Established in 1972 as a branch bank of Ljubljanska Banka of Slovenia, you are today an autonomous bank and among the largest in Macedonia. But before going into more details, can you give us a brief outline of the main steps that mark the development of the bank since its creation?
Originally established as a branch of Ljubljanska Banka in 1972 it has since then gone through different forms of organization due to some changes in the political and economical environment of former Yugoslavia; 51% were held by Ljubljanska Banka until '94. Since then MAKEDONSKA BANKA is an incorporated company where more than 80 shareholders are Macedonian companies. No one has the majority, the larger shareholders possess some 10 to 15%. MAKEDONSKA BANKA has been the third largest bank in Macedonia according to its market share, most of all we are talking about the participation of the total placement of loans in Macedonia. The first one is still Stopanska Banka, the second Komercijalna Banka and the three largest banks are controlling more than 65% of the total market. Our market share is below 10%, for deposits it is somewhere between 3 and 5 %, for loans between 5 and 8%.
Concerning the bank's competitiveness, in some areas we do have an advantage over the other banks, one of them is the good branch network; we have at the moment 10 branches out of Skopje throughout the country, 5 more are in preparation. So , we should be capable to increase the market share, especially now taking into account the changes of payment operations and ZPP (Bureau of payment operations) which is expected to happen starting July 1, when all these operation are going to be transferred to the banks. So, we are in the process of restructuring the bank accordingly.
All the banks are quoting the ZPP payment restructuration. Is it really the most significant reform within the banking system?
Many other reforms did or are taking place in the banking sector. They are the result of new law implementations. They aim at further liberalizing banks. But this change in payment operations is more technical, it regards the execution of the payments whether it will be ZPP or the banks. From the point of view of the banks, it is really important because for a foreigner it will mean the possibility to establish a direct relationship with the clients and, of course, to maintain our liquidity and to set up total procedures and policies for assets and liabilities management, which in this case was very difficult to get done so far.
I'd like to point out that MAKEDONSKA BANKA is very well established on the international market, we have more than 30 correspondent banks in the EU and US. MAKEDONSKA BANKA is also participating in almost every kind of foreign loans and credit lines which are at disposal for Macedonia, such as EBRD credit line, the Taiwanese credit line, the Italian one, German KW - but, what is important is that all of them are targeting the SME market. That is very interesting for us because during the year we have implemented a strategy of shifting the bank from a wholesale bank to a SME bank. I believe with this we have had a very good success. Previously, the bank was dealing with very limited number of large companies. Unfortunately, they became some of the biggest loss makers.
Therefore, during the last few years we have adopted a new policy - supporting mostly the SMEs which now cover more than 80% of our portfolio. This has finally given very good results in the portfolio.
Which sectors are you mainly providing loans to?
We have tried to make good distribution concerning our placements in several sectors, we don't have exposure of more than 15% in any of the sectors, unfortunately agriculture is very tiny. We are involved in different kind of businesses including car dealers, computer dealers, manufacturers working in cooperation with European companies. The agriculture is a problem, it is mainly excluded of all these credit lines. Therefore we don't have a very large engagement in the agriculture.
Between the reform and the privatization process, some banks have opened their capital to strategic investors. Has this competition intensification contributed to review your investment strategy?
The situation is the following: There are in Macedonia 22 banks, a number of emerging banks such as Tutunska Banka are being bought by foreign investors (Ljubljanska Banka from Slovenia and LHB Frankfurt). Others are closing to the first three banks. Last year for the first time we had foreign investors coming in the banking sector; so now we are facing new competition which will probably increase in the future. Now these banks are still in the process of internal restructuring, reorganization, generating new products etc. I believe there will be a tough competition in the next years.
We will make a proposal to the board of directors,
to the shareholders, somewhere in September or October
in order to start working on the due diligence of
the bank and the investment memorandum.. The danger
is that without identified foreign partner, the
bank may suffer in the future, not because of funding
problem, but the problem of the brand name, of technology,
of new image - these are the problems which will
really occur in the market. |
So far, we have worked out a strategy for the next three years and our assumption is that with the liability base that we are planning to create in the near future, we'll be competitive enough with the other banks. So, we believe that a foreign partner is very important for the brand image, technology, and know-how.
Which market would you most probably see your future partner to come from?
EU banks are certainly our best chance, because in the foreign trade the biggest partner of Macedonia is the EU. Stopanska Banka is now part of the EU through the buy out from the National Bank of Greece and this is certainly an advantage for the bank in future.
The Americans are of course welcomed but I believe it is much easier for the Europeans to come here.
To your opinion, is there an ideal number of banks for Macedonia to actually operate efficiently on the national market?
It is interesting - the law of '96 has increased the minimum capital requirement. So it was expected that the banks would not be able to achieve it and that merging processes would start. Unfortunately, no mergers have occurred so far, some of the banks have managed to achieve that like Tutunska, Ohridska ; others didn't and they lost their foreign currency operation license and became local savings banks.
The point is that it is very difficult to predict the ideal number of banks, despite the expectation for reduction of the number of the banks. What is important is not the size of the bank but its efficiency. The bank can be rather small but if it operates efficiently it is still good for the economy.
Coming back on the future development of MAKEDONSKA BANKA, to summarize you are involved in many sectors: international banking, treasury banking, retail banking ; in which one of those sectors are you investing the most?
So far we are mostly involved in the SME sector.. In the future, for the remaining part of the portfolio we would like to get out of the activities connected with the big loss making companies; the second priority is to develop the retail sector which was neglected for a number of years and offer number of products for households, such as mortgage loans, consumption loans, different kinds of savings. Then, as a third development priority: the market of micro businesses. The number of sole traders, customers and craftsmen are the orientation to establish the cooperation with, as well as with their representatives, the Chamber of Commerce and the Chamber of craftsmen. We believe that within these sectors we can generate some 15 -20 % of the portfolio within the next few years.
We are also undertaking some steps towards investing in new technologies such as tele-banking. Alongside Stopanska Banka, we are about to start testing the new payment operations. The second phase is the Internet banking. We are now purchasing IT technology and softwares. Last, we shall be participating in the project of national credit card processing center, participating also in issuing the American Express credit card. Since it's not limited, we will proceed with issuing a second one, probably VISA.
For any potential foreign investor, how would you describe Macedonia as a long term investment destination?
Concerning the banking sector, I believe that the difficult years are already behind us. A lot of the bad loans were fully provisioned, but finally, most of them were recovered. I believe the future of the banking sector is now appearing brighter since there is a number of foreign companies becoming important clients for the banks. Let me give you an example: we have increased our deposits from around 120 million last year to some 700 million this year. Regarding the Macedonian economy I find that the main advantage is in the good financial regime (taxation and tax exemptions for foreign investors) . Our market is becoming interesting with the presence of free trade agreements with many countries, ex-Yu republics and many others like Turkey, Ukraine. That gives Macedonia a large potential.
Due to the new law on the management of banks, you are today two GMs to run Makedonska Banka.
I came in the bank during the summer '99. Previously I worked in a small service bank. The new banking act from last year requires banks to have more than one GM. That clause was imposed in order to generate confidence and to enforce clear banking practices .
Part of the banking industry was reluctant to implement it, anyway we were the first ones to do so. I believe that now the banks have more freedom to organize themselves the way they like, there is a possibility of 3 directors with one president, whatever you like. (similarly like Tutunska Banka). Anyway it was all together a successful implementation for the banking industry. |
