Petia Dimitrova: The challenging environment drives us to be even bigger winners


Over the past years, Postbank increased its market share with the successful acquisition of the branches of Alfa Bank and Piraeus Bank Bulgaria. Has the time for organic growth come and what do your 2022 data show so far?
A few weeks ago, at the 29th Banker of the Year Awards, I received an award in the category for high organic growth achieved. The data speak for themselves and show that we are sending off a year that was very successful for us. Our loan portfolio exceeded BGN 10 billion, which is a growth of 14.5% on an annual basis and a market share of 11.9%. We are growing at the pace of the market, which is our goal, because we do not want to gain market share at any cost but rather to strictly adhere to our credit criteria and maintain our excellent profitability indicators.
Regarding the first part of your question, Postbank will continue to grow and that is already a fact. The acquisition of the Bulgarian branch of BNP Paribas Personal Finance, which we expect to be finalised in 2023, will be another step towards expanding our market share and taking an even stronger and more stable position in the “big four” of the banking sector. This merger is taking place in a challenging and changing environment that only drives us to be even bigger winners. That is why we want to preserve and develop the business model of BNP Paribas Personal Finance, together with the team that achieved these successes over the past 15 years.
For nearly a decade, commercial banks were forced to operate in an environment of record low interest rates. This prompted them to look for new sources of revenue and to increase the fees. Is the current rise in interest rates going to affect the fees?
Fees and commissions also reflect the costs we incur to be able to provide these services, as well as the investments in information technology and control functions with which we meet the ever-increasing legal regulations and regulatory requirements.
At the same time, however, we allow our clients to pay lower bank fees by using our online services. We have invested a lot of effort and resources to ensure their maximum security and reliability. Our clients appreciate that and the share of transactions via the digital channels keeps growing.

The profit of the banking system continues to grow. What are your expectations regarding lending and deposits in 2023?
The increase in interest rates by the US Federal Reserve and the ECB will affect interest rates in Bulgaria, which will cause an increase in the interest rates on loans and deposits in the country. We expect an increase in interest rates on loans in the country, but it will happen gradually.
The first to experience the rise in interest rates are the clients, mainly the large companies whose loans are tied to EURIBOR. Until recently, its value was negative, but due to the increase in interest rates by ECB, the rate of the 3-month index is already above 2%. We can expect some rise in interest rates on standard term deposits, but they will be far from the levels we saw a few years ago.
The banking system continues to be ultra-liquid and to maintain very high liquidity buffers. The system maintains a healthy gross loan-to-deposit ratio of around 70%, which means that banks are maintaining their liquidity buffers despite the record increase in loans this year.

Is the ECB late with its measures to control inflation? While the US was already categorically talking about raising interest rates, Europe was still continuing with quantitative easing…
Indeed, we witnessed the US Federal Reserve implementing its most aggressive monetary tightening campaign since the early 1980s. Although belatedly, the ECB also responded to high inflation and began raising interest rates at a record pace.
The task of the ECB is difficult because it must find the right balance between controlling the inflationary processes in the EU and preventing the excessive increase in the cost of financing government debts in Member States. Following the rapid rise in interest rates, we can expect a slowdown in food and non-food inflation in the coming months. But there will also be secondary waves in relation to the demands for wage increases in the countries in Western Europe. Therefore, the expectations are for the ECB not to make any drastic changes to its monetary policy and to slow down the process of quantitative tightening.

What are Postbank’s forecasts for the economy in 2023? Does taking out a mortgage loan pose greater risks to clients today than in 2019, for example?
The demand for loans currently remains high because it is the way for households and businesses to counteract high inflation. Households view the purchase of real estate as a way to protect their savings and future income from inflation.
The expectations for next year are that the Bulgarian economy will slow down its growth but that we will avoid recession. The forecasts for GDP growth are mixed and range from a conservative 0.1% to a far more optimistic 1.6%. Looking at the current macroeconomic indicators, we are rather optimistic that the slowdown in the economy will be short-lived and we will quickly return to growth.
We, at Postbank, are among the leaders in mortgage lending and we work very actively to introduce innovative products that bring added value to our clients. That is why we are actively developing our dedicated mortgage loan centres, of which there are now more than thirty throughout the country. They employ experts in the field of mortgage lending, so that our clients can receive the most clear and comprehensive answers to their lending-related questions.

Postbank has been among the pioneers in digitalization for years – it was the first to introduce Smart POS and the first to offer instant payments. What will be your next steps in this regard?
The digitalization process will continue because it is undoubtedly the path to greater efficiency, bringing more benefits to our clients. We have a very solid track record in introducing innovations to provide an excellent experience to our clients.
We recently began expanding the range of users of our digital ONE wallet. We added new functionalities to the mobile application and made it available to both our clients and users who have cards issued by other banks in the country and are not using our products and services currently, but prefer our digital payment methods and greatly appreciate their benefits.
The other recent innovation is the digital assistant EVA – a chatbot based on artificial intelligence technology, providing real-time consultations. EVA is the client’s guide in the digital environment – always active and ready to help. The digital assistant’s functionalities are entirely based on AI technology, which is developing at a dynamic pace and is constantly improving, currently answering over 12,000 questions. Thanks to EVA, users have the unique opportunity to choose the solutions that suit their needs the best depending on their financial needs – quickly, easily and conveniently.
Our goal is to continue to provide tailored solutions depending on the expectations and needs of our users.

Bulgarian banks with foreign owners have been firm supporters of the adoption of the euro for years. What benefits will it bring in today’s environment, where indebtedness in the euro area is at record high levels?
The banking sector in our country is among the most prepared for full membership in the euro area and this is due to the fact that our country is already part of the banking union. The banking system is very well capitalized, over-regulated and liquid and all its indicators are above the European average.
We, banks, are ready. We have internal communications and experts following a plan for entry into the euro area, and we are convinced that the adoption of the single European currency by Bulgaria will bring many benefits to the clients. It will have a positive impact on our economy and will be a driver for accelerating reforms to reach European living standards and a more favourable business environment.
The biggest advantage of the adoption of the euro will be the minimization of currency risk for the economy, since it will be more competitive, granting access to the financial markets and global financial infrastructure.

In Greece, the euro opened up the local credit market to many new players, for example smaller German banks. Is it possible for similar competition to appear in our country if Bulgaria enters the euro area?
Competition, in its market principle and not only between banks, is always a significant factor for the development of a given sector. Every player wants to stay in the market and take an ever larger share of it. And this is normal because this is how it determines the direction of its development, sets its strategy and its implementation.
In particular, Bulgaria joining the euro area and adopting the second most used currency in the world would most likely increase such interest, but let’s keep in mind that this will definitely benefit us too, because Bulgarian banks will have access to financing from the ECB as a lender of last resort, as well as easier access to the financial markets.
We, at Postbank, are not afraid of competition, we welcome it. In any case, we are among the financial institutions in our country that offer the most state-of-the-art and innovative products and services, therefore we are ready to enter into direct market competition with any new banks.

Some time ago, at a conference organized by Bulgaria ON AIR TV, you said that you believe blockchain technology will play a major role in the banking sector in the future. The past few months shook up the digital currencies quite a bit. Is the time for new less speculative blockchain applications coming?
We witnessed crypto investors taking a series of hits this year – from the crash of the FTX exchange to the collapse of the TerraUSD ‘stablecoin’ and the sharp depreciation of Bitcoin.
Blockchain technology is at the forefront of innovation in the financial industry, promising to provide fast and secure transactions and help manage risk in the interconnected global financial system. Moreover, blockchain technology allows for decentralization, transparency, speed and unlimited access to data and information that are recorded and stored in a manner that guarantees their security and is impossible to tamper with and alter.
Since one of the biggest advantages of blockchain technologies is that they offer efficient traceability of products on all chains, among their potential applications in other areas are the public administration, health and energy sectors.
Bulgaria is also already working on the implementation of the European Blockchain Services Infrastructure, which aims to introduce the use of blockchain to accelerate the creation of cross-border services for public administrations and their ecosystems, secure information verification and more reliable communications.