Because Erste sees its purpose as helping to promote and secure prosperity in its market, we are closely working together with the region’s governments, central banks and other stakeholders to implement the support programs as quickly and efficiently as possible
Although the economic downturn in CEE is likely to be more muted than that for the Eurozone and perhaps less catastrophic than many had at first feared, the recovery may well prove to be more wavelike and extended than the sharp “V” that many observers had hoped for – especially if the health crisis re-emerges through additional outbreaks later this year, said Ingo Bleier, Erste Group Bank AG and Erste Bank Serbia.
How do you assess the overall environment created by pandemic?
Obviously, the coronavirus crisis and the reactions that countries across CEE have taken to combat it have had a sharp impact on the region’s societies and economies. The CEE states have generally been more successful in limiting the health crisis than many Western European countries and the economies in our markets are now on the path of reopening – something already apparent in such indicators as mobility data, the level of capacity utilisation in automotive plants and – unwelcome – rising levels of pollution. However, there can be no doubt that the impact of the lockdowns will weigh heavily on economies, also in CEE, both in the current quarter and the ones ahead of us. Global supply chains have been disrupted and the business models of sectors like tourism and gastronomy are under massive pressure.
What is different this time in comparison to the financial crisis in 2008 and following years?
The trigger is an entirely different one. The 2008 crisis had its roots in the financial sector, primarily in the United States. In this crisis, the financial sector is not the cause – the current crisis is at its heart a health crisis. Instead, this time around banks can and must play an important role in combatting the crisis by working together with other stakeholders to help safeguard the real economy. That is why it is good that banks are in a very different position these days than they were back in the financial crisis. Banks are now far better capitalized and ready to face the current crisis thanks to a decade of strict banking regulation, as well as reflection within our industry about the general role banks should play within society.
Although the collapse of Lehman Brothers was without a doubt the trigger event for the financial crisis, the impact of the COVID-19 pandemic is if anything even more radical and abrupt. Within the space of just a few months, it has put the real economy out of action – and done so immediately, completely and across most countries worldwide. Unlike any other event in our lifetime, this crisis has managed to absolutely crush both supply and demand at the very same time. Also as a result of that, the current crisis is not only impacting a broader range of industries than the global financial crisis, it also is hitting them harder, at least in the short-term.
Securing liquidity was and remains a key concern for private clients, SMEs and corporates across our region
What sort of support are you offering to the corporations?
Securing liquidity was and remains a key concern for private clients, SMEs and corporates across our region. We are helping them by providing liquidity, keeping credit lines open, and addressing their acute needs in this exceptional environment. In a tense economic situation like the one this crisis has triggered, banks play the role of vital utility providers. That’s why we’re fully committed to implementing the comprehensive support measures that states across the region have drawn up. Our overarching goal: ensuring that our customers can pursue their revised business objectives, ramp up their trade and business operations again, and manage their investments in these turbulent times. We also remain open to grow our business and attract new clients despite the current operational constraints.
How do your initiatives differ based on the regions in which do you operate?
For Erste Group, our home region is Central and Eastern Europe, including Austria. The countries and economies in our region don’t all have the same profile in normal times, and there are also differences in the specific focus and scope of the responses that they’ve taken in the crisis. But on the whole, the CEE states are applying the same set of fiscal support measures: loan repayment moratoria, state-backed loan guarantees and bridge loans, short-term work schemes, and various tax incentives. Measured as a percentage of national GDP, the fiscal packages in those CEE economies where we are active are generally quite large in international comparison – with the 11% for Serbia more or less on the same level as Austria (10%). Because Erste sees its purpose as helping to promote and secure prosperity in its market, we are closely working together with the region’s governments, central banks and other stakeholders to implement the support programs as quickly and efficiently as possible. In addition to retail customers, these programs also focus heavily on small and medium-sized enterprises, which play such an important role in CEE economies, both in terms of growth and jobs.
The use of digital services
Erste Bank Serbia has intensively promoted the use of digital services during the state of emergency as a good choice for safe and simple banking operations, and it will continue to do so. Among other things, EBS has enabled its clients to contract or activate electronic banking services or receive a new payment card without having to go to a branch. EBS’s mBanking and NetBanking were both used for filing requests for cash loans. As for corporate clients, these had already handled a lot of their business — fast and safe payments and running daily business — through electronic banking before the crisis. This trend has continued throughout the state of emergency.
What strategy does Erste Bank Serbia follow and where do you see your role in helping to steer the bank?
Erste Bank Serbia (EBS) acts as a good corporate citizen, operating in compliance with the strict rules that apply in Serbia and seeking close cooperation and agreement with the National Bank of Serbia in its role as the regulator for the country’s financial sector. We take this approach while at the same time maintaining our growth strategy, which has seen EBS increase its assets nearly 19-fold since it entered the market in 2005.
Among all corporate segments, EBS stands out in renewables and specialized lending, where it has been a pioneer and serves as a market maker. The same is true for EBS’s real estate project financing, where the bank has achieved outstanding results and was a leader in the market in both 2018 and 2019. However, EBS is perhaps the closest to small and medium-sized enterprises, companies that are the very backbone of Serbian economy.
As president of EBS’s Board of Directors, I am there to help my colleagues in EBS with my own and Erste Group’s experience to continue our business growth, in line with the strategy of the Group, while fostering the financial wellbeing of clients and further developing our digital agenda.
Are the existing banking products fit for new circumstances or you are ready to offer new ones?
Times of crisis are always times that call for innovation. But that doesn’t necessarily mean that we need to create new products and services out of thin air — instead, it often means realizing that existing offerings can be applied for new purposes and in new ways. One thing this crisis has unquestionably made clear: flexibility, resilience and speed are absolutely essential qualities for any- and everything we in the corporate banking and markets sphere offer. That’s also why our focus on digitalisation, both on the front and back-ends, is now stronger than ever.
Supply chain financing is a good example of an offering that has a new urgency as a result of the crisis and also benefits greatly from digitalisation. Because the crisis has demolished global supply chains, trade risks have spiked. That makes innovative trade offerings like we.trade, a blockchain-based platform that Erste Group has just launched in Austria, a very compelling solution as trade-focused companies seek to reboot their sales both domestically and internationally. Another example: when the crisis first took off in our region, Erste quickly worked together with payments partners in several markets to offer those small corporate customers who to date had been purely brick-and-mortar with simple to use e-shop solutions that allowed them to sell and deliver goods – and generate some revenues — even while their physical shops had to stay shut during the lockdown.
It is believed that COVID-19 pushed everybody to digitalise at a fast pace. Were your clients in Serbia ready to fully embrace e-banking?
Yes, clients in Serbia are embracing electronic and mobile banking. They were already doing so even before the crisis. According to a survey Erste Group conducted last year, Serbia and Romania are actually the first markets in the CEE region in which people who use digital banking services are more likely to do so via mobile phones than desktop computers. With the social distancing being enforced during the COVID-19 pandemic, the need for and use of digital services has only grown stronger. Active users of electronic banking have further increased their activities on online channels, while passive ones have recognized the need for easier and safer banking operations from the comfort of their homes. In addition, a significant number of clients decided for the first time to perform banking activities digitally.