Being a responsible leader in the corporate banking in Bulgaria, we strengthened further our focus on taking the digital banking services to the next level. Companies can take advantage of our e-solutions in the digital channels as well as in Bulbank Online and Bulbank Mobile. We have been developing and popularising further the Module for Online Securities Trading in Bulbank Online, which gives the individual clients opportunities to place orders and keep track of the securities and transactions from their personal wallet. Furthermore, we are proud with our Trade Finance Module in Bulbank Online which accepts easily corporate clients’ orders and all trade finance deals can be administrated completely online. The newest service developed by UniCredit Bulbank is the e-signing of documents – now legal entities have the opportunity to digitally sign (approve and send documents using QES* or the mobile app Evrotrust). For us it is important that Evrotrust, in their start-up phase, entrusted UniCredit in Bulgaria to support and help them grow. This is another proof of the important interdependence between fintech and financial institutions. This way we simplify and accelerate the process being more operationally effective paperless and maintaining a better traceability and archive of the documents. Easy, secure and time-saving.
Mergers and acquisitions (M&A) activity in SEE slowed further down in 2020 before a robust recovery so far in 2021 with total transactions amounting to 5.4 billion euro versus 6.6 billion euro for the entire previous year. Both deals flow and timing were affected by the COVID-19 pandemic. Investment decision-making and deal processing postponed in 2020 are becoming a fact in 2021. The M&A market rebound is most visible in Bulgaria, Slovenia and Croatia. Romania, usually the highest contributor, is catching up at a slower pace. In the past 20 months the regional leaders are the traditional ones – Romania and Bulgaria, with Slovenia coming on board as a high performer. While M&A activity in most SEE countries was influenced by the COVID-19 pandemic, the global economic investment sentiment, as well as excessive funding availability, it was local specifics rather than common features which tended to determine the main drivers of M&A in each country.
On 17 April 2019, the EU Parliament and the Council adopted the Directive (EU) 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain (UTP Directive) with Member States required to transpose the provisions of the UTP Directive into national law and publish them officially by May 1, 2021.
The changes should enter into force by November 1, 2021 at the latest. The parties to supply agreements of agricultural and food products concluded before the date of publication of national provisions above shall be obliged to align their agreements to the UTP.
The fact is that the pandemic changed everything both in our private life and business. Our clients’ focus moved to organisation, digital and process efficiency, and IT systems connected to the new reality of working from home, social distancing, and lockdowns across Europe. Every business that wanted to survive had to fully change towards a new way of work and that was their main issue we were trying to solve. We had several IT and digital projects followed by process improvements and change and implementing digital business models. On the other hand, many of our clients used this opportunity to optimise their organisation and improve efficiency. The future perspective and opportunity assessment were also very much present and even though we believed that we would not work too much on strategy with our clients, we had many strategy projects in 2021.
We will continue to actively invest in the overall development of the Kaufland brand as one synonymous with quality and innovation on the retail market. Significant investments are planned in our active expansion process which is underway. We plan to expand our retail network in Sofia, Varna, Plovdiv and other cities. We will continue to invest in the modernisation of our hypermarkets, as well. We remain focused on the range of products we offer – Bulgarian products, with an even stronger emphasis on quality, as well as non-standard, innovative and niche products. We will further invest in our team and its development. Our people have the key role in the overall performance of our company and the results we achieve.
In 2020, cement consumption in Bulgaria decreased by approximately 2.5%, compared to 2019, thus putting an end to an increase that the market had experienced for three years in a row. The sector came to a standstill for the better part of the second quarter of the year. Specific segments like tourist and commercial buildings were hit particularly hard and did not recover until the end of the year and large infrastructure projects kicked off quite late in the year. Nevertheless, we still have a strong market with demand being 14% higher than the 2017-2018 levels.
COVID-19 has jumpstarted the digital transformation in the insurance sector. Insurance customers are embracing digital touchpoints across the entire customer lifecycle: 71% of US life insurance buyers researched their insurance products online, 74% of UK insurance buyers bought insurance online, 13% of Italian insurance buyers have interacted with their insurer via online chat, and the list goes on (Forrester, The State of Digital Insurance, 2021). Where insurance companies haven’t responded with better digital experiences, a number of insurtechs are prepared to take over. But digital technologies are changing more than just sales and service, and this is starting to affect the entire insurance value chain. Insurers are now facing three key challenges: how to increase customer satisfaction and retention, reduce operational cost and utilise legacy core insurance technology.
By integrating CEZ Group’s assets, we are adding the largest supplier and distributor of electricity in Bulgaria, serving nearly 3 million customers nationwide, including the most populated southwestern part of the country and the capital Sofia. Additionally, we have retained most of CEZ Bulgaria’s management team in order to secure the in-depth expertise that has been gained through the years, while at the same time inviting new members to join the board, each of whom with over 25 years of experience in the sector at leading positions in energy companies operating across Eastern Europe. The combination of our insurance and energy business will significantly improve the holding company’s model and profile, generating considerable growth of operating cash flows. This year the total assets and revenue of the combined company are expected to exceed 1.5 billion euro, while its EBITDA is forecast to reach around 120 million euro. Еurohold serves to over 7 million customers and employs approximately 6,000 people in 14 countries in CESEE and FSU. Looking ahead, Еurohold expects to generate revenue and EBITDA of almost 2 billion euro and 200 million euro per annum by 2025, respectively. This will make us large enough to list our shares on a larger stock exchange. This is the next big thing in our upcoming timeline.
It has been shown that people particularly appreciate protection and security in crisis situations. Our business model therefore proves its worth especially in such situations. People appreciate being well protected at such times, which is why we were confronted with almost no cancellations of insurance policies and we registered an increased interest in health insurance. What has also proven successful is that we have been pushing the digital transformation within our group for years. The already extensive range of digital services and products has been a great benefit for us during the pandemic. We have also consciously continued to strengthen digital offerings and will continue to do so. Another factor is our strategic orientation with a high level of diversity. It has been confirmed that our business model, with its broad diversity across countries, brands, distribution channels and products, is proving successful even in difficult times. We therefore did not have to, and do not have to, rethink our strategic goals.
The main trend is the speed of globalisation of the financial services. In the past years we’ve seen only banks expand abroad, and many of those regionally. On a larger scale we had in many countries the heavyweights Citibaank, Barclays, Deutsche Bank, ING, etc. In SEE, after the fall of the iron curtain mostly banks from Germany, Austria and Greece were expanding their foothold. The global players were involved mostly in institutional and large corporate lending. And retail lending was left to companies with limited technological and managerial potential. This resulted in much slower development of financial services in general in SEE. Due to the smaller standalone scale of the markets, the lenders were not willing to invest too much.
Within Access Finance product portfolio, we also have consumer loans, as well as “boutique” credit cards for the loyal clients only. Furthermore, we are very proud of our co-branded products offered through a partnership with a telecom. We established a successful business model with A1 in the last three years and we currently offer consumer loans and credit cards under the brand of A1 through their customer network. Stepping on the experience we have from this quite beneficial for both sides partnership, we are currently actively researching potential telecom partners in the other markets where we operate so we can export the model abroad.
MAIB is the largest bank in Moldova, accounting for around 30% of the country’s banking assets and around 35% of loans. MAIB provides 24.6% of all mortgage loans extended to Moldovans. MAIB booked an average 11.4% asset growth, 11.7% deposit growth and 8.9% profit growth in the last five years. The bank serves over 20% of Moldova’s population and is among the largest employers in the country. The bank is widely recognised for its customer service and product innovation.