Could you give us a brief overview of the history of Hipotekarna Banka, and how it became the number one bank in Montenegro?
Hipotekarna Banka will celebrate its 10th anniversary next month. It is the first bank in the region that has been founded as a shareholder company.
Of course at the beginning we have experienced many difficulties, together with Montenegro, and Yugoslavia while it existed, through the period of catastrophic inflation. We have supported the monetary reforms in Montenegro, in order to create normal conditions for the banking sector.
We can say that the bank is privately owned, because over 70% of the shareholders are private companies and citizens, which is quite a novelty for this country. It reflects the trust of the people in the bank, and it pays out large dividends to its shareholders. Apart from the good service it is offering regarding credit issues, in the terms of the profits and turnover, the bank has reached a good level of development and it has very healthy assets and liabilities. We also have resources for increased credit contracts, which will be at disposal when the political and economic stability of the country is reached finally. We are asking the country to create these conditions for us and we also ask for the support of those who want to do business in Montenegro. That would create the necessary environment for the bank in which it could develop its potentials.
Could you give us an insight on the financial performance of the bank?
We are in a region where we have twenty banks operating. Montenegro is quite a small market; in addition, we lost some of our clients from the territory of Serbia, which influenced our further development significantly.
Our bank has the lowest interest rates in Montenegro for credits. Our interest rates are 8% on annual level, for all projects in the production sector. Commercial and trade projects have a 12% interest rate. In the total credit program of Montenegro, the credit activity of Hipotekarna banka is over 70%. That means that all other banks in this area are included in credit transactions with only 30%!
According to our credit activities, compared to the deposits of companies, the total deposit without the state deposit, which has no relations with Hipotekarna banka, is larger than our credits. It means that this bank bears the biggest risk of all banks in Montenegro.
With this basis, and with transactions totalling 1.500.000.000 DEM last year, this year we are planning it to increase around 2.000.000.000 DEM.
We have earned a considerable profit and paid out the dividends to all our shareholders, 29,5% of the shares nominal value. This is an extremely high dividend, and it almost does not exist in other banks, considering the fact that dividends are normally at the average annual level of interest rates. These results have attracted the interest of other banks and companies in our surrounding, including the Economic Bank for Development and Reconstruction. They offered us three ways of cooperation, and according to our earlier agreement they should confirm one of them in October. They are ready to confirm our guarantees and letters of credit, for 138 banks in Europe, which is a great help in trade transactions with neighbouring countries. They are also ready to authorize a credit line of 10 million DEM, with our obligation towards dispersion, so that each business program cannot be credited with more than 500.000 DEM, as an important contribution for development of small and medium size companies in Montenegro. They have also expressed interest in buying shares in the amount of 2.000.000 DEM, in order to improve the capitalization.
We managed to reach these arrangements because we had good auditing of our balance sheets and our processes, which by itself speaks about the quality of the bank. This is also the proof of the quality that brings us to the top of the banking sector, although we have some problems investing in the funds, due to the fact, that we do not have good business programs and business ideas now, which is a direct consequence of the politics of the past 12 years.
You also have the most successful privatisation fund, with HLT. What is the secret of the success of your fund and could you comment on the privatisation process?
There is no secret at all, out of seven privatisation funds, which operate today, almost all of them have fulfilled the necessary requirements. We have been the founders of HLT fund, together with a very serious company, which is called "Lovcen insurance"; they are our biggest shareholders, and the bank is also a shareholder in their company, and "Triglav insurance", which is also a big company with high investment potential. The citizens recognized this as a security, although we do not make more promises than other privatisation funds, but the result of this recognition and trust is that most of the vouchers have been put into our fund. Our estimate was that we could collect at least 25% of the total vouchers points, which is around 500.000.000. However, until the end of the period we have 18 days left, we will face the end of voucher submitting, and majority of these activities will be probably in the last days of the privatisation process, and the estimate is that we will collect around 250.000.000 voucher points, which is half of what we had planned.
My opinion is that it is not enough, and we probably made a mistake. We had a lot of funds, which are not supported by any institution; we let them enter the market, and the number probably is the cause of the suspicion of citizens. We will see what will happen with the vouchers procedure, we have it in our development plans, we are prepared to get the shares of the companies in auctions which are worth to invest in, and we will increase the quality as much as possible. | This process cannot be completed until Montenegro does not finalize its state, and stays in this non-defined situation, it will always be treated as a risky region. It is the final time to define this process and go back to the world market, professionalism, and legal security for anyone who is in business in this region.
In about five months, you will adopt the Euro, this is a big step, it will also give opportunity to offer more services to the customers. How are you preparing for that?
We will, according to the program made by the Central Bank, be very active in the process of exchange of DEM into Euros, especially because the structure of our deposits is to be changed from DEM and other European currencies into Euros.
Part of the banking services regarding the exchange of DEM into Euro for citizens will be performed through one of the branch offices of the bank. In any case, the citizens will have a certain suspicion towards the banking sector, especially towards the banks where they still have their old savings blocked. We have a big trust of our citizens since we do not owe any money and we do not have any accounts or savings blocked. I believe that the interest of citizens to do the exchange in our offices will be quite big. We have planned to enter this process through the intermediary bank, with not many encounters where citizens will be able to do the exchange. In this business, it is very important that the Central Bank does its share of the job and provides physically, in cash, as much Euros that might have a return influence regarding the future savings. It is a big task. It is a direct obligation and duty of the Central Bank, because the DEM is a legal means of payment here, and after April the 1st it will not be in use anymore- that means that we will have to provide the functioning of both currencies from January 1st until March 31st.
You have said that the financial sector is one of the pillars of economy. Some people say that it is a pillar that will help Montenegro achieve independence. Do you agree with that?
Absolutely. The biggest task of Montenegro on its way to becoming a sovereign country, is to keep the DEM, and tomorrow the Euro, and at no price to go back to the Dinar. It is the basic assumption of sovereignty. Because of the program of exchange and introduction of the new currency in 1997 I had to leave the government from the position of vice-president. I was supporting the introduction of 'Perper', a national currency, and I was proclaimed to be a separatist.
The national currency makes the foundation of toady's economic program of Montenegro. I am really happy with the present situation. I think we can still have the 'Perper', once we reach the independence and have our own Central Bank.
What is one of your biggest successes as General Manager of Hipotekarna Banka?
My biggest success is having a nice and healthy family. Having had the opportunity to work in many different positions and functions, I cannot really say what is my biggest success in business - I guess that I will be able to point that out once I retire and look back on my career.
If I can be satisfied with something, apart from my family, which is of course in the first place, is that I remained free to say openly what I want and what I think, to bear no consequences for doing so, which is a big step in the democracy of Montenegro. I like this company. I was here from the very beginning, being its founder and director. I left this position twice to help out the government but I always came back. I am almost 56 years old, and I am starting to approach the pension.
I have one more personal wish: to be able to build a new building for this bank, just here across the road, together with the WTC Association that we are members of, and to bring young people who will continue to lead the bank successfully. Then, I can sit back and enjoy the results of the job done.
I planned to finish everything in three years time. In 2004, the plan is to move into the new building. I will be 60 years old at that time, and I can be a member of the Board of Directors if the shareholders decide that it will be good for the bank and someone else will take the position of General Manager. This is really a tough job, because we are doing all our activities in a legally unstable state, and we cannot count on the help of courts or any other legal or state bodies, and the risks of our daily job are very high. So far we have managed very good, with a good team that has been working with me in the bank, and that I have chosen from the very beginning, with only one condition - that all of them had to be younger than I was at that time. Now I need even younger people, and they will influence the work of the bank. The only condition is that they have to know at least English.
What would be your final message to our readers?
Montenegro has potentials that can be of interest to potential investors. Montenegro is a small country, but full of contrasts that one can hardly find in any other place in the world.
The message would be to encourage all potential investors. They can come and invest in Montenegro. They will find economic interest and partners that will be of interest for them, and they can even be pleasantly surprised. Lead by their own interests, they can help Montenegro to get back to the world as a free and sovereign country.
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