Petia Dimitrova, Chief Executive Officer and Chairperson of the Management Board of Postbank

06 December 2019

- Despite low and even negative interest rates, deposits continue to increase. How do you explain this behaviour of depositors in the presence of alternative forms of investment?

In the first place, this is proof for the confidence that depositors have in banks. Banks are perceived as a safe place where people put their savings. Interest rates are low, precisely because a bank deposit is considered a low-risk investment.

On the other hand, there are not many alternatives for investing on the market. In the last few years, deposits in Bulgaria have been growing at record levels, which is due to the good macroeconomic framework and the growing incomes of people and companies. Such volumes can hardly be “utilized” in the form of loans, which contributes to the increasing liquidity of banks.

Alternative forms of investment can bring higher returns, but at the same time require a higher financial culture, and such investments are associated with a certain level of risk, which many Bulgarians consider unacceptable. However, we see that investments in other financial and non-financial assets are also increasing.

For example, Postbank successfully offers mutual funds, which are among the most recognizable and affordable alternatives for long-term savings worldwide. What is characteristic of them is that they can respond, due to their diversity, to the individual investor profile. They provide access to stocks, bonds and other securities from Europe, the United States, Japan, global emerging markets and at the same time they are fully harmonized with the EU legislation and are a response to the market trends. At the same time, clients can participate in the international financial markets with smaller amounts – the equivalent of BGN 50 in EUR or USD. The opportunities we offer to the highest segment of clients are even greater, as we are successfully partnering with Eurobank Private Bank Luxembourg. That provides them with access to the world’s leading financial centre, Luxembourg, which means exclusive opportunities for them, global product offerings and 100% Wealth Management services. So there is an alternative to deposits for all who are interested in them.

- Is it possible the prolonged low-rate period and increased lending to create a risk of higher indebtedness of individuals and businesses?
This depends on the pace of lending and economic growth. The expected loan growth this year is about eight percent on an annual basis – this is comparable to the nominal growth of gross domestic product, which means that the relative indebtedness of households and companies remains almost unchanged. Low interest rates alone are not the only factor that stimulates companies and citizens to seek new loans – it also depends on their income and expectations for the future.

The low interest rates in the country are largely a consequence of the huge liquidity of the banks and the strong competition between them. This trend is expected to continue for some time, but we cannot talk about over-indebtedness yet.

Banks in the country are currently significantly more conservative in risk assessment and make a very in-depth assessment of the customers’ solvency when applying for loans, because thus they protect the interests of their shareholders and depositors. A number of regulations at a local and European level also contribute to this.

For Postbank in particular, it is constantly striving to create and offer unique products on the market that are fully tailored to the customers’ individual needs and strictly follow the stringent risk policy of the international group of which we are part – Eurobank, which is supervised by the European Central Bank.

- Banks increased most of the fees in recent years. What is the reason behind that trend and what result do you expect to see?

Banks are commercial enterprises and the price of their services is influenced by many different factors. As an example, I will give the huge investments related to the new and heavier regulations in the sector, including IFRS 9 and PSD2, GDPR and the Markets in Financial Instruments Directive (MiFID 2). Other serious challenges are the large-scale digitalization at every level in response to the requirements of modern consumers, the desire to attract and retain talents in the labour market, the cost of maintaining a wide and modern branch network, etc.

All these projects are extremely important for consumers who expect the banks to provide security, reliability, innovation, various distribution channels and professional advice.

For our part, we encourage customers to perform their operations through our electronic channels, which are the cheapest, fastest and most convenient way of banking. Customers are also aware of this and it is no coincidence that the share of transactions performed through electronic channels is growing every year.

- The recast Payment Services Directive allows for the emergence of innovative solutions in this area. How will the banks respond to the challenge – will they seek cooperation with Fintech companies or will they try to cope on their own and compete with them?

I appreciate PSD2 as an opportunity to compete with the best in innovation.

Postbank has always chosen to be not just part of the trends, but a company that sets them – a market leader with a vision and ambition. Cooperation with fintech companies is an opportunity, not a threat for us. We believe that we can exchange experiences and ideas with them in order to serve our customers – ours and those of other companies with which we will partner even better, which is our top priority.

We are an innovator and have a strategy on how to use the PSD2 capabilities to expand our market position. We consider the opportunities in payments and consumer lending where Postbank is a traditional leader to be essential. We expect not only to stabilize our leadership positions, but to expand our market share among retail customers by fully expanding our capabilities at the technological level and increase trust and customer satisfaction.