T oday, there is the prospect of the recession worsening in the region and EU countries. This indicates that 2012 will be even more challenging than 2011 for the economy and banks,” said CEO of Piraeus Bank, Neoclis Neocleus at thebeginning of our interview.

■ Most Serbian and Greek banks have begun the new year with the same, old problems, with generally less money to be loaned to the economy, difficulties in getting money from previously given
loans and the much lower credit rating of citizens. In such a challenging environment, what are your global expectations?
- It is expected that, due to challenging market conditions, banks will continue to be faced with  the non-performing loan problem, focus will be on maintaining credit activity levels whilst at the same time
not compromising the quality of operations. In order to maintain lend-ing levels, and thereby preserve stability in the banking sector, it is necessary to reduce the high level of non-performing loans, which is the shared obligation of banks and enterprises. In addition, banks will have to quickly and effectively respond to changes in the business environment and satisfy customer needs through loan restructuring, innovative products and favourable credit lines. For Piraeus Bank, our main objectives are the improvement of internal organization and the further expansion of our business.

■ So far, Piraeus Bank has invested nearly 500 million euros in the Serbian market. How are these investments performing, considering the current economic and business conditions?
- Due to our strategy, in the previous few years we have managed to achieve satisfactory growth. Strong capital and high liquidity in 2011 enabled us to be a reliable partner of the economy and citizens.
Piraeus Bank is still in the process of investing since it hasn’t reached the expected levels of activity. Times are tough, but we remain optimistic and have a positive approach. We are now more cautious in deciding when and where we invest, but that does not mean that we are going to stop providing loans.

 

■ Would you say that the business climate in Greece is calming after the EU’s assistance, or is that just a false impression due to the New Year holidays? Also, what future trends do you expect to see in 2012 for the Greek banking sector?

- In the second half of 2011, there was a significant increase in uncertainty regarding the international economic and financial environment. Sovereign debt crisis has spread to the core economies of
the Euro Zone endangering global economic growth. Hopefully, the recent European aid package will enable Greece to enter into a sustained period of economy calming, enabling the restructure of the economy and “freeing” economic forces that will bring changes in the future. Currently, Greece’s economy is facing a difficult period of adjustment, deficit reducing and the changing role and functioning of the public sector. In this context, it is to be expected that banks are financially supported with liquidity and capital where necessary. Regarding Piraeus Bank Group, we have reemphasized our policies to safeguard our balance sheet through the implementation of stricter evaluation criteria in the loan portfolio and a significant increase in provisions. Recently, Piraeus Bank Athens increased the Bank’s share capital with €380,000,000 due to 1,266,666,666 newpreference shares undertaken by the Greek State. This share capital increase reinforces Piraeus Group’s capital adequacy ratio by 1 percentage point, leading to a 9.8% total capital adequacy ratio.

 

■ To what extent is the economic crisis in Greece dictating the terms of your business in Serbia, having in mind the significant global burden of the Greek banking sector?
- The events and crises in Greece have little direct effect on the financial conditions and business operations of Piraeus Bank in Serbia. Piraeus Bank Beograd operates as an independent legal entity in Serbia and is highly liquid and solvent. Money that the bank has invested as equity capital cannot be withdrawn and remains in Serbia as a permanent guarantee of solvency to local depositors, lenders and other creditors. It is also important to stress that there is no possibility that our mother bank will ask for capital withdrawal. Greek banks have a market share of 16 percent in Serbia as a result of rapid growth before the crisis. At present, due to the crisis and problems faced by the banking sector in Greece, we are adhering to a more conservative plan in Serbia that does not involve rapid growth. However, this is also common with other non-Greek banks. An improvement in our business operations and the everyday management of the bank, including cost optimization, is now our priority. It is important to stress that we still aim to achieve growth, albeit cautiously

 

■ As the director of a Greek bank, how would you assess the EU’s support of Greece’s economy, particularly concerning the banking sector that according to the latest forecasts can easily fall below expected results? What are the consequences if that happens?
- Following EU Summit decisions for “A voluntary bond exchange with a nominal discount of 50% on notional Greek debt held by private invstors,” there will be a need to recapitalize the Greek and European banks whose regulatory capital will be negatively affected, either by private or by public funds. The decision also mentions how this will be carried out and the mechanisms that will be used. Shareholders will be asked, by mid-2012, to cover this capital shortfall. In the event that they are not able to do so, the Hellenic Financial Stability Fund stands ready to cover this with 30 billion euros earmarked for that purpose. These issues do not affect our relations with customers, other business relationships or daily operations.

 

■ In comparison to your business plan for 2011, in which segments have you made the biggest changes for 2012?
- Our business plan for 2012 envisages growth for both loans and deposits. We are also planning to introduce improved products and services that will better serve the needs of our clients. Quality of service and customer orientation is paramount to us in 2012.Innovation is also a very high priority for us. We are continuously searching for better ways of doing business - aiming to offer faster and better services with simpler procedures.Two high priorities that have been identified for 2012 are in having more loan and deposit products in Dinars as opposed to foreign currencies and to promote further lending in the SME sector.

 

■ Serbian law defines all foreign banks operating in Serbia as domestic banks, thus legislation is very strict, especially when it comes to capital adequacy and provisions when approving loans. Does this bring about additional caution when it comes to granting new credit?
What monetary measures are you expecting the National Bank of Serbia to take?
Regarding our cooperation and supervision by NBS, we believe that Piraeus Bank is treated in a fair and correct manner, but that does not mean that there is no room for improvement.The NBS’s regulatory framework and rules on capital adequacy are quite conservative, which in turn is making commercial banks more conservative, however it helps at times of crisis. We do not expect any imminent additional monetary measures by NBS or changes to the banking regulatory framework in the near future.

 

■ The large number of non-performing loans in Serbia has been growing steadily and exceeds 20 percent. Is it a problem for your Bank and, if so, how do you plan on tackling the issue?
- Piraeus Bank’s total loan portfolio is about €600 million, out of which around 10 to 11 percent is non-performing loans. Problem-atic loans date back to the “distant past”, in the period from 2006 to 2008, but due to slow legal procedures, they are still in Piraeus Bank’s books. As for the loans in arrears, their number is slightly higher, but the bank is trying to help borrowers through restructuring. We are talking here about clients who have a good chance of recovering and those that we believe will be able to fulfil their obligations to the bank.

 

■ Several Greek banks that operate in Serbia have entered into the merging process. Piraeus Bank is also occasionally mentioned. What can you tell us about these processes and the situation with your bank?
- The announced merger of Alpha Bank with EFG will be very positive for both parties, chiefly due to the external investor who will pledge funds for capital increase. Piraeus Bank at present is not in any negotiations regarding a merger. ■