'This could end well'

Richárd Szabados: We experience a lower demand in comparison with the first phase, for several reasons. Obviously the time window for companies is wider now, which allows SME’s more time to work out how to spend the loans, so there’s no need to hurry now. Also, growth can be achieved when consumption rises, for which you need economic expansion as well. Since consumption isn’t rising on this market, a known psychological effect kicks in: companies don’t want to be left out; if we are talking about forint financing, this is their first option. The duration of the loans is favorable, a maximum of 10 years for investments, which is longer then the normal interval in this type of loan.

By the end of April some HUF 126 billion was contracted at the bank market level, our share was HUF 6.5 bln. Our market share is 8% in the given and available SME portfolio (as defined by MNB), and I see a total demand of HUF 20 bln in the pipeline. I think some HUF 300-400 bln will be lent from the total available HUF 2,000 bln. To sum up, the ‘Funding for Growth’ scheme has a definitely positive affect on the whole economy, and the relief of interest charges also benefits the customers. This also favors indebtedness in forints rather than foreign currencies, as most of the companies’ revenues come in forints. Another benefit is that the loan goals are broad enough, covering typical SME’s financial demands. The ‘Funding for Growth’ scheme also stimulates investments. Naturally a program like that is insufficient to put the economy on a stronger growth path itself, but it’s enough to give a boost to the stagnant loan market, igniting slight growth.

BBJ: Apart from the funding scheme, what else do you think is necessary for economic growth?

R.SZ.: What we really need is more trust and cooperation between the government, financial institutions and clients, as well as more intense communication between the players. I see positive signs in the economy: inflation has decreased, in line with expectations, while the central bank gradually reduces the base interest rate, making loan borrowing more attractive to the clients. Also we see a tendency to move from deposits to different types of  bonds and securities. The deposit market shows a decreasing trend, since there are more attractive ways for companies to maximize their income. Not only does domestic financing become more important, but also export financing too, in which Eximbank has a major role. We have managed a contract framework with Exim, so the new products are available to our customers as well. Exim offers the most suitable currency loans for export oriented customers.

BBJ: Do you think the currently more or less favorable economic figures show a long-term trend?

R.SZ.: GDP and inflation data never show the actual moment, they are always a result of the past. It’s a fact though that a predictable inflation policy coupled with a stimulating environment could be sustainable, which is in the interest of the government, companies and banks. So I’m fairly optimistic. This could end well.

BBJ: How about CIB’s future plans in Hungary? Will you stay or go?

R.SZ.: The Hungarian subsidiary of ISP Group  is now in a top position in both liquidity and equity ratio, thanks to the owners’ strong support. We have had a major capital increase, and the mother bank has also accepted our three-year strategy, which guarantees the group’s intentions to maintain a presence in Hungary. So we have trust from the owners, they clearly see our efforts. Our three-year strategy aims to achieve a profitable operation.

BBJ: What’s the main goal for these three years?

R.SZ.: Our aim is to double our SME portfolio in three years, keeping it a profitable division, offering faster administration and less bureaucracy for our clients. Our SME portfolio is now worth around HUF 130 bln, covering companies with net revenue from HUF 250 million to HUF 10 bln. We are ahead of major changes in making administration easier. Also we intend to put our flag on certain fields, offering partnerships to companies in agriculture, trade, manufacturing, as well as the processing industry, food production, and auto industry suppliers, focusing mainly on agricultural vehicles, cars and trucks.

In the leasing group, our goal is to be in the top three-five in terms of new volumes at an annual level. We start from a good position, being second in new financing in agriculture machinery industry.

BBJ: How do you see the future of cooperation between financial institutions, consultants and companies?

R.SZ.: All companies have evolutionary phases in their life cycle, with different demands from a financial partner who only asks for assistance in financing, or just in transactions, or wants to invest. We believe in implementing the life-cycle model in the finance field. The question is how to move from the current relationship manager role to becoming a consultant partner. Of course many already see us as consultants, having a dedicated contact person at our offices, a sort of corporate banker. We intend to take another step toward becoming a consultant partner, who doesn’t just fulfill the clients’ needs, but also gives them advice, practically thinks for them, offering them a complete menu about solutions. It’s a big leap, and it took us four years to get to where we are today; now we would like to step further to become a real challenger sales representative.