The FINANCIAL — ProCredit Bank, focusing on SMEs and agriculture, has seen a change in client behaviour since February as demand for long-term investment loans has been picking up again.
The FINANCIAL — ProCredit Bank, focusing on SMEs and agriculture, has seen a change in client behaviour since February as demand for long-term investment loans has been picking up again.
“Since summer 2012 we have observed that clients are more interested in keeping their businesses stable, than expanding. For that reason we were requested to provide mainly short-term loans just for turnover means. This trend is already changing and demand on bigger loans is on the rise,” said Sascha Ternes, General Director of ProCredit Bank.
ProCredit Bank lowered the rates for Term Deposits just a few days ago, which is supposed to be the first step of general lowering of interest rates.
“In my opinion, interest rates on deposits are too high in Georgia, and I expect them to come down this year. I do not wonder whether other banks will follow our example. Interest rates on loans, however, have stabilized during the last several months, and I would only see a potential for further decrease if the cost of funding were to significantly reduce in the future,” he added.
2012 was a financially successful year for ProCredit Bank Georgia. The Bank maintained its strong and stable market position as the third largest bank in the country, with total assets now exceeding GEL 1 billion. The loan and deposit portfolios grew by 7% and 4% respectively, and the Bank’s equity increased by 10%. The Bank still has the best loan portfolio quality, and a liquidity ratio of 39% which is way above the requirement. Net profit of GEL 22 million marks the best result in the Bank’s history, with a RoE (return on equity according to NBG) of 17% that outperforms the banking sector.
“During 2012 much attention was paid to further improving client service by simplifying and streamlining many processes and by redesigning branches in line with our new One-Stop-Banking concept, thus allowing even more customers to benefit from our enhanced, fast and efficient service. We have completed our new head-office building, a big project of the last few years. This clearly demonstrates our long-term commitment to, as well as our strong position in, the local banking sector. This building also reflects the main principles of our corporate philosophy as it fosters open communication and transparency. Total investment was around GEL 40 million.”
Q. What were the main challenges of 2012? How did you manage to overcome them?
A. During the second half of 2012 it was rather challenging to achieve substantial growth of business volumes, especially due to the low demand from the market. However we used this period for the successful implementation of many efficiency projects. The key element for that is a good team-spirit, which required frequent and transparent communication.
Q. According to ABG, the net profit of the banking sector was thrice reduced in 2012 compared to 2011. From your point of view, what caused such a big change? How did ProCredit Bank manage to end 2012 with increased net profit compared to 2011?
A. There has been increasing competition among banks over the last one to two years as supply has been higher than demand, thus resulting in lower interest rates on loans. As interest rates on deposits remained relatively stable this caused a reduction in the profit margins of banks. Furthermore, we could see an increase in loan loss provisions, as some banks had to create additional reserves for potential losses from problematic loans.
Our business model is rather conservative and risk-averse, which in combination with our stable operations and strong focus on our core competence (financing very small, small and medium sized businesses) has always resulted in a sustainable and strong financial performance, even in the recently difficult years. This is probably also one of the reasons why many other banks became more and more interested in our segment as well. Furthermore, due to efficiency gains we have been able to reduce our cost-to-income ratio from 72% in 2011 to 65% in 2012.
Q. The new government plans to subsidize more than a billion US Dollars in agriculture. How will this influence your business?
A. We are looking forward to new initiatives of the authorities with great interest. This is not only because we expect additional opportunities to grow our business volumes, since ProCredit Bank has the biggest market share in the financing of agriculture anyway, but also because in my opinion this part of the economy has been deserving of a lot more attention for a long time already, as it will be one of the main contributors to the country’s development.
Q. What are the main problems of the banking sector today?
A. The Georgian banking system has been very resilient throughout the global financial crisis, due to its high local requirements towards capitalization and liquidity, which are above international averages, thereby however making it quite costly to operate a bank here. On the macroeconomic level the high dollarization is another area of concern, as more than 70% of all loans or deposits are denominated in foreign currency, thus posing an exchange rate risk. In general I would wish that more depositors would save in Georgian Lari, which consequently will then also enable the banks to extend more loans in Lari. Finally I would also mention the lack of transparency, as many offers, advertisements and agreements do not always reflect the real conditions. ProCredit Bank has been a pioneer in raising the awareness of the population in that regard, and in engaging actively in the promotion of financial literacy.
Q. Have you changed/tightened bank security since the attacks on banks were reported? Have there been any changes in terms of security in the area of service desks and relations with customers?
A. Two years ago we introduced our concept of “One-Stop-Banking” which enables clients to perform cash transactions not only at closed cash-desks in our branches, but also at all Client Advisor places. This has been having a very positive impact on customer satisfaction. Of course, the recent bank robberies make us concerned, however they do not prevent us from further shrinking the number of closed cash-desks. For example in the capital’s district of Avlabari we have just opened a new Service Point, which as a pilot project is operating without any closed cash-desks at all. We rely on our modern and advanced security systems, which are all connected to our centralized monitoring office. Additionally we have now started to implement innovative new technologies, which make our branches quite an unattractive place for robbers.
Q. How would you evaluate ProCredit Bank Georgia in comparison to other countries?
A. The ProCredit Group operates in 21 other countries, and on a consolidated basis has been profitable throughout all of its years, which is quite unusual for an international banking group, especially during times of financial crisis. Our bank in Georgia is definitely among the largest and most successful institutions in the Group.
As of the end of December our branch network consisted of 58 outlets, and the total number of employees stood at 1,251 persons. A total of 89 new employees were hired in 2012, of which 56 were selected through the Young Bankers Programme.
I have been closely allied with Georgia since 1996 because of my profession, and also for private reasons as I met my wife here in Tbilisi just a year later. After living together for years in my home country of Germany, we and our two children are now permanently based here ever since I joined the Management of ProCredit in early 2007. By the way I am happy to announce that there will soon be happy changes in our family as we are expecting the birth of our third child.
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