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Georgi Zamanov: The country cannot live without the railroad, and the economy - without banks


Director of Corporate Banking Center and a member of UniCredit Bank Georgi Zamanov told "Top 100" about the consequences of the economic crisis for the bank, problems in legislation, possibilities for corporate clients and prospects of the Ukrainian market.

How much seriously did recent events influence the corporate sector of the bank?

They influenced greatly the actual economy – production lowered to 5%. The recession of gross domestic product directly reflects in corporate business both on the capacity and on the quality of the loan portfolio. According to the budget of the year 2014, during this year our loan portfolio should have grown to $300 million as it was last year. At the beginning of this year we reviewed our plan and directed all our forces into the preservation of the loan portfolio‘s quality and gradual reduction of its capacity. Now nobody invests. For example, one client planned to build elevator this year, and now decided to wait to the next year, someone who was building a port or buying some equipment also decided to wait till the end of this year. Ukraine has already lost three years for economy’s rehabilitation from the crisis times of 2008, when GDP went 15 percent down, and now it will lose two or three years more. However, there are some prospects for market’s rehabilitation. Ukraine has its GDP at the level of $3.5 thousand, while Turkey and Poland, which are related to us in population and the structure of economy, have it bigger in 4-5 times, and its growth continues. Ukraine also has such perspectives, but this is possible only in the condition of the political stability, open and transparent politics of business development.

Has the expiration of corporate sector grown during the last half of the year?

Yes, it has. The same problems were even after the crisis of 2009, but now the situation is much better. During the last 4 years the quality of our loan portfolio, its structure and product line has enhanced greatly. It was possible, because we know our clients and their business well, and we have good partnership relations with them. Only two clients from our portfolio have disappeared during the last three years, before “Maidan”, with the general sum of approximately UAH 40 million ( it is less than 0.01% from general portfolio in UAH 16 216 million). Since February a number of clients have had delays in payment for no more than a half of a month (during 30 days) – that is not a problem. Business in Crimea will have problems. There are a lot of clients in Donetsk and Luhansk, and loss of their capacities is not small, but still it is less than one third. We try to help our clients in this hard condition, and if we have a possibility, we do restructuring according to new economic realities.

Which difficulties arise?

One of the primary tasks that are necessary to be solved by the Verkhovna Rada, the Cabinet of Ministers, the National Bank, is a matter of protecting the rights of the creditor. The client should not have any possibilities to avoid the debt payment as well as ways not to pay their commitment should be removed on the legislative level. And also the society should come through changes, which would make such kind of relations inadmissible in business environment.

In what conditions you may agree for restructuring?

The most important for the client is to be ready to negotiate. Then we watch together which perspectives his business will have till the end of this year, the next one, we plan according to short-term restructuring, because in nowadays situation nobody can answer how the business will look like in 5 years.

We know the business of the client, what has happened with it during the last quarter, what the marginality of his business is, and see if restricting is needed for three quarters or for much longer period. If it is needed we resort to grace period and payment’s decreasing in interests and under the body of the credit. There are clients who can’t pay high interests. Currency rate has been preserved at the level of 10%, but because of the rates growth the sum of the payment has increased by 45%. UAH loans interest rate has increased to 20-25%.

Sometimes clients come, who can’t pay the half of the payment, but they promise to cover everything including the difference in interests, - and we can do this.

There is a business which will lack only for the loan body, however, there is such that won’t be able to cover neither the loan body, nor interest, but its owner believes in his business and service it for own money. Moreover, there are clients who have good cash flow, but don’t want to pay. This is a real complicated client. If there is trust and partnership– a bank is working, but when these are absent – it is not our client. We think that partnership relations are the most important for work.

What trade structure at the corporate department you have at present and how has it changed?

22% are agriculture and nutrition processing, retail – 17%, power industry, metallurgy – 12%. In the past, before UniCredit bought the bank, the biggest part belonged to real estate (in 2008, when there was the old corporate portfolio). Now the part of real estate counts approximately at 10%, and before it was more than 50%.

Which criterion is the most essential when selecting the corporate client?

The most important is the quality of the client: If he/she has prolonged plans for business development, if he/she is ready to be a long-term partner, or going to cooperate with the new bank each year. Bank needs to build long-term plans, including plans on cooperation with the clients. Bank is a business for centuries, this business works as infrastructure. A country couldn’t live without railway, and economics – without banks. Infrastructure isn’t done for a year; it should be developing all the time, especially it is important to settle the question about the creditors’ rights protection.

What other products are demanded among the corporate clients now?

Starting to work with the corporate client, we cover his/her banking needs in full as legal entity – assurances, bills of credit, cash-management, overdrafts, credits for working capital’s replenishment, investment credits, including salary projects of client’s employees, production of credit cards for them, service of their deposits, and also installation of ATMs.

What is the structure of currency loans in the corporate sector?

At the end of the last year, when the rate was 8UAH/$, it was fifty-fifty, and now one third in UAH and two thirds in cash, 90% of which is dollar. Almost all export receipt in Ukraine is connected with dollar – this refers as to agriculture products (wheat, barley, sunflower) as to coal and metallurgy.

How it is possible to estimate the client’s honesty?

In this case we have a good system of risks assessment, but experience and manager’s inner sense of corporate business play their main role here. Then we do profound financial analysis, assessment of financial risks, study client’s business thoroughly. At the same time if the bank has assessed the risk as a very high one, it is better to refuse at once. The client wouldn’t be satisfied, if we work in vain for a month and promise to do something impossible.

When we meet a client we should like and believe each other. It is like a friendship. You will not be friends with everybody, will you? The same is in business – we cannot be partners with everybody. If you don’t believe that you can become partners with this company, you won’t be able to create trustworthy relationships.

What is the level of refinancing in corporate sector now?

During the last three months nobody issues a loan to cover credits in other banks. First, I don’t advice clients to do so, because a new credit will be much expensive and with larger coverage. It was profitable a year or two before, when banks were ready to refinance increasing the size of the credit or reducing the rate in order to attract the client.

What is your forecast on rates by the year end?

Loan rate is calculated from the deposit rate plus margin. Margin, if we count our operating expenses and credits risks, does not exceed 5% (if not to count “complicated clients”). That’s why, if the deposit rates are 15%, they will be not less than 20% for credits.

The level of credit rate – is a great problem for Ukrainian economy and citizens, because the mortgage at 25% in UAH, or purchase of new equipment at 25% - is not working. There is the only decision – an increase of deposit base and a level of Ukrainians’ welfare. If there is a great amount of money, which people deposit to the bank’s account, it means that population has free income. Stable growing deposit base promotes future development and strengthens Ukraine’s economy.

Source: TOP-100 rating
Date: 05.08.2014

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