The FINANCIAL — “Now when the financial crisis is over TBC bank is given huge opportunities to set ambitious growth plans both in the local and international market, plus Azerbaijan,” said Vakhtang Butskhrikidze, General Director of TBC Bank to The FINANCIAL.
In his previous interview with The FINANCIAL, Mr. Butskhrikidze stated that the high interest rates make it attractive for foreigners to open their deposits in Georgia banks and according to him each month deposits amounting to several million are opened by foreigners at TBC Bank.
To the question – does TBC Bank promote the above mentioned advantage in the international market? Butskhrikidze said “Yes, of course, we outline the big difference among interest rates in Georgia and in the international market. To encourage this, we took the decision to open our first representative office in Tel Aviv, Israel, We think that by the end of the year several representative offices will be added throughout the world,” Butskhrikidze said.
The year 2010 was quite profitable for TBC Bank, with total net profit of 45 million GEL, exceeding the financial results of 2007 by 17 million GEL. Butskhrikidze said that net income of 45 million GEL is not a high indicator as investors are mainly interested in return on capital which turned out to be 14% at TBC Bank in 2010.
“I strongly believe that in the next 5 years the banking sector will grow rapidly. However, we should not forget those mistakes the banks made in the years 2007 and 2008, the growth should be more dynamic. In the first half of 2008 the growth was 70% which meant that risks would not be manageable,” Butskhrikidze said.
Q. How has the demand for different banking products changed at TBC Bank?
A. The demand for different banking products depends on the country’s economic conditions. After the August war, for a year and a half, the focus was on deposit products, which was for a reason. Due to increased risks people took fewer decisions on spending and preferred to keep money for the future, consequently the number of deposits was increased. However, as the economy is returning back to its old indicators, there is expectation that the economy will stabilize and lead to growth. Consequently, from the second half of 2010 the demand increased for loans, and we forecast that within 2-3 years the tendency for loans will be stable.
Q what is prognosis on rates on deposits and loans for the next months?
A. Interest rates on loans will be decreased; the fundamental base exists for this. However, first of all the interest rates on deposits should be decreased and this will happen later, Everything depends on the next 3-4 months, what the bank sector’s behaviour will be regarding interest rates.
If the inflow of deposits will increase in huge sums from local as well as foreign markets, the interest rates on deposits will be decreased which automatically in several months will cause the rates on loans to decrease. TBC Bank always prefers to provide a low interest rate loan which carries lower risk. We are interested in creating the environment which gives us the opportunity to provide low rate loans.
Q. Out of banking products, which provides the largest share of profit?
A. If we discuss the issue according to segments, currently TBC Bank is a corporate and retail bank. Most of the profitability came from the corporate sector in 2010.
Historically we were a corporate bank and from 2007 we decided to enter the retail sector. When the company started expanding the chain, it coincided with the August war. Consequently we opened the chain and could not provide lending. We started developing the retail chain from 2010 and will continue making it a more profitable direction.
Q. In your opinion, which products will be most in demand in 2011?
A. We believe that the year 2011 will be active both from a deposit and lending side, not only at TBC but in the whole banking sector.
Q. From the year 2009 and during 2010 the Bank’s main strategy was to provide high interest rates on deposits. While at the end of 2010 the tendency was changed and banks chose low interest rates on deposits as their strategy. In your opinion, what were these changes governed by?
A. Due to the fact that in the first half of 2009 there was outflow of deposits, there was high competition on deposits and banks offered high interest rates. However in 2009 there was more than 40% liquidity in the market, which is quite high according to Georgian and international standards. There was necessity for the banks to start lending. For motivating lending banks started campaigns which caused a decrease in interest rates.
Q. The Bank had significantly decreased interest rates on mortgage loans at the end of the year 2010. You offered mortgage loans from 11% interest rate – what was the total amount distributed in that direction in 2010?
A. The two month campaign turned out to be quite successful and within this period only we increased our credit portfolio by 64 million GEL. The major aim of the campaign was to test the behaviour of clients, how they would respond to decreased interest rates.
Q. Out of the cards issued by TBC Bank, which types of cards are most popular?
A. The most successful card was Cosmo, specially designed for Georgian women. Cosmo Cardholders are offered different discounts at very wide range of merchants, which they visit for everyday shopping. Our experience shows, that if a consumer is offered even low discount at the merchant, this usually becomes a reason for them to choose it. In May we will have a big campaign of new cards and will offer completely new types of cards to society.
Q. How would you evaluate client’s loyalty towards TBC Bank before and after the crisis? In your opinion, what are the expectations of clients towards TBC Bank?
A. Client loyalty is vital for us. Each year TBC Bank conducts research which indicates that we have high outcomes. In 2010 we launched a big loyalty campaign – Smart Club. This is a long term project and has already incorporated 70,000 TBC Bank clients. This project is one of the most successful projects launched by Bank, which directly linked to the activities of our individual clients. Whether you make a transaction, open a deposit or take a loan within TBC Bank you’re given Smart Club points. Besides, TBC Bank constantly offers various events, exclusives to the members of Smart Club. Smart Club has attracted some tens of thousands of people from the very beginning and we’ll be launching bigger marketing activities to further promote this project.
TBC Bank’s Smart Club is also the most large-scale social media project in Georgia. Currently the number of fans of Smart Club page on Facebook exceeds almost 130 000 and this number significantly increases every day. We pay lots of attention to clients and spend millions each year on increasing their loyalty.
Q. How would you evaluate the activities of corporate clients in 2010?
A. Corporate banking plays an important role in the creation of competitive advantage of TBC Bank. TBC Bank’s indicators in this direction are increasing annually. At the same time, the bank’s structure and operation methodology is being developed in order to improve quality of service.
In 2010 the whole banking sector increased financing of corporate clients, which had been restricted since the second half of 2008. This year we plan to have an increase in the corporate sector by 25%. As for 2010, we managed to have a 35% increase on corporate clients lending and deposits practically doubled.
Q. What will be TBC Bank’s offers for corporate clients in 2011?
A. Our approach will be more client-oriented in 2011. We have already considered with whom to continue partnership. We will try to acknowledge what the demand from corporate clients is and try to satisfy these demands from the Bank’s side.
Q. In your opinion, what challenges does the Georgian banking sector face in 2011?
A. I believe that there will be more activities in retail as well as corporate sectors in 2011. However, National Bank of Georgia has restricted banks’ regulations from a liquidity point, capital adequacy and reserves were increased also. Whereas in the banking system the credit activities growth consisted of 25% in 2010, we expect this number to be 15-20% in 2011.
Q. TBC Bank is represented in Azerbaijan also by TBC Credit. How does Azerbaijan’s banking sector differ from that of Georgia’s? How is this reflected in numbers?
A. The banking sector in Azerbaijan is developing dynamically. Compared to 2009 when the banking sector in Georgia decreased in Azerbaijan the market was increasing. However the percentage increase was lower in Azerbaijan than in Georgia in 2010. The financial crisis did not influence Azerbaijan’s economy much, as the country is an exporter and has income from oil.
The banking sector in Azerbaijan will grow. However as opposed to in Georgia where the banking sector is presented by local as well as international banks, and there is high competition, in Azerbaijan we see more local banks and international institutions are not present there.
Q. Did the demand for Gold Deposits change? Is gold currently considered a solid guarantee?
A. Demand for gold has increased not only in Georgia but throughout the world. If we observe the price change of gold, we will see permanent growth. The gold campaign which we started two years ago was successful. Those who believed and trusted us received a 16% interest rate.
Q. How did the demand for GEL and USD deposits change in 2010?
A. There was a slight tendency of an increasing share of GEL in lending and deposits. However it is vital to decrease the level of dollarization in the banking sector, which is a long term issue, needs years and cooperation from the banks’ side, from NBG as well as the Government. GEL, which is mainly used for daily transactions, is to become a saving mean.
Q. Does TBC Bank intend to expand the chain in 2011? How many branches and service centres does TBC Bank currently have?
A. TBC Bank will add seven new branched and service centres during the year in Tbilisi as well as outside the capital. We are maximally trying to cover and provide our service throughout Georgia. Currently TBC Bank operates 44 branches.
Q. Does the Bank plan to form an agreement with an online payment system like PayPal?
A. First of all the Government should switch to the system. As soon as this happens, we will be switched to the system also.
Q. In February, TBC Bank announced that internet banking is already available in Safari and Firefox. However, using Bank Client is impossible on Mac computers. Does the Bank plan to implement any changes in these directions?
A. TBC Bank will have completely new internet banking by the end of 2011. This will be a modern programme based on high-edge technologies, which will be more flexible than modern technologies.
Q. In 2010 TBC Bank accumulated more than 100,000 likes on facebook. Do you intend to use such a critical mass for other purposes?
A. We believe that together with the development of social networks, TBC Bank’s participation in this system is important. Through facebook and other pages we try to raise awareness of our products and company, and gain potential clients.
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