By Jane Winterbottom – jane.winterbottom@internationalbanker.com
While the Macedonian economy has experienced steady economic growth now for more than two years, economic challenges have remained in the Eurozone—a significant trading partner for Macedonia. The annual growth rate for the final quarter of 2014 remained below 1 percent for the Eurozone, while the year was capped off with a sluggish 0.6-percent growth in industrial production and an inflation rate of -0.2 percent—the first time the region slipped into negative territory since 2009. This has constrained Macedonia’s economy to some degree, with the country recording -0.3 percent inflation at the end of the year. Despite the economic challenges, however, Macedonia’s domestic banking sector has remained robust, with liquidity levels rising throughout last year. Indeed, the country’s banking sector over the last few years has been generally regarded as well capitalised and deposit-funded—growth of the sector’s deposit base, for example, reached more than 10 percent in 2014—while the sector has also maintained a low-risk profile.
Stopanska Banka AD Bitola (Bitolska) Headquarters
Among Macedonia’s top banking performers in 2014 was Stopanska Banka AD Bitola (Bitolska), which experienced significant increases in its number of clients and the scope of its loan and payment operations. As a result of the overall growth in business activity, Bitolska also managed to increase its total number of employees during the year. Among its many financial highlights, Bitolska’s increase in profitability is especially notable, with return-on-equity rising from 5.58 percent to 14.50 percent during 2014, underlining its sterling efforts to deliver exceptional value to its shareholders. Over the same period, profit after tax increased dramatically by more than 200 percent, while the bank’s net-interest margin more than doubled from 3.00 percent to 6.78 percent. Given the large selection of growth figures posted by Bitolska for 2014, one can certainly conclude that it was an exceptional year for the Macedonian lender.
Bitolska has provided banking services in Macedonia since 1948, making it one of the country’s oldest financial institutions. It is considered a medium-sized lender with an unparalleled reputation within Macedonia’s banking sector, and attributes much of its long-term success to its employees, who, over the years, have worked hard to consistently improve the quality of the products and services on offer from the bank. Since its establishment, moreover, Bitolska has regularly managed to carry some of the country’s biggest investment programmes for developing electrification, industrialization, road infrastructure, agriculture and tourism. This has invariably meant that Bitolska’s success has been synonymous with the economic vitality of Macedonia. Bitolska has clearly defined strategic goals for the medium-term. The bank aims to be the elite financial institution in the region, both within Macedonia and the wider European region, and in doing so, regularly be a significant contributor to the global financial market. It also aims to provide high-quality financial products and services to the economy and individuals, under “qualitative and acceptable prices”, as well as remaining independent and autonomous, while generating profit for its shareholders.
Retail banking was the business that took centre stage for Bitolska during 2014, resulting in it generating significant overall growth for the bank. The total value of loans increased by more than 50 percent throughout the year, while total deposits expanded by a more modest—but still respectable—7.15 percent. Much of this impressive growth can be credited to the bank’s continual preparation and offering of new products and services. The constant drive to remain adaptable to customers’ needs has meant that prices have always been harmonised with the market. In turn, customers have recognised that Bitolska is a stable, secure financial institution, which has helped to reinforce the bank’s dominant market position. Indeed, Bitolska’s retail customer base expanded by more than 6 percent in 2014, while the number of Bitolska retail branches and ATMs also grew by a sizeable 26.67 percent and 41.18 percent respectively.
Stopanska Banka AD Bitola CEO Vladimir Eftimoski
Bitolska takes a rather distinct approach to retail banking; this is a deliberate choice by the bank and one that allows it to separate itself favourably from its competitors. The bank employs regular reviews of its portfolios of products and services to ensure it remains competitive, while new, innovative programs and products are enthusiastically promoted in order to attract potential clients and upgrade the existing client base. The fact that long-term deposits as a proportion of overall household deposits grew from 39.72 percent to 42.00 percent in 2014 significantly supports the notion that it is a strong, reliable and trustworthy bank that is committed to looking after the best interests of its clients over the longer-term horizon. The bank has also established quick, efficient decision-making committees to ensure that red tape is kept to a minimum.
Last year also proved to be a vintage one for Bitolska’s corporative banking division. The bank grew its corporate loan portfolio by 10.26 percent, while deposits increased by a massive 39.18 percent, helping to reinforce Bitolska’s leading market position in Macedonia. Such growth figures are even more impressive in light of the fact that economic challenges remain in Macedonia, specifically those resulting from the aftermath of the global debt crisis, which, in 2014, still generated much insecurity regarding the regional economic environment. The corporate client base was also expanded thanks to business relationships being established with new customers, as well as a deepening of ties with Bitolska’s existing qualitative clients.
Bitolska’s corporative division prides itself on providing a wide selection of loan and deposit products at competitive interest rates, offered to clients in a speedy, efficient manner, which helps to support their individual development plans as a result. Bitolska also used much of 2014 to improve the qualitative structure of its credit portfolio, with the bank settling non-functional loans, as well as writing off the parts of non-functional receivables for which the possibility of repayment from customers was excluded. The portfolio was improved further with Bitolska managing the sale of foreclosed assets, as well as generating more income from investments in shares of investment funds, as a more profitable alternative compared to investments in long-term government securities.
Bitolska is also known in the Macedonian banking market for applying the highest quality standards towards its investments in human capital, which as a result contributes critically towards its lauded position within the industry. Indeed, the bank is always quick to give credit for much of its recent success to the devotion, flexibility and efforts of its employees, who are committed to achieving the highest possible results, and in particular, by putting the needs and satisfaction of its clients first. Employees are often put through rigorous training programmes, especially to improve sales skills, while the bank makes clever use of its foreign-credit lines with world-class institutions such as the European Bank for Reconstruction and Development (EBRD) and United States Agency for International Development (USAID) in order to provide its employees with external training. Furthermore, only highly motivated, educated people with foreign-language skills are hired by the bank. Treasurers, for example, are hired only if they have secondary education at the very least and can speak English.
In Macedonia, Bitolska is considered a pioneer in employing the latest banking-sector technology available on the market. The bank recognises the importance of adjusting and evolving in order to be as accessible as possible to its customers, while remaining competitive. Such an adjustment involves creating and applying innovative, easily accessible and automated processes and solutions. 2014 was a pivotal year for the bank’s internal application systems, many of which were substantially modified in order to meet new regulatory requirements and standards for compliance, as well as helping Bitolska to maintain its competitive advantage. The bank’s information technology (IT) infrastructure was also upgraded, with regards to its overall system, communication facilities, database and security information. Such comprehensive changes, according to Bitolska, are enabling the bank to effectively monitor the growth of the market and the subsequent volume of work that is required to be carried out. This in turn allows the bank to be flexible and adapt in order to make changes to its internal organisational structure, to adapt to meet various regulatory requirements, and to provide solutions for new products and services.
Bitolska treats its corporate social responsibility with the utmost seriousness and respect, with “permanent care for the social good” being one of the bank’s strategic objectives, as stated in its Business Policy and Development Plan. This has culminated in the bank getting involved in a highly diverse range of projects and activities that have created socially beneficial results. In particular, the bank has placed significant value on supporting Macedonia’s children—it has donated to the Association for Autistic Children and Children with Asperger Syndrome, and has also supported the international youth art festival “Bitola – Open City”. Furthermore, Bitolska enjoys getting involved in local construction projects—in 2014, for example, it donated assets for the construction of the temple “St. Konstantin and Elena” in Skopje, as well as sponsoring the equipping of the city pool “Atina Bojadzi” in Ohrid.
Going forward, conditions within Macedonia are likely to pose significant challenges to attaining the excellent results it has managed in recent times, especially due to the turbulence between the government and opposition parties, which has adversely impacted political stability in the country for much of 2015. While the crisis seems to have been more muted during the second half of the year, the likelihood that tensions may flare up again in the near future remains, which in turn could have an adverse impact on the country’s business climate. Furthermore, the deflation that Macedonia is currently experiencing could begin to dent business confidence.
Given its long-term track record as a market leader, however, one would expect Bitolska to be the one bank in Macedonia that is able to adequately weather such impending storms. The bank has set out 14 very clear strategic objectives for the period 2015-2019, which takes into account the needs of its clients, expected changes in the business surroundings, and Bitolska’s internal projections for growth rates. It hopes to continue to transform itself from a product-oriented bank to a client-oriented bank, for example, as well as expand its network of branches in order to achieve a larger degree of market coverage. For the same period, Bitolska has also established financial objectives, such as an annual average growth rate of 12.24 percent in total assets, as well as annual growth of 12.14 percent in loans of non-financial legal entities, with a particular focus on crediting small and medium-sized enterprises (SMEs). It therefore seems clear that no matter what challenges are thrown up over the next few years, Bitolska has been preparing admirably to address them.