EximBank stays tuned to market opportunities
What are EximBank’s main achievements this year and what aspects have not gone to plan?
Our main objective is to channel as much funding as possible into the real economy, into companies, and I can say that we have managed to achieve that target. We have employed a two-fold approach. On the one hand, we’ve focused on raising the utilization rate of the financial instruments that the bank provides in the name and on behalf of the State (guarantees and insurance), as EximBank is the main vehicle through which public funds are distributed in the economy in order to increase the competitiveness of domestic companies. Thus, we have implemented simplified workflows, resulting from an efficient separation of our activities conducted as an agent for the State from our typical operations as a commercial bank. We have launched new products (counter guarantees in the name and on behalf of the State, the SME debt guarantee ceiling), and, more importantly, we have succeeded in communicating much more efficiently with our partners – the other banks in the market. I’m saying that because the commercial banks’ response to the launching of the debt guarantee ceiling was extraordinary. Of the total 200 million lei debt guarantee ceiling EximBank has made available to commercial banks for their SME lending operations this year, lenders have requested and obtained guarantees worth 125 million lei combined. We believe the entire debt guarantee volume is going to be used by the end of the year, generating positive outcomes for all parties involved in financing agreements.
Access to state guarantees provides support to SMEs in the process of obtaining much-needed financing, and, on the other hand, it allows partner banks to speed up lending, while risks are consistently covered. The guarantees offered by the State to companies through EximBank represent an extraordinary, accessible resource, and we encourage small and medium-sized companies, and especially commercial banks to use that resource more.
As for our second area of interest, we have set our sights on developing commercial banking operations. We are aware that many people still regard EximBank as a bank exclusively dedicated to exporters. It is true that the bank’s name has a contribution to preserving such a perception, but the business community should know that things have changed.
The bank has gone through a complex modernization process in the last four years, adapting products and services to new standards imposed by customers and the competition. Thus, in 2016, EximBank has been able to tackle the market fully prepared to offer the corporate segment a complex and attractive portfolio of products and services for all Romanian companies. As a result, in the first nine month of the year we posted a 15 per cent increase in our loan exposure compared to the same 2015 period, while the non-performing loan rate remained below market average. In the complementary product segment, we recorded higher revenues from foreign currency transactions (+52 per cent) and cash management (+10 per cent). Thus, the bank ended the third quarter with a gross profit of 40 million lei, 54 per cent above the budgeted level.
As for the second half of your question, as always, we could have done a lot more and a lot better…
What are the bank’s main targets for 2017?
Next year, we plan to maintain the bank’s rapid growth, as seen in the last few years, while our main preoccupation still focuses on building a solid relationship with the business community, in order to consolidate our status as its preferred financial partner. Therefore, we want to develop our business and our customer base, and we are going to stay focused on supporting and promoting exports and Romanian investments abroad, on providing financial support to projects that have a significant impact at local and regional level. We also plan to support SME development and competitiveness-boosting programs. With regard to SMEs, I would like to point out that we plan to employ a more dynamic approach and we have already set the stage for that process. This year, we have launched two new products exclusively dedicated to that segment (Line of credit for current operations and Credit for investments), and the bank’s website offers a pre-selection application that allows SMEs to find out online if they are eligible for those products. We are able to grant loans very quickly and we can add a full range of products, including guarantees and other complementary products such as factoring or cash management. We are also going to analyze the SME Debt Guarantee Ceiling and make a decision on whether to keep the product and possibly raise the ceiling. So, we are confident that we are going to extend our exposure in this important segment for the economy in 2017. We have, therefore, outlined the main lines of action for next year, but, as with any strategy, we may still see changes, reflecting the macroeconomic objectives set by the authorities. I am optimistic about our capacity to reach our objectives and we are well prepared to deal with any kind of challenges.
What services and products can give EximBank an edge in front of its competitors in the commercial banking segment? Which aspects can give it a competitive advantage?
It is true that we are competing in a segment with very strong banks, but I think there are enough opportunities that are waiting to be tapped in this market, especially since we have no intention of conquering the entire market. I believe that our main advantage is that we’ve quickly managed to put together a very well-positioned product package in the market. I can’t say there’s anything missing, and it offers us much flexibility in preparing financial packages. Practically, we are now a financial “mall” for the business community, offering loans, treasury products and services, cash management, trade finance and factoring as well as state guarantees and insurance. All those services and products are accompanied by personalized consultancy, which supports us in our effort to build an integrated banking relationship with our customers. We rely on that model because we are confident that in the long run success will favor banks that have a closer and direct relation with their customers and are able to provide solutions “tailored to the clients’ needs”.
What new developments are expected to influence Romania’s banking market in 2017?
The banking system is still going through challenging times, generated both by the domestic and international macro-economic context and by uncertainties in the legal framework. The margins between active and passive interest rates have declined considerably, which, together with the low interest rates, continue to affect profitability and force bank managers to find extra sources of revenues or to cut expenses. I believe this trend is here to stay, and due to the international background characterized by very low interest rates and persistent excessive liquidity in the Romanian banking system we may see further cuts in the ROBOR indices.
As for lending, even though official estimates indicate a sizeable potential in the corporate segment (around 100 billion lei – enough to double the volume of loans for this category of customers), debt aversion among entrepreneurs and legal uncertainties do not show any improved perspectives. I also believe we will continue to see a decline in the volume of loans denominated in foreign currency, as the low interest rates on domestic currency loans attract potential customers.
To what extent would you say the expected 2016 economic growth could generate an increased appetite for investments among companies and a more intense activity in the corporate segment for banks?
Currently, entrepreneurs are somewhat tempted to take a wait-and-see attitude regarding investment plans, watching closely the developments in the domestic and international economic and political contexts. However, I don’t think this year’s estimated five per cent economic growth could, on its own, be the trigger for relaunching investments, as we all know that the country’s strong economic advance has been fueled by consumption, while investments barely register and net exports have had a negative contribution. According to the feedback we receive, the business community wants a sustainable, long-term economic growth model. But, as I’ve said on other occasions, economic reforms are essential for ensuring a sustainable economic growth. Long-term competitiveness development should remain a major objective when macro-economic policies are designed and implemented, and the list of priorities should include restructuring of the revenue collection, health, and education systems as well as increasing EU fund absorption and infrastructure investments.
As for EximBank, it has both the capacity and resources to support companies’ investment projects, and we hope our potential will be enhanced in the near future, with the addition of new responsibilities specific to a development bank, allowing us to create efficient financing and support mechanisms for the domestic economy. It is true that the development bank project, which has been up for public debate for more than a year, has seen delays in implementation, but we are confident that the legislative framework is soon revised, so we can have a contribution to projects that bring new jobs, facilitate the development of local infrastructure and support a sustainable economic growth.
Our main objective is to channel as much funding as possible into the real economy, into companies, and I can say that we have managed to achieve that target. We have employed a two-fold approach. On the one hand, we’ve focused on raising the utilization rate of the financial instruments that the bank provides in the name and on behalf of the State (guarantees and insurance), as EximBank is the main vehicle through which public funds are distributed in the economy in order to increase the competitiveness of domestic companies. Thus, we have implemented simplified workflows, resulting from an efficient separation of our activities conducted as an agent for the State from our typical operations as a commercial bank. We have launched new products (counter guarantees in the name and on behalf of the State, the SME debt guarantee ceiling), and, more importantly, we have succeeded in communicating much more efficiently with our partners – the other banks in the market. I’m saying that because the commercial banks’ response to the launching of the debt guarantee ceiling was extraordinary. Of the total 200 million lei debt guarantee ceiling EximBank has made available to commercial banks for their SME lending operations this year, lenders have requested and obtained guarantees worth 125 million lei combined. We believe the entire debt guarantee volume is going to be used by the end of the year, generating positive outcomes for all parties involved in financing agreements.
Access to state guarantees provides support to SMEs in the process of obtaining much-needed financing, and, on the other hand, it allows partner banks to speed up lending, while risks are consistently covered. The guarantees offered by the State to companies through EximBank represent an extraordinary, accessible resource, and we encourage small and medium-sized companies, and especially commercial banks to use that resource more.
As for our second area of interest, we have set our sights on developing commercial banking operations. We are aware that many people still regard EximBank as a bank exclusively dedicated to exporters. It is true that the bank’s name has a contribution to preserving such a perception, but the business community should know that things have changed.
The bank has gone through a complex modernization process in the last four years, adapting products and services to new standards imposed by customers and the competition. Thus, in 2016, EximBank has been able to tackle the market fully prepared to offer the corporate segment a complex and attractive portfolio of products and services for all Romanian companies. As a result, in the first nine month of the year we posted a 15 per cent increase in our loan exposure compared to the same 2015 period, while the non-performing loan rate remained below market average. In the complementary product segment, we recorded higher revenues from foreign currency transactions (+52 per cent) and cash management (+10 per cent). Thus, the bank ended the third quarter with a gross profit of 40 million lei, 54 per cent above the budgeted level.
As for the second half of your question, as always, we could have done a lot more and a lot better…
What are the bank’s main targets for 2017?
Next year, we plan to maintain the bank’s rapid growth, as seen in the last few years, while our main preoccupation still focuses on building a solid relationship with the business community, in order to consolidate our status as its preferred financial partner. Therefore, we want to develop our business and our customer base, and we are going to stay focused on supporting and promoting exports and Romanian investments abroad, on providing financial support to projects that have a significant impact at local and regional level. We also plan to support SME development and competitiveness-boosting programs. With regard to SMEs, I would like to point out that we plan to employ a more dynamic approach and we have already set the stage for that process. This year, we have launched two new products exclusively dedicated to that segment (Line of credit for current operations and Credit for investments), and the bank’s website offers a pre-selection application that allows SMEs to find out online if they are eligible for those products. We are able to grant loans very quickly and we can add a full range of products, including guarantees and other complementary products such as factoring or cash management. We are also going to analyze the SME Debt Guarantee Ceiling and make a decision on whether to keep the product and possibly raise the ceiling. So, we are confident that we are going to extend our exposure in this important segment for the economy in 2017. We have, therefore, outlined the main lines of action for next year, but, as with any strategy, we may still see changes, reflecting the macroeconomic objectives set by the authorities. I am optimistic about our capacity to reach our objectives and we are well prepared to deal with any kind of challenges.
What services and products can give EximBank an edge in front of its competitors in the commercial banking segment? Which aspects can give it a competitive advantage?
It is true that we are competing in a segment with very strong banks, but I think there are enough opportunities that are waiting to be tapped in this market, especially since we have no intention of conquering the entire market. I believe that our main advantage is that we’ve quickly managed to put together a very well-positioned product package in the market. I can’t say there’s anything missing, and it offers us much flexibility in preparing financial packages. Practically, we are now a financial “mall” for the business community, offering loans, treasury products and services, cash management, trade finance and factoring as well as state guarantees and insurance. All those services and products are accompanied by personalized consultancy, which supports us in our effort to build an integrated banking relationship with our customers. We rely on that model because we are confident that in the long run success will favor banks that have a closer and direct relation with their customers and are able to provide solutions “tailored to the clients’ needs”.
What new developments are expected to influence Romania’s banking market in 2017?
The banking system is still going through challenging times, generated both by the domestic and international macro-economic context and by uncertainties in the legal framework. The margins between active and passive interest rates have declined considerably, which, together with the low interest rates, continue to affect profitability and force bank managers to find extra sources of revenues or to cut expenses. I believe this trend is here to stay, and due to the international background characterized by very low interest rates and persistent excessive liquidity in the Romanian banking system we may see further cuts in the ROBOR indices.
As for lending, even though official estimates indicate a sizeable potential in the corporate segment (around 100 billion lei – enough to double the volume of loans for this category of customers), debt aversion among entrepreneurs and legal uncertainties do not show any improved perspectives. I also believe we will continue to see a decline in the volume of loans denominated in foreign currency, as the low interest rates on domestic currency loans attract potential customers.
To what extent would you say the expected 2016 economic growth could generate an increased appetite for investments among companies and a more intense activity in the corporate segment for banks?
Currently, entrepreneurs are somewhat tempted to take a wait-and-see attitude regarding investment plans, watching closely the developments in the domestic and international economic and political contexts. However, I don’t think this year’s estimated five per cent economic growth could, on its own, be the trigger for relaunching investments, as we all know that the country’s strong economic advance has been fueled by consumption, while investments barely register and net exports have had a negative contribution. According to the feedback we receive, the business community wants a sustainable, long-term economic growth model. But, as I’ve said on other occasions, economic reforms are essential for ensuring a sustainable economic growth. Long-term competitiveness development should remain a major objective when macro-economic policies are designed and implemented, and the list of priorities should include restructuring of the revenue collection, health, and education systems as well as increasing EU fund absorption and infrastructure investments.
As for EximBank, it has both the capacity and resources to support companies’ investment projects, and we hope our potential will be enhanced in the near future, with the addition of new responsibilities specific to a development bank, allowing us to create efficient financing and support mechanisms for the domestic economy. It is true that the development bank project, which has been up for public debate for more than a year, has seen delays in implementation, but we are confident that the legislative framework is soon revised, so we can have a contribution to projects that bring new jobs, facilitate the development of local infrastructure and support a sustainable economic growth.
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