Forecasts are a thankless task, especially difficult after a complicated 2020. Nevertheless, what do you think we will see in the banking sector in 2021?
- If we move from the general to the specific, understanding that the banking sector does not operate in a vacuum but depends on the larger economy, we will see that our economy is in good condition. This is confirmed by assessments from international rating agencies. In addition, fiscal policy is functioning effectively, and significant currency reserves have been accumulated that we can use for a 'rainy day'. This is the basis of sound financial management, not only state or banking, but also family. Whenever there is a 'fat' year, one must conservatively manage expenses and strive to save. When hard times come, you can take out the savings and spend them.
We saw that in 2020 national governments injected money into the economy to prevent it from falling sharply. An absolutely correct step. In 2021, we will see that countries that were not frugal in supporting the economy will start economic growth faster. I believe that Kazakhstan will certainly be among these countries.
It is quite likely that 2021 will be a good driver for Kazakhstani banks. Of course, the pandemic and restrictions reduced the size of Kazakhstan's economy; certain sectors, like SMEs and the service economy, were significantly affected. However, during 2020 and early 2021, we continue to observe a change in leading profiles in the corporate sector. Financial and oil companies no longer dominate, and fast-growing leaders are now technological service companies.
In 2020, 'stay-at-home' companies conquered the market. In 2018, delivery services like Glovo and Wolt entered Kazakhstan, and in 2019, 'Yandex.Eda' followed. Since 2013, a local player, Chocofood, has been operating in the country. Now we see new companies branching out from them, which is quite justified – the market is rapidly growing, and many want to try to earn from growth. I believe that delivery services will continue to enter our market, which is in a formative stage and appealing for SMEs.
The second direction that will grow this year is food production. Import substitution is necessary as air today. Demand for poultry, cheese, and dairy products must be completely satisfied with local supply. The pandemic showed that with border closures, supply chains collapse, and national security issues intensify. Therefore, it will be addressed by both the government and private investors: the food market was, is, and will remain attractive.
The third promising direction is SMEs. Most likely, in 2021, we will see growth in small innovative and service-oriented companies. And certainly, in 2021, we expect mass vaccination worldwide, after which borders will reopen. Tourism, transport, and the hotel business will regain momentum. This will also contribute to the growth of national economies.
What is interesting about these 'new' companies for banks, and how will you integrate them into your business?
- Despite being a banker, I am not as avaricious as it might seem (laughs). We do not seek our advantages from new companies on the market. The overall effect is more important here, especially the creation of new jobs. If you recall, in the spring of 2020, delivery services became a lifeline for city dwellers left without work. Delivery created temporary jobs at the peak demand for their services. Similarly, taxi services are creating a new economy. Previously, private transportation was in the gray zone and did not pay taxes; now it is a transparent and, importantly, safe service. Such services allow you to build a career or just earn extra money if necessary, receiving official income.
The emergence of new industries increases jobs, tax revenues, and overall economic stability. And this is already very good for any bank.
Where will the main points of banking growth be in the coming year?
- Classic products: deposits and loans will remain the main offerings from most banks, including Nurbank. Speaking of loans, we are among the banks with some of the lowest rates for all categories of borrowers. I am often reproached for not earning a lot compared to other banks. I repeat, I am not avaricious (laughs). I do not want to raise prices and ultimately lose clients. Now, for instance, the permissible effective issuance rate is 56%. Issuing loans at such a rate is quite legal. But why? Is this decision right?
We are growing adequately with the market, understanding our strengths. For example, we have 100 branches. We strategically distributed them so as not to spend extra money opening new ones, but at the same time, ensuring branches are located within at least a ten-minute drive by car from certain locations. Now three-quarters of Kazakhstan's population live within 10-15 minutes from a Nurbank branch. Branch accessibility provides the client with attentive managers in the first place. People are always social and rarely refuse live communication. We like interacting with clients, and we eagerly take advantage of this.
We do not advertise often or much, it is true. We just do not see the point in spending millions; better to find a more worthy application for them. We mostly spend money saved on advertising for developing services and products. We improve ourselves as a bank for clients.
In 2020, we placed subordinated bonds totaling 46.8 billion tenge for 15 years. The funds are aimed at lending and supporting the real sector of the economy. Also, in May 2020, a major shareholder recapitalized the bank by 20.038 billion tenge. Thus, we formed additional provisions, derived from profits, as a safety net to cover potential losses from problem loans. This affected the financial result (a loss in the amount of the established provisions). It is important to understand that these losses were clearly planned by us and are the natural consequence of creating such a substantial volume of provisions.
I would also like to draw your attention to the fact that Nurbank has been operating in the market for 28 years. We have a strong professional team, and we love and care for our clients. Therefore, during all this time, the bank has never defaulted. Not even for one day. In 2020, we cleared a large volume of problem loans. We adequately provisioned 68 billion tenge. Standard and Poor’s improved our ratings, raising the outlook from 'negative' to 'stable'. We improved our rating outlook. We are among the banks with some of the lowest loan rates. I believe we reasonably compete with the largest players in our market and do so quite successfully.
How will Nurbank strengthen its market opportunities with its own advantages?
- We develop new technologies, considering both the successes and failures of market peers. So far, we have postponed the implementation of services that are almost considered standard with us until now. There is no point in changing everything built on an old base until that base is updated. We are currently updating the interface and introducing new internet banking.
We plan to offer new cards and Samsung Pay and Apple Pay in the first half of 2021. These payment features have become a standard thanks to competition, and we will definitely integrate them. Therefore, in 2021 we will refine the mobile application.
Currently, there is a trend towards the reduction of market players, but, in my opinion, there won’t be a significant reduction. The sector needs competition, as it encourages banks to offer services at lower costs and more promptly.
Source: Forbes.kz