting from amendments to the Public Notary Law, Enforcement Law, up to the decisions of the Central bank related to the treatment of writing-off non-performing loans and foreign transactions. As a result, in the last period, the banking sector as well as the entire economy was rather inert. Crediting trend is not increasing but is anyhow stable and positive, while deposit portfolio, except for the short crisis period from April-May, can be evaluated as positive and exceptionally stable. These challenges for the group of medium-sized banks, as Stopanska banka a.d. Bitola, are extremely advantageous. They represent a possibility for greater increase of the market share and opportunity to clear our loan portfolio. We have quite successfully utilized the banking market inertness; thus by 30.06.2016 the Bank increased total assets  by 14%, dominated by retail loans by 39% compared to the same period last year. The Bank has additionally cleared up nonperforming loan portfolio. The participation of nonperforming loans in the total loan portfolio is 2.97% and the nonperforming loan coverage ratio is 123.2%, being an extraordinary sound indicator for the Bank operation.

How are customer behaviours and the increased movement towards cashless transactions changing banking in Macedonia?

Related to this issue Macedonia is advantageous compared to the countries in the region. We have good communication infrastructure, strong mobile network coverage and Internet access throughout most of the country. Most of the population gravitates in the Skopje region, reducing even further the need of better infrastructure connections. In this setup majority of corporate clients are focused to electronic services and payments, while retail still prefers cash payments, especially aged groups of clients and retired persons. The trend of cashless payments and electronic services, is intensified with the renewal of the client base and replacement of pensioners with a new client base. The banking system, but especially medium-sized banks such as Stopanska Banka a.d. Bitola, are focused on introducing new and optimizing existing electronic services. In the past period, the Bank has upgraded the bank electronic system, introduced M-payment System, the website upgrade process is ongoing, and issue and processing of two new brands of MasterCard has started. To induce the trend of use of these services, in addition to introducing relevant bonus schemes and beneficial provisions for their use, technical support is provided to aged clients indicating their advantages, possibility of 24-hour access and facilitation related to fast services without queuing and personal presence.

Let’s talk for a minute about product development. What drives product creation at Stopanska banka a.d. Bitola? What role does technology play?

Our bank pays special attention to its permanent development in the banking industry, as well as to the needs of younger generation clients. It is of particular importance that this occurs in conditions where the clients have still not changed their habits entirely, and to serve them properly, a widespread branch network is required throughout the country. In addition to investing in new services and technologies we are oriented to their promotion and marketing. Product and service development is not a guarantee that they will be accepted in the market. The constant need for their promotion and clarification to the clients, is what differentiates us from the other banks in the market.  Our promotion and sales are not oriented only in direction of meeting targets. Our basic mission with the promotion is presenting the benefits offered by the new services and technology.

Has the demand for credit from corporates increased?

Macedonia is a country with a small open economy, where as a principle, external economic movements do not have major impact on the domestic product demand and spending. In other words, we are a small-scale production country in absolute numbers, and irrelevant of how much we produce, the quantity can be absorbed by foreign markets, if competitive products are offered. Consequently, our corporate sector was not considerably affected by the world economic crisis, thus the need for borrowing did not reduce. However, in conditions of internal political crisis, the investors’ concern increased as numerous investment projects were postponed. Therefore as I mentioned in the beginning, the resolution of this political deadlock is a key factor for further development of our economy. Corporative loan cycle increased, but with different investment purposes. In the past long-term investment loans were required, but now the emphasis is put on liquidity, working capital and investment refinancing. These changes encompass further increase of corporate loans, which now estimates to 10% on annual level. Stopanska banka a.d. Bitola relatively fast adapted to the new situation. Now our credit conditions and products and focused on SME segment where there is greatest need for borrowing. In 2015 it raised by 15% which is over the market increase. This increase mainly occurred in the SME segment, which is more profitable compared to segment of large corporates.

In what ways does your corporate banking division assist clients in managing their risk and enhance their revenue?

Risk management is one of the key factors accounted in our Bank, in terms of balance growth and development of the Bank. We have a special sector and a special service in charge of risk management. Such operational organization is in compliance with the world’s banking standards dividing sales and risks. Sales Sector is responsible for monitoring business and clients’ plans by analysing their balance, while Risk Sector executes monitoring, but in terms of risks. This sector perceives soft-spots in their balances, makes analyses of the cash flow during the loan period and the financial repayment capacity of the relevant client. In this analysis, sales is mainly focused on advisory and analytical aspects of income increase, while the organizational part of risk management makes analyses whether the relevant client has dimensioned its business in optimum profitable range and whether its liquidity and solvency is sufficient to realize the undertaking. This symbiosis of both analyses are key for the client to undertake sufficiently acceptable risk to increase its profitability, and at the same time avoiding the exposure of the Bank to a loan risk.

Do you have any ongoing projects you’d like to share with us?

Stopanska Banka a.d. Bitola is continuously developing numerous projects. In addition to constant internal projects to optimize our operations and operational technology, we permanently develop projects in terms of introduction of new services and products. We are currently completing three key projects aimed at development of new, user-friendly website, introducing two new MasterCard products with contactless payment, M-payment service and a multichannel distribution system. And we will not stop here. We have a number of projects upgrading our information system. This will additionally simplify and accelerate the processes, helping us to become more competitive and efficient in the market.

What are your current development plans?

At the moment we are focused on an activity that has not been executed by any bank or company in Macedonia. We are in process of issuing corporate bond as a hybrid financial instrument. This idea is part of the strategy to attract strategic investors that will support further development and growth of the Bank. The assets from sales of the corporate bond will be used for credit activities in corporate sector which will support the Bank growth in the next five years. In this period we will intensify our performance, increasing our market share, profitability and efficiency. Our intention is to impose ourselves as a factor in the Macedonian banking market, with dominant domestic capital that will be interesting for acquisition or recapitalization by a foreign strategic partner.  This approach, in the technology segment as well as the other financial operational segments, will distinguish Stopanska banka a.d. Bitola as a most innovative, modern and efficient bank in the Macedonian banking market.

Global Banking & Finance Review spoke with Mr. Vladimir Eftimoski,  CEO of Stopanska banka a.d. Bitola to find out the current banking trends in Macedonia.

What are the current trends you see taking place in the banking sector in Macedonia? What are the challenges and opportunities? 

Mr. Vladimir Eftimoski

Macedonian economy is in a specific and complex condition. Early parliamentary elections have been delayed twice so far and for a moment the political crisis overflew the banking system resulting in withdrawal of part of the retail deposits. What is positive and perspective is that retail clients relatively fast recognized that the banking system in the country is safe and stable, thus the deposit return process commenced, even increasing the scope before the crisis. Unfortunately in the beginning the will and responsibility of those who should have surpassed the political crisis was missing, but is now finally resolved by dialogue and arrangement. Other trends in the banking sector mainly depended on amendments to a range of regulations which directly and indirectly caused changes in the banking market. Starting from amendments to the Public Notary Law, Enforcement Law, up to the decisions of the Central bank related to the treatment of writing-off non-performing loans and foreign transactions. As a result, in the last period, the banking sector as well as the entire economy was rather inert. Crediting trend is not increasing but is anyhow stable and positive, while deposit portfolio, except for the short crisis period from April-May, can be evaluated as positive and exceptionally stable. These challenges for the group of medium-sized banks, as Stopanska banka a.d. Bitola, are extremely advantageous. They represent a possibility for greater increase of the market share and opportunity to clear our loan portfolio. We have quite successfully utilized the banking market inertness; thus by 30.06.2016 the Bank increased total assets  by 14%, dominated by retail loans by 39% compared to the same period last year. The Bank has additionally cleared up nonperforming loan portfolio. The participation of nonperforming loans in the total loan portfolio is 2.97% and the nonperforming loan coverage ratio is 123.2%, being an extraordinary sound indicator for the Bank operation.

How are customer behaviours and the increased movement towards cashless transactions changing banking in Macedonia?

Related to this issue Macedonia is advantageous compared to the countries in the region. We have good communication infrastructure, strong mobile network coverage and Internet access throughout most of the country. Most of the population gravitates in the Skopje region, reducing even further the need of better infrastructure connections. In this setup majority of corporate clients are focused to electronic services and payments, while retail still prefers cash payments, especially aged groups of clients and retired persons. The trend of cashless payments and electronic services, is intensified with the renewal of the client base and replacement of pensioners with a new client base. The banking system, but especially medium-sized banks such as Stopanska Banka a.d. Bitola, are focused on introducing new and optimizing existing electronic services. In the past period, the Bank has upgraded the bank electronic system, introduced M-payment System, the website upgrade process is ongoing, and issue and processing of two new brands of MasterCard has started. To induce the trend of use of these services, in addition to introducing relevant bonus schemes and beneficial provisions for their use, technical support is provided to aged clients indicating their advantages, possibility of 24-hour access and facilitation related to fast services without queuing and personal presence.

Let’s talk for a minute about product development. What drives product creation at Stopanska banka a.d. Bitola? What role does technology play?

Our bank pays special attention to its permanent development in the banking industry, as well as to the needs of younger generation clients. It is of particular importance that this occurs in conditions where the clients have still not changed their habits entirely, and to serve them properly, a widespread branch network is required throughout the country. In addition to investing in new services and technologies we are oriented to their promotion and marketing. Product and service development is not a guarantee that they will be accepted in the market. The constant need for their promotion and clarification to the clients, is what differentiates us from the other banks in the market.  Our promotion and sales are not oriented only in direction of meeting targets. Our basic mission with the promotion is presenting the benefits offered by the new services and technology.

Has the demand for credit from corporates increased?

Macedonia is a country with a small open economy, where as a principle, external economic movements do not have major impact on the domestic product demand and spending. In other words, we are a small-scale production country in absolute numbers, and irrelevant of how much we produce, the quantity can be absorbed by foreign markets, if competitive products are offered. Consequently, our corporate sector was not considerably affected by the world economic crisis, thus the need for borrowing did not reduce. However, in conditions of internal political crisis, the investors’ concern increased as numerous investment projects were postponed. Therefore as I mentioned in the beginning, the resolution of this political deadlock is a key factor for further development of our economy. Corporative loan cycle increased, but with different investment purposes. In the past long-term investment loans were required, but now the emphasis is put on liquidity, working capital and investment refinancing. These changes encompass further increase of corporate loans, which now estimates to 10% on annual level. Stopanska banka a.d. Bitola relatively fast adapted to the new situation. Now our credit conditions and products and focused on SME segment where there is greatest need for borrowing. In 2015 it raised by 15% which is over the market increase. This increase mainly occurred in the SME segment, which is more profitable compared to segment of large corporates.

In what ways does your corporate banking division assist clients in managing their risk and enhance their revenue?

Risk management is one of the key factors accounted in our Bank, in terms of balance growth and development of the Bank. We have a special sector and a special service in charge of risk management. Such operational organization is in compliance with the world’s banking standards dividing sales and risks. Sales Sector is responsible for monitoring business and clients’ plans by analysing their balance, while Risk Sector executes monitoring, but in terms of risks. This sector perceives soft-spots in their balances, makes analyses of the cash flow during the loan period and the financial repayment capacity of the relevant client. In this analysis, sales is mainly focused on advisory and analytical aspects of income increase, while the organizational part of risk management makes analyses whether the relevant client has dimensioned its business in optimum profitable range and whether its liquidity and solvency is sufficient to realize the undertaking. This symbiosis of both analyses are key for the client to undertake sufficiently acceptable risk to increase its profitability, and at the same time avoiding the exposure of the Bank to a loan risk.

Do you have any ongoing projects you’d like to share with us?

Stopanska Banka a.d. Bitola is continuously developing numerous projects. In addition to constant internal projects to optimize our operations and operational technology, we permanently develop projects in terms of introduction of new services and products. We are currently completing three key projects aimed at development of new, user-friendly website, introducing two new MasterCard products with contactless payment, M-payment service and a multichannel distribution system. And we will not stop here. We have a number of projects upgrading our information system. This will additionally simplify and accelerate the processes, helping us to become more competitive and efficient in the market.

What are your current development plans?

At the moment we are focused on an activity that has not been executed by any bank or company in Macedonia. We are in process of issuing corporate bond as a hybrid financial instrument. This idea is part of the strategy to attract strategic investors that will support further development and growth of the Bank. The assets from sales of the corporate bond will be used for credit activities in corporate sector which will support the Bank growth in the next five years. In this period we will intensify our performance, increasing our market share, profitability and efficiency. Our intention is to impose ourselves as a factor in the Macedonian banking market, with dominant domestic capital that will be interesting for acquisition or recapitalization by a foreign strategic partner.  This approach, in the technology segment as well as the other financial operational segments, will distinguish Stopanska banka a.d. Bitola as a most innovative, modern and efficient bank in the Macedonian banking market.