Bulgaria’s economic growth in 2022 and so far in 2023 has been slow amid high inflation, sluggish exports and low investments. Going forward, do you expect a pickup in economic activity by the end of the year and in 2024?
We expect economic activity to gain momentum next year. Our economists at UniCredit Bulbank forecast real GDP growth to accelerate to 2.9% year-on-year next year, as compared to 1.9% anticipated in 2023.
We think that easing inflationary pressure would help private consumption growth to remain resilient, while, in the context of the persistent shortages of labour in almost every sector of the economy, real wages growth is set to accelerate next year, which bodes well for consumption.
Acceleration of investments will be a key growth driver next year. In fact, the first indications of investments growth shifting to a higher gear were already present in the middle of this year. Most recent data showed that real growth of gross fixed capital formation accelerated to 7.3% year-on-year in the second quarter of 2023.
In case political stability is preserved, investments are set to grow even stronger next year in my view. Absorption of more EU funds under the Recovery and Resilience Plan would be a key driver. But not only that, I think that the processes of reorganisation of supply chains, which was triggered by the corona virus pandemic and the shifts in geopolitical tectonic plates caused by the war in Ukraine, will positively affect investment flows to Bulgaria. I think that Bulgaria remains a promising destination for investments, which is why I expect the country to benefit from the drive to shift more production activities to friendly countries that are located closer to the western European markets. Here it is worth mentioning our significant international footprint and market leadership – more than 70% of the international companies which have operations in Bulgaria are with us. We also support the expansion of the Bulgarian business abroad.
Also, importantly, investments will draw support from the significant increase in the volume of newly launched residential construction in the capital and other large cities over the past few years.
A positive factor is the fact that Bulgaria finally has a regular government and a working parliament, which makes it possible for the decision-making processes to speed up. In June already we observed an accelerated pace of investment in the economy, which in the banking sector is manifested in an increase in loans in support of key sectors. Data for the July 2022 – July 2023 period show credit volumes growing on an annual basis, whereas real growth reached 10.6%. In terms of loans to companies, the rise in the same period is 7.2%. At UniCredit Bulbank it is 11.5%, which goes to show that we are outpacing the market and that we are the preferred bank in corporate lending.
Overall, we expect positive developments in the next months and a stable last quarter for the business. We will stand by our clients and will be glad to support their investment intentions.
In the corporate banking segment, what are the key trends and where does UniCredit Bulbank stand?
With the pressure that macro-economic conditions are placing on businesses across Europe and here, in the local market, it is more than ever important that banks help companies navigate these difficulties and surmount them to achieve success. For this reason, we at UniCredit Bulbank are relentlessly focused on executing our strategy, investing in ourselves by having the best professionals and the right balance of investments in technology and digital. I believe that the best is yet to come and we are enabling ourselves to transform further into a stronger cohesive entity that can better support our communities and deliver on commitments to clients and shareholders, in spite of the difficulties we are collectively facing.
UniCredit Bulbank is the leading bank in the country, number one in corporate banking and a preferred financial partner. Our strong team of nearly 3,500 colleagues every day strives to provide comprehensive solutions to our customers, irrespective of whether related to a large-scale investment project for the construction of renewable energy facilities, structuring complex transactions, a full banking service to a corporate client or payroll and preferential banking conditions for the employees of a corporate client.
We are committed to creating growth opportunities for all stakeholders – our customers, as well as our partners, suppliers and employees. I believe that we will be able to achieve even greater success for our clients by pushing ourselves further to be a holistically different and better bank – the bank of Europe’s future.
What are the highlights of your business strategy in corporate banking for 2023 and 2024?
To continue creating value, we believe that the role of a bank goes far beyond just lending. We are a business partner, we have professional expertise on the market and the macroeconomic and business environment. Our colleagues have in-depth knowledge of our clients’ operations and a vision for their development, and this way we can offer the best solution for their diverse needs.
In the past year, we supported nearly 470 investment projects worth nearly 2 billion levs, of which about 500 million levs were earmarked for green solutions. In the first half of 2023 alone, we financed the construction of over 300 megawatts of renewable energy capacity. On the M&A advisory side, UniCredit sustained its leadership position as a preferred advisor in the renewable energy sector with a third deal in the recent years. UniCredit acted as a sole financial advisor in the disposal of the second largest wind park in Bulgaria with 72.5MW installed capacity. The deal team managed to attract significant interest from both international and local investors and lead the transaction to a successful close in challenging market conditions. We acknowledge the fact that we have a structurally determining role in the development of the country’s economy, and we approach this role with the uttermost responsibility.
To be even closer to our customers, we are not only familiar with the business of our customers but we are open to dialogue with them at any time. With one of our important initiatives, Give us food for thought, we invite our corporate clients to evaluate the products and the service they receive from their UniCredit Bulbank banker within 30 days after their transaction discussion. We are glad that companies are increasingly open to share with us ideas and suggestions on how to improve our service and facilitate them. We believe that our clients are partners, and in such relationships the parties together define the work processes, rules and solutions. Sustainability is integrated into everything we do. The topic of environmental, social and corporate governance (ESG) has entered the agenda of almost all companies, but for us it is not a simple concept. We finance companies that have a long-term vision for sustainable development and clearly defined key performance indicators. UniCredit Bulbank structures preferential terms with an exclusive focus on compliance with the ESG strategy and goals of the company. Practically every company has the opportunity to benefit if it has a clear vision and strategy for the sustainable development of its business.
We are hugely successful in attracting more and more customers – individuals and legal entities – to electric mobility and making it an affordable alternative with our Green Leasing exclusive offer. UniCredit Leasing holds approximately 35% of the leasing market of new electric cars in Bulgaria, according to data as of the end of 2022.
Moreover, we pay special attention to support SMEs as well as micro- and small mid-caps enterprises in developing regions. We offer a variety of guarantee instruments. In 2023, we signed a new agreement for the Invest EU program to support businesses for sustainable and also innovative investments. We are increasingly accepting sustainable transactions in our loan portfolio, supporting investments in renewables, energy efficiency and electric vehicles. We see huge potential in projects related to the transition to circular economy and energy efficiency.
Could you tell us more about the bank’s comprehensive banking platform for business clients?
We listen and value the voice of our customers and proactively ask them for their opinion in order to meet their expectations as fully as possible.Today, we can say that more than 95% of our customers are actively using Bulbank Online and they are one of the main driving forces behind the upgrades of the platform that we make every day. What that means for them is precise and fast service, customized financial solutions and digital banking, with Bulbank Online as the main digital service platform for comprehensive communication with our corporate clients. Moreover, it is the platform, which we evolve into an ecosystem for exclusive financial customer experience and future value creation. Our extensive experience and knowledge of different sectors have enabled us to develop innovative functionalities in online banking for our corporate clients – legal entities.
In July 2022, we launched a new functionality, embedded in the Digital products menu in Bulbank Online – a digital financial analysis of the companies. Our corporate clients can now compare their company performance with benchmark indicators and with other participants on the market in their industry or in other industries. They can obtain relevant information for their competitors, find relevant vendors and partners, as well as gain a better understanding of the environment. Having an extremely positive feedback from the market, we are further developing and enhancing this service. We are focused on perfecting customer experience and differentiating even further from the traditional banking and from the other players on the market. We aim to maintain a strong brand for all our stakeholders and further empower our customers to grow.
This year we are launching innovative Digital Document Exchange platform which will allow the companies to exchange and sign digitally documents with the bank. The usage of the new platform guarantees to the clients even more user-friendly and of course – secure process, completely free of charge. In the platform clients will be able to issue and use disposable qualified electronic signature for free or in case they prefer to use their own qualified electronic signature for documents signing. Thanks to this essential platform, we are able to achieve the maximum level of convenience in the exchange of digitally signed documents. The platform has been developed to optimize the convenience for our customers by providing an intuitive, fast and easy workflow and is a step towards the transition to a fully digital service environment.
To better address client needs, what new solutions have you added to your portfolio lately?
We are actively developing the portfolio of digital Trade Finance services in Bulbank Online. We have already closed the loop to comprise all the steps from the Trade Finance process in a fully digital, time-saving way.
Based on customer feedback, we have launched Host-to-Host (H2H) – this service is an opportunity for legal entities to order a group of outgoing transfers in Bulgarian levs and/or foreign currency through their Bulbank Online using their own ERP system.
Over the past year we launched several new digital solutions. One of them is ePOS, which allows the mobile phone to become a POS terminal and to accept payments by a debit or credit card entirely contactless.
We have developed an entirely new digital functionality – Aggregated POS transactions, which allows for the aggregation on a daily basis of the total volume of card transactions and fees at merchant or retail level. We work a lot for the small companies and UniCredit Bulbank is offering reliable remote full banking service for the small companies.
Our digital and innovations teams work also on new functionalities of the Online and Mobile banking in order to enhance further the customer experience. Most of our clients are already using M-token to log-in and sign transactions in our Online banking and they experience really fast and smooth service of their daily operations.
Our main ambition is to offer integrated digital solutions that not only facilitate consumers, but also significantly improve their interaction with the bank. We strongly believe that the future lies in digital banking, but without losing human contact with the customer.