18.02.2022

Interview with Mr. Toni Stojanovski, Chief Corporate Officer and Member of the BoD

Read the interview of Mr. Stojanovski published in the February edition of the "Ekonomija i biznis" magazine.

TOGETHER WITH OUR CLIENTS WE PROVIDE PERSPECTIVES FOR THE FUTURE

E&B: During a pandemic period, it is logical to start the conversation about its consequences for the banks. How did they fight with the challenge? What do the results of Stopanska Banka AD Skopje show for 2021?

T. Stojanovski:
For two years now, the pandemic has been a part of our lives, new habits and challenges. Like everything else that follows the nature laws, in crises like this, individuals and systems that are healthier and stronger, that have previously invested in their energy, vitality, better habits and health, are more resistant to the shocks of the crisis and are  very important part of communities. They help them to fight more successfully with the challenges of the crisis, to reduce losses and to maintain the continuity in daily life. Here, I would like to make a parallel with the role of the banks and the banking sector in this crisis. Namely, on a global level, unlike the previous major crisis, banks faced the pandemic ready to be part of the solution, not part of the problem, largely as a result of the robust measures that were taken and implemented, mainly through the Basel 3 standards. Our banking sector, as during the previous crisis, in this pandemic has shown the capacity to absorb the shocks brought by the crisis, without retransmitting them further as negative waves to the economy, with all the consequences from it. With a capital adequacy ratio of over 17%, non-performing loans below 4%, fully covered by provisions, strong liquidity position and healthy profitability, the banks in this pandemic have shown that they are healthy tissue and strong support of our economy and society.
Stopanska Banka AD - Skopje, as one of the systematically most important banks in the country, during the pandemic 2020 and 2021, maintained the multi-year continuity of successful operation with achieved high results on all grounds. Thus, according to the unaudited financial statements, the Bank ended 2021 with a profit before tax of 2.7 billion denars, total loan portfolio of 80.7 billion denars and total capital of 19.8 billion denars. Thus, Stopanska Banka AD - Skopje remains a Bank with the largest loan portfolio and the largest capital strength in the country, as well as high profitability which is one of the pillars of further strengthening of the capital position, stability and future prospects of the Bank.   

E&B: How did the Bank loan clients behave during the past year?
T. Stojanovski:
Since the beginning of the pandemic in March 2020, apart of the measures to protect the health of our employees and all customers who visit the Bank's premises daily, to ensure continuity in operations and delivery of services to customers and the economy, one of the most important priorities was maintaining the quality of the loan portfolio. In doing so, it was necessary to synchronize two very important goals. First, to understand the situation and the problems faced by the loan clients, especially the companies and, if necessary, to adequately meet them by designing modified loan repayment terms, which in the given crisis circumstances are consistent with the changed cash flows of the debtors. The second goal was to maintain lending activity and to continue delivering credit support to companies and retail clients. From this time perspective, it can be said that the Bank has successfully fulfilled both of them. The loan growth we achieved last year is 9.5%. Thereby, the growth of loans to retail clients was 6.2%, while the credit support to companies increased by high 16%. At the same time, the non-performing loans rate remained at a relatively low level of 3.8%, with full coverage with impairment and capital position of the Bank, which is continuously growing. Our clients recognize the Bank's partnership approach and make an extremely important contribution to the fulfillment of the above-mentioned goals. Special emphasis should be placed here on the continuity in the delivery of fresh money to the economy, which would not be possible with different behavior of our loan clients. From that aspect, the Bank is proud and grateful to its customers because together and in mutual interest we achieved a lot, providing perspectives for the future.  

E&B: What do you expect from 2022 regarding the Macedonian economy?
T. Stojanovski:
We should expect continuation of the process of economic recovery that will lead to a return to the level of economic activity from 2019. At the same time, the energy crisis, the pandemic and the shadow of inflationary pressures remain high on the agenda of the issues that we will have to deal with this year. In such an environment, businesses remain in need of permanent rethinking of their business models, strategies and business plans as well as the need for dynamic but careful decisions. At the same time, the challenge for the economic policy makers in the country is to deal with the energy crisis as well as to be careful in the fiscal and monetary policy in relation to the inflationary pressures. There should be no dilemma that the basic anchor of the macroeconomic stability of the country remains the stable exchange rate of the denar, which is extremely important for the economy as a whole, but also for every individual business and every household in the country.

E&B: In the past ten years, Stopanska Banka AD - Skopje was predominantly focused on retail lending and was a market leader in that segment. But now the Bank has an ambitious approach to increase the share of loans to corporate clients in the total loan portfolio of the bank. You manage the Bank's activities for corporate lending. What would you say about this?
T. Stojanovski:
Stopanska Banka AD - Skopje is a leader on the banking market in the country with the largest loan portfolio, which at the end of 2021 reached a level of 81 billion denars. Thus, the Bank ensures optimal utilization of its deposit base through efficient allocation of the collected national savings in placements to retail and corporate clients. Thereby, from the point of view of the Bank and beyond, it is of a great importance for the economy to make a better balance in lending to retail and corporate clients. Thus, the banking lending will result in greater effects on the growth of the economy, which, in turn, has a positive impact on ensuring the sustainability of lending activity and the quality of the banks loan portfolios in the medium and long term. Starting from this point and following the long-term interests of the Bank, from the end of 2019 we started applying a new strategy in corporate banking, which together with lending to small businesses constitutes the segment of lending to legal entities. The main goal of the new approach is to increase the Bank's market share in the corporate banking segment, through a comprehensive offer of highly competitive market banking support to the companies' operations. The Bank has made many changes in its approach in this segment by fully recognizing the needs of companies and the requirements imposed by the market. This was appropriately recognized by the existing clients, as well as by many other companies that during the last two years have decided to entrust their financial needs to Stopanska Banka AD - Skopje, in which they see a stable long-term business partner. The successful implementation of the Bank's new approach in this segment has led to relatively high growth rates of corporate lending, even in the conditions of two very difficult pandemic years. Thus, in 2020, the Bank achieved credit growth for companies by 12.1%, while in 2021 this rate reached 16.2%. Thus, during the previous two years, the Bank increased its market share in lending to companies from 12.9% to 15.5%. This trend continues further.    

E&B: Do you have different approach to lending to large corporations, small and medium and start-ups?
Т. Stojanovski:
Each company, no matter its size, needs a customized approach, where the financing needs can be individually identified and we can proceed in appropriately designing the lending product structure to best fit the financing of the company’s business model. In other words, each company and its business is a story for itself and only by fully comprehending this business story and its perspectives, the Bank can establish a sound partner relationship which will thereafter results in a successful cooperation and achieve a common long-term business interest.  

E&B: there is an old saying that lending funds are never a problem, the money is there, we need ideas, projects... As a rule, companies complain that banks are very strict and require collateral bigger than the loan, and they do not support project financing. Is there any truth in this?
Т. Stojanovski:
All over the world, banks as financial intermediators are obliged at the front of their shareholders, depositors, regulators and the broader public to be careful and prudent when lending the collected deposits and to follow strictly defined credit standards. Although, sometimes it happens during the process of negotiating a new lending deal between the bank and the company to get the impression that the two sides work with completely opposing interests and that one of the sides is asking too much or illogical things from the other side, yet experience has proven time and time again that when both sides maintain basic levels of professionalism and understanding of the basic business premise, the common interest can prevail and it is much easier to broker a deal. It is very important for the company to have clear goals ahead of itself and for itself, for the goals of its own financial management, to make sure that the new investment, the new project or business expansion that requires bank loan support, is economically sound and the cash flows it will bring will be sufficient to cover all costs, loan repayment and make profit for the company. In my long years of experience in the banking sector, I can say that I haven’t met a company that presented a solid project/a successful business model that was left out of bank financing. The Bank should always remain open to hearing and understanding the company perspectives, its plans and analysis so it can be an actual useful partner in the communication, even if it needs to say no to the request for financing, because in the end it is also of benefit for the company which also doesn’t want to enter insecure areas and endanger its business future.

E&B: What are the corporate lending projections for 2022?
Т. Stojanovski:
Similar to the previous year, during 2022 we continue to execute the established Bank business goals aimed to maintaining the leading position in the retail lending segment and increasing the market share in the corporate lending segment. The uncertainty brought on by the pandemic is still high and joined by the energy crisis and the inflation pressures have forced the need for increased attention in the bank lending activities. However, the economic recovery trend, both globally and locally, together with the expectations about the end of the pandemic, is giving us the real base to expect a better year which should bring reduced uncertainty and increased economic activity. This, amplified by the strong capital and liquidity position of the Bank, the established and successful business model, and the expertise we have built leads to the continuation of the intensive credit support for both corporate and retail clients.

E&B: Let us mention also the new banking technologies. I remember at the time when SB was introducing the new core system “Globus”, which was a sort of a small “revolution” in its operations. Will the new technologies, digitization etc transform the banks into tech companies?
Т. Stojanovski:
Yes, the “Globus” system even after 20 years of its introduction still is one of the most sophisticated banking core system in our environment, enabling a strong operational support to the Bank performance. At the same time, following the emergence and development of new technologies and digitization, as well as the needs our clients have related to this, SB permanently invests in innovating its products and services and the communication and sales channels. The pandemic which still lingers, additionally emphasized the need for digitization of the services and the sales of banking products, as well as promotion and acceptance on the side of our clients. In general, I would say that the digitization endeavors are a challenge not only for banks but overall for any business entity. Especially in small economies such as ours, they have to find ways to exist and develop with globalization dictating the trends, and the expenses that come with these trends, some which smaller economies or companies cannot afford or rationalize because of the lack of economy of scope on their disposal.

E&B: The appearance and development of fin tech companies changes the institutional infrastructure of the financial sector. Do they pose a competition to the banking sector?
T. Stojanovski: For the good and stern market contributors, a healthy form of competition is always welcome. However, this means that anyone preparing to perform a specific operation, or entering the market to offer a specific service, should meet the same criteria and baselines as all other players. In other words, we should be careful to maintain “level playing field” to enable healthy competition. This is a major topic of discussion internationally and without a doubt these trends will lead to increased competition in the financial sector. However, will this lead to bigger benefits for the consumers of financial products and services, to the large extent, depends on the provided market conditions for healthy and fair competition.

E&B: You were one of the initiators and designers of the foundation of the Macedonian Banking Association, who you vice-chair at the moment. How are things going on from that perspective?
T. Stojanovski:
The Macedonian Banking Association/MBA was established in April of 2018 following the best organizational practices for institutions of this sort in Europe and the region. The establishment was strongly supported by the European Banking Federation / EBF situated in Brussels, where MBA is now an associate member.
Shortly after MBA was established, the annual EBF associate members meeting was held in Skopje, in May of 2018 and the EBF CeO Mr. Wim Mijs attended and chaired the meeting. His visit to Skopje and the opportunity to organize the meeting was a very significant way of recognizing the establishment of MBA as a strongly integrated and recognized member within the EBF.
Ever since, with the dedication and enthusiasm of all our members, MBA has grown to become an institution recognized as the appropriate place to address issues of common interest related to the area of activities of all its members. The importance of the institution came to light during the pandemic crisis, when the banking sector was faced with several difficult tasks i.e. the enabling the postponements of loan repayments, organization of pensions and social welfare appropriate disbursement, the measures to protect the health of clients, employees etc. All these activities were coordinated with the Central bank, the Government, the Ministries and were channelized and executed through MBA with specific results, which we achieved together.