OTP Bank has been represented in the Ukrainian market since 1998, and is the recognised leader of Ukraine's financial sector. Wanda Rich, the editor of Global Banking & Finance Review, recently spoke with Volodymyr Mudryi to discuss customer relations, product development, challenges within the crucial Agri sector and how OTP Bank is tackling the changing environment following the impact of COVID-19.
Volodymyr began by telling Wanda about the initiatives that OTP Bank has implemented that he feels most contribute to its success. "Any real market leader is to have a clear competitive advantage for its actual and potential clientele," he said. "Our core advantage is deep, long expertise in lending processes, so we provide both standard and specific loans for special target groups of private individuals or their separate need satisfaction. This includes plenty of car loans, cash loans, different consumer loans, loans for new construction, mortgages and others.
"We do this better, faster and more efficiently than our competitors. Moreover, today we have the biggest range of retail loans and other products in the Ukrainian market among all the retail banks. That reflects our approach that a bank, in its classical understanding, has to be a core loan supplier to both household consumers and a country's economy in general. In the future, we plan to implement a mobile application focused on private individuals' lending in the simplest and fastest way."
With Agri-Business being such a core sector in Ukraine, the challenges Agri customers face are varied. "It's one of the most dynamic and export-oriented sectors in Ukraine," Volodymyr said. "Many banks strive for leadership achievement and loan share growth in this sector. However, there are plenty of natural challenges quite common to Agri-Business, and probably everywhere to some extent. They include the risk of further yield loss or damage, collateral safety, prices volatility and exchange rate risks. The latest negatively impacted the EBITDA of Ukrainian Agri companies in 2019-2020 since they focused on export and faced losses, due to both UAH devaluation and revaluation, depending on the season.
"The 2020 pandemic strengthened some of these issues significantly: prices volatility increased the prices of core Ukrainian products like oil, and sugar fell on the global market. Surely, that could not help but harm Agri-Business' financial standing and its borrowers' status."
In light of these challenges, OTP Bank is supporting the growth of Agri-Business customers by opening up financial opportunities. "In 2020, OTP Bank continued to develop a unique and innovative local market project launched in 2017 — a separate unit for Agri-Business customers, which operates as a conveying unit," Volodymyr told Wanda. "This project aims to provide small- and mid-sized farmers and other Agri sector enterprises with different funding options, tariff bundles and other products adapted to their specific needs and features. In particular, the farmers can get funding just against warehouse receipts within nine days. Owing to this, OTP Bank has become a leader among all the creditors who work with this tool; the whole volume of warehouse receipts issued in OTP Bank's favour reached 24% of all such receipts issued in Ukraine.
"On top of that, in 2020 the bank entered proactive cooperation with different partners and concluded about 30 new partnership programmes with leading suppliers to Agri-Business," he went on. "Among them are Binfield, AgriPartner, WexlerAgro, UPG, Landtex, Timak Agro and other famous companies. Besides, the cooperation conditions with the actual partners and the leaders of the plant protection products market, e.g. Syngenta, UkraVit, АlfaSmartAgro and UkrAgroCom, were improved considerably. These programmes allowed us to fund our clients with a rate starting from 0.01% p.a.
"As a result, in 2020 the OTP Bank's loan volume to Agri-Business almost reached 45% of the overall bank's loan volume, while the whole loan volume of OTP Bank Agri Factory covered 360 borrowers – Agri companies."
Unsurprisingly, the bank has had to take measures to adapt to the current pandemic. "Our first and core goal was to protect our employees and the clientele from COVID-19 contamination as much as possible," Volodymyr explained. "First, we implemented the possibility of remote work for our employees, flexible working hours and free COVID tests. Then during 2020, the bank implemented a range of additional online services, including various applications, statement requests, instant payments and others via a mobile application to let our clients avoid visiting the bank's branches. For the business customers who suffered a lot from the quarantine restrictions, especially trade, HORECA and tourism, the bank proposed a specific loans restructuring programme to support them in such a completely different environment. Despite this, the quarantine restrictions and profitability decrease caused business activity to stop in some sectors.
"OTP Bank continued to provide loans both to legal entities and private individuals. Notably, due to the macroeconomic situation, the National Bank of Ukraine decreased the base rate to its historical minimum, down to 6% p.a. Thus, we managed to make our UAH loans to the business segment as affordable as possible, which was highly significant to our clientele in the current environment."
As one of the bank's top priorities, building strong customer relationships maintains considerable focus with OTP Bank. "Our bank's strategic vision is 'easy to deal with,' which we try to implement in our activities, including product development and client relations management," he said. "We constantly improve business processes to meet customers' needs and wants, which occur depending on the market and economic circumstances. For this purpose, regular collection of feedback from our customers was implemented in 2020. On top of this, we have launched a CRM system specifically for our premium clientele, which allowed us to take the quality of our services and client relations up a notch."
Customer relations goes hand-in-hand with product development at OTP Bank, and is the driver behind much of its innovation. "As I have already mentioned, OTP Bank has the biggest range of specific products, services and special offers, especially in loans, for both private individuals and business customers in the Ukrainian market," Volodymyr stated. "The main driver for the development and 'go-live' is the clientele and its needs, specific requests, financial behaviour and status. When we develop products we analyse these needs, take customer opinion polls and test our solution. That is the fastest way to become familiar with a customer.
"It is also an opportunity to make tailored offers under standard products if corresponding solutions for massive sales are inexpedient or as yet unneeded. Thus, the greatest value that technology brings to us is the possibility to make highly tailored offers to our clients easily, online and at the correct time."