He said that for a state that is not big in territory, this number of banks is impressive, but he believes some changes will happen soon, because this number is above optimal in relation to our capacities.
WEDN: How would you say Erste Bank did in 2015? WHat is the position of Erste at Montenegrin bank market and are you happy with results achieved?
Lukić: Another successful year is behind us, and we achieved great financial results. We confirmed our strong market value, that serves as a strong foundation for our clients. Although we are dominantly focused on business with citizens, last year we strengthened partnerships with commerce in Montenegro. It gives me pleasure to say that Erste Bank is today the first choice for many citizens and legal entities. Our business is defined by high quality and stability, shown in a few crucial parameters. During last year, we had a revenue of 6,53 million EUR, which is a 9% increase from the year before, with capital revenue of 12,5%. Net credits for citizens are also on increase, and the number of clients is at 80.000. Deposit level is stable, although we permanently did corrections of passive interest rates. This shows strong trust put in us by clients. When it comes to active, we maintained a rate of so called bad credits that are late at a high level, considering the average at market. This parameter is traditionally among the lowest at the market. Exposure of Erste Bank to bad credits was 6,4% last year. Quality of our results confirms our strategy and long term approach to clients and the market. Erste Bank will continue to put clients first, because we see these relationships as the only way forward to a position of leading bank of Montenegro.
WEDN: It was announced recently that interests rates would decrease in Erste Bank. How much would that decrease be?
Lukić: For certain types of citizen credits we decreased the rates for over 2%. This decision is our response to the trust put in us. During 2015 we did intensive preparations and created conditions to offer the most attractive credits for this year, with addition relaxation for clients when it comes to procurement resources. Quality business and optimized prices enabled us to come forth with this offer. It is important to us that we communicate with clients, to understand their motives and needs, to be close to them and offer them our support when needed. I think this attitude is clearly demonstrated through current offer. Reaction in the market is great, clients recognized the quality of offer and want to do a refinancing from other banks to Erste. Today, you can buy a car with a fixed interest rate of 6,9%. Until recently, it was hard to imagine that a bank would give such a credit on such interest rates. When it comes to residential credits, the offer goes from 3,99% with variable interest rate related to Euribor, and 4,5% with fixed rate. Citizens with average income can buy an apartment with a rate of 4,5%, which is much more affordable than it was one or two years ago. Although comparing interest rates among states is a complex matter, due to credit ratings of the country and structure of credit, we can say that we are approaching a level of developed economy as seen in EU, especially when it comes to long term credits. Competition in banking is also a reason for these changes, because we did not have important shifts in country’s credit rating, and there were no placement risks.
WEDN: There are 15 banks at the market in Montenegro, what to do to win over clients? What is the motivation behind banks doing business in Montenegro?
Lukić: For a country that has a small territory, the number of banks is impressive, but it is my belief that this will change, because the number is too large for our capacities. Motives are different, and they can be partly explained by small potential for growth in developed economies compared to our region, as well as investment opportunities that are being opened. Favorable tax policies have an influence as well, that attracts investors to Montenegro. Clients can chose and get really affordable conditions. They change banks easily and it is getting harder to keep them. Every bank has a different approach for this challenge. Banking business has always been competitive, but now even more so. Affordable rates are just one of the segments in keeping loyal clients. In order to gain loyalty, you must demonstrate it first, you must demonstrate your own value. Other factors come in play here, that can be summed up to your employees, their will to be the best in market and offer the best quality of service, efficiency, communication and fairness. I believe this segment will become more significant in the future, along with innovative solutions and digitalization that brings new quality for the client. Time and space limitations that market client relationships are not so strong anymore. In our near future, clients will be able to keep their bank in their pocket. Personal contact between the bank and client will be advisory, because this is a part that artificial intelligence can not replace yet.
WEDN: What do you see as the biggest problem for banks in Montenegro?
Lukić: For a few years already, the big problem is bad placement. It directly influences results of the business, as well as the availability of resources for credits for good projects and healthy companies. Positive trend is encouraging, although bad placement is still at a high level. Lack of liquidity in real sector, that is manifested by many companies with blocked accounts, is certainly one of the big problems in commerce. One of the solutions can be legally defined deadlines for payment in credit relationships and active implementation of that legislation. Also, there is not yet a system that would enable efficient and fast method of payment, although I can note some progress in this fiend. We have recognized certain elements that we can improve and make the business environment of banks easier, in order to push the development of economy. Regulation of quality and financial reporting are important. Potential clients of banks need to recognize the fact that financial reports are important for them as well, because they enable easier, faster and cheaper access to bank’s resources. When it comes to entrepreneurship and small businesses in tourism and agriculture, I see room for progress. As a bank, we recognize the efforts the Government is making in improving business environment in Montenegro, and we fully support the reforms that comply with EU standards, with further strengthening of consultational dialogue in legislation.
WEDN: One of the major challenges for banks are non-quality credits. Why didn’t Podgorica Model improve this matter, although it was designed as a solution?
Lukić: Erste Bank may not be the most representative to estimate the success of that model considering our low level of bad placement compared to the average. However, we do support this idea, and efforts of Central Bank of Montenegro and the Government to find the solution for protecting financial stability.
