The bank was founded ten years ago…
The bank has existed as a subsidiary since 1994. We became operative in 1995, so historically we are the first wholly foreign-owned bank in Bulgaria.
But, did not you resume operations with shares in the Agricultural Bank?
Yes, this was a different venture, which started in 1991 but then ended in 1994.
Could you give our readers a brief summary of the experience of Raiffeisen Bank in Bulgaria?
The beginning was not easy because the economic climate was very difficult at that time. We had the culmination of the difficulties in 1996 and 1997 with the banking crisis, and then with the introduction of the Currency Board which of course brought a lot of stability. Ever since I have to say the development of the bank has been very stable. The most dynamic development we have seen over the past two years appeared when we started opening branches throughout the country and the client base expanded. So we are not sure yet what the figures at the end of the year will show but if we look at September, we see we are the tenth largest bank according to assets and we expect that by the end of the year we should have reached the eighth position. We are still concentrating on corporate as customers but we have also started retail banking activities one and half years ago and they have also developed quite quickly.
You said you went through rough times in the beginning. The crisis even swallowed The Agricultural Bank but Raiffeisen decided to ask for a license as an independent bank. What made you invest in Bulgaria?
At that stage we decided to open a subsidiary, we had already been in the country for three years or so and had seen the potential. Since in the original venture we could not get the majority, we decided to do it alone. Overall it has to be seen as part of the strategy of our parent institution - Raiffeisen Zentralbank Austria, which wants to cover the whole region and this would not be complete without Bulgaria of course.
Did you perceive Bulgaria as a stepping board to other countries such as Turkey may be?
Not exactly because at the moment Bulgaria is our southernmost operation, we are not in Greece and we are not in Turkey. Of course the markets there are different and we have no intentions so far to go into these other markets. We are more concentrated on Central and Eastern Europe.
How would you qualify your relations with Raiffeisen Zentralbank Austria? How have they evolved since 96-97?
We have always been a fully owned subsidiary and the relationship has always been very close. We have the full support of our parent for the development here, and it has probably become even closer. Because in the beginning Raiffeisen Zentralbank started setting up subsidiaries in Central and Eastern Europe and over the past two or three years we have seen a stronger integration of these banks within the group framework and much closer cooperation with the other subsidiaries.
What would you consider to be the most important recent developments within the banking sector and what was your contribution to this development?
If we look at the period between 1994 and 2001, of course the most important decision was the introduction of the Currency Board, which really stabilized the situation, and later also led to a lot of investments in the financial sector. Raiffeisen came to the market earlier, we managed to survive the crisis quite well. During this period of time, we managed to establish ourselves as a serious and reliable bank, because there were essentially no other banks left. Then, step-by-step, we increased our presence in the corporate market, later also in retail with the opening of branches in different regions and with the according increase in staff and products. Nowadays, we offer essentially all the products that you can find in western markets.
We have seen the situation in Argentina. Somebody said Bulgaria could be in a similar situation because of the Currency Board. What is your opinion?
Everything will depend on the further decisions and policy of the government. If the same mistakes are made, this will lead more or less to the same results. But in contrast to Argentina, we are only in the beginning phase of the Currency Board - it was introduced only four years ago - and the gap between the development in Germany and Bulgaria has not been as big as it is between the Argentinean Peso and the US Dollar. And also the foreign debt is much smaller than the one in Argentina. Theoretically, there is a risk, and I think this is a good lesson for the decisions to be made here. But I think the risk is quite small.
Your bank is known as being in the so-called Group 3 among commercial banks...
Now, as from January 1st, we are already in the second group. We have a balance sheet of more than 450 million BGN and banks with more than 400 million are put into the second group.
Who is your main competitor and how do you like to differentiate from them in terms of products and services?
There are competitors in different areas, there is no single competitor we can point. Of course there are bigger banks than us - banks in group one. There is still a big gap between the three bigger banks - they are six and ten times bigger than the other banks if you look at their total assets. So, there is a high concentration of assets in Bulbank, United Bulgarian Bank and Savings Bank. At the same time, their market shares are declining and the market share gainers are in the second and third group. They are developing much faster. We believe that for last year we have been the best developing bank in Bulgaria. According to the September balance sheet we have an increase of 48% and by the end of the year it will be nearly 100%.
What are the reasons behind such growth?
We decided to go for organic growth and started opening branches much faster than in the past. Right now we have eleven branches, three more are to be opened by the end of February and then we will have another ten branches by the end of this year. It will give us a really good coverage of the most important areas of Bulgaria. We also managed to get good people for the branches and the head office here, excellent people with good experience in the market. The effects could be seen almost immediately. We have also managed to maintain the quality of our portfolio. That means we have no problem with our loans and we want to keep it that way also in future. | Did you participate in the tender of Expressbank?
No, we did not participate. We were mentioned in a lot of tenders as potentially interested. We have looked at various possibilities but finally decided not to go for it but to rely on our own strength.
What about Biochim bank?
We are not interested.
Although people are saying you are one of the potential future owners of the bank?
We are used to that. We have been mentioned as potentially interested buyers for Expressbank, the Central Cooperative Bank, now for Biochim. I will not be surprised if we are mentioned for DSK - Savings Bank. I can only tell you that we are not going to bid. This is not our strategy. We have principally decided to grow our own network because we believe it offers a better risk-reward ratio for us.
How are you financing this expansion?
We are financing it ourselves, out of our own cash flow that we generate. We also have the possibility to apply to our parent institution but at this stage we believe we can do it alone.
Let's talk a little bit more about your clients…
We started with loans to bigger companies and foreign-owned companies because this was the lowest risk group. Then, we moved to bigger Bulgarian companies and now we are working also with small and medium-sized companies mainly via our branches.
How do you see now the investment climate in Bulgaria?
I think there was initially a lot of interest in setting up operations in Bulgaria. Then people realized it was not that easy, there are quite a few risks involved. Now the new government is again interested in supporting and acquiring foreign investors. Definitely, as far as privatization is concerned, there is not much left. There is almost only the opportunity of green field investment and here the problem of Bulgaria is that the market is a bit too small and the purchasing power is limited. But I think that if the government continues to improve conditions and provides incentives for foreign investors, they should also succeed in that.
Is there any place left in the banking and finance sector for new entrants?
I would say that Bulgaria is already over banked, especially as far as dealing with the corporate sector is concerned. We have 35 commercial banks in Bulgaria, most of them rather small ones. Two thirds of the banking assets are concentrated in the three biggest banks. Those who are not among the first fifteen banks have a combined market share of not more than 10%. I think that it is more than natural that most of these banks will have to go out of business because they cannot be competitive in the long term. As far as foreign involvement is concerned, I do not think there will be new players because it is not attractive for anyone any more. But among the foreign banks there is a real potential for consolidation. And what is happening now with Biochim further proves it - we see mainly banks interested in the privatization who already have some presence and who believe that this will further enhance their efforts.
What is your opinion about Bulgaria joining the EU?
I think this is a natural process. Bulgaria is a part of Europe. On the other hand, the economic situation, especially the macroeconomic situation needs a lot of improvement. This is well understood by Bulgarians. With the initial indications given that within the second half of this decade there should be a fair chance of entry, this is realistic. But it will depend on the further efforts and achievements on the Bulgarian side, as well as the general political developments in Europe. You know that the EU is not yet a completely unified block and people have different opinions. But I definitely think there is a fair chance and it will be very advisable to have Bulgaria among the members of the EU.
Have you noticed any change in Bulgarian business with the new currency, the Euro?
We are very much involved as Raiffeisen Bank in the conversion of European currencies into the Euro, and we have seen significant interest mainly by private customers. Traditionally Bulgarians tend to keep savings in foreign currency rather than in local currency. The most important foreign currency here is still the US Dollar but the Euro will definitely take the second place. Our own expectations regarding demand for Euro and Euro deposits were actually surpassed by reality. There is quite a lot of business and travel going on between Bulgaria and the EU, so people are exchanging their Deutsche Marks, their Drachmas and Pesetas into Euros.
What advantages does Bulgaria have compared to neighboring countries as an investment destination?
We have one of the biggest advantages - the Currency Board and having a stable currency. There is also the very good educational base in Bulgaria. Traditionally they have been more oriented to the West than other countries from the former communist world. Language knowledge is much better than in most other countries in the region. People are very open-minded. These are probably the major assets. And of course the geographic location - the crossroads to Asia and to the Middle East - this should not be forgotten either.
How long have you been in the institution?
In Bulgaria I have been a bit more than a year, but for Raiffeisen I have been working for more than 14 years.
What do you consider to be your major achievement in the bank?
Most probably the very dynamic development that was initiated last year. It is showing now in the increased market share and in the overall result. I hope that we can stick to this dynamism so that we can grow further.
What do you plan for the future?
To continue as we have started, gradually expanding further, opening more branches, hiring more people, getting more market share and of course expanding the products that we offer with an adaptation as much as possible to the local market.
Do you have an encouraging message to our readers worldwide?
I would definitely recommend everyone to have a close look at Bulgaria. As far as I can see from the foreign investors we deal with, the majority is happy with what they have achieved in Bulgaria. There are still further fields that would need foreign investments and there is big potential. Tourism is of utmost importance. I would say in general the service industries have a lot of potential.
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