Banking 2021: the year was not boring
Commentary by InfoMarket Agency
The results of the year are usually summed up after December 31. But sometimes, one can assess the situation more accurately a month or two before the end of the calendar. The interim results of the Moldovan commercial banks’ activities in 2021 may reflect the picture that is closest to reality.And the proof of this is the fact that every bank employee, to put it mildly, does not like the last day of the month, when it is necessary to adjust the indicators to the framework set by the internal policy, not to mention the end of the calendar year. In addition, if we take the first ten months as a basis (data as of October 31, 2021), they, perhaps, reflect the real state of affairs, when the profit is not yet “hidden” in the risk fund, and the indicators are not “combed” for the eyes of auditors and shareholders.
But before moving on to the indicators, let us dwell on several landmark events for the banking sector of Moldova in the outgoing 2021.
Two bank names vanish from the "map".
When the French bought the bank, they added to the bank name the “cap” of the main shareholder - Groupe Societe Generale. By the way, the shareholders of Eximbank, which was first Gruppo Veneto Banca, and later Intenso, did the same. This practice allows clients to gradually get used to the middle name, but call their bank the way they are used to. OTP Bank, which bought Mobiasbanca from Societe Generale, did the same at first, adding the fact that the Moldovan bank is now part of the OTP Group. But this year the bank was completely renamed, and the word “Mobias”, which is familiar to clients, will be forgotten in the coming years. Even if OTP Group for some reason suddenly decides to sell the bank, the new shareholder would be unlikely to restore the bank’s name given at birth.
Moldova Agroindbank, which has long ceased to be an agricultural bank, has firmly taken the position of the largest universal institution in Moldova, and with the arrival of the new leadership, it also changes its name: now it is maib. Moreover, it is in lowercase letters. The name MAIB has long been assigned to this bank, and now it will become the only one. One of the reasons is the lead-up for the bank's IPO, but more on that below.
Three banks have changed their Chairmen of the Board.
The change of the General Manager is a serious step for the shareholders, given the fact that the banking sector is a very conservative sector. Therefore, on international markets, such events rarely occur, either after the expiration of the contract (especially when it comes to an expatriate), or against the background of scandals, or because of seniority, or for personal reasons, among which the most "popular" is the state of health. How did this happen in Moldova? It is not easy to comment, but perhaps one of the above reasons can be applied to the leadership change in each of the three banks.
Giorgi Shagidze, who was appointed Chairman of the Board of Moldova Agroindbank, replaced Serghei Cebotari in this post. Last year, Fincombank shareholders decided to appoint Aliona Levca Chairperson of the Board; she replaced the permanent head and one of the founders of the bank, Victor Hvorostovschi. Subsequently, the shareholders changed and Victor Hvorostovschi became Head of the bank’s Council. Currently, Dana Scripnic performs the duties of the Chairperson of the Board. When the OTP Group acquired Mobiasbanca, László Diósi was appointed Chairman of the Board. However, in October 2021, after two years in this position, he decided to stop his professional activities. The duties of the Chairman of the Management Board are currently performed by Vice President Elena Guzun.
The first IPO in the banking sector is being prepared.
The most striking and very ambitious project of the outgoing banking year in Moldova was the maib's first steps towards an IPO. The bank was represented within the framework of the “Moldovan Capital Markets Day” held at the London Stock Exchange. This is one of the practical steps towards an IPO (Initial Public Offering). The first public sale of shares of a joint-stock company can be carried out both by placing an additional issue of shares by open subscription, and by publicly selling existing shares. In the case of an IPO of a Moldovan bank, it will be important to comply with the requirements of our legislation.
Purcari Winery was the first in Moldova to step towards an IPO; then the shareholders sold part of their shares without issuing new ones. By the way, among the shareholders of Purcari Winery is the Horizon Capital investment fund, which sold part of its shares during the IPO. The same fund also owns maib shares.
Marketing activity.
It should be noted that banks, especially market leaders, are pursuing a pronounced and very aggressive marketing policy in 2021. Both, advertising and image news and offers appear almost every day. Marketing services are fighting for news occasions, which immediately spill out onto the pages of the mass media. Behind this, in particular, there are noticed (in alphabetical order): Fincombank, maib, Moldindconbank, OTP Bank, Victoriabank. Other market participants’ news is also emerging, but somewhat less frequently.
The banks are owned by foreign shareholders.
In recent years, the banking system of Moldova has changed a lot. In the early 1990s, up to the mid-2000s, the National Bank actively advocated for Moldovan banks to strengthen independently, tried to prevent large international players from accessing the then still very weak Moldovan banking market. Now, by the end of 2021, the vast majority of shares in Moldovan banks belong to foreign shareholders. Among other things (such as increasing the banks’ competitiveness, introducing new technologies, etc.) this means that the profits earned by Moldovan banks leave the country when distributing dividends. There are only two banks created in Moldova from scratch (without the Soviet past) - Energbank and Fincombank. Most of these banks’ shares are owned by local investors. In all the rest of the banks, the controlling stake and the final word belong to foreign shareholders.
The return on bank shares is 13% per annum.
Operating with data for 10 months of 2021, all banks register profits, albeit differently. Return on Equity (ROE) ranges from 3.2% to 17.7% per annum. On average in the system, this is 12.9% per annum, and this still exceeds the inflation rate in the country.
This year, the banking system is more profitable than last year: for 10 months of this year, the total profit in all 11 banks amounted to 1.88 billion lei, which is 35% more than in the same period of the last year (the profit was 1.39 billion lei). In total, according to the results of the last year, the profit of the banking system amounted to 1.65 billion lei, that is, in 10 months of this year, the banks earned more than in the entire last year.
The data for January-October show that the banks are registering an increase in all indicators relative to the data for 10 months of the last year. Assets grew by 16.25%; banks' own funds - by 9.23%; profit (as noted) - by 34.98%; liquid assets - by 13.11%; deposits - by 16.37%; individuals’ deposits - by 13.16%; loan portfolio - by 21.8% and the "loan impairment" indicator increased only by 9.18% , which indicates an improvement in the quality of loans.
And, finally, let's point out the leaders by individual indicators. The share of liquid assets in the total assets of Procreditbank is 65.1%. The largest share of individuals’ deposits belongs to Moldindconbank - 72.4%. Comertbank is the leader in terms of the quality of its loan portfolio, with a “loan impairment” ratio of just 1.1%. In terms of Return on Assets (ROA) and Return on Equity (ROE), Moldindconbank is leading with indicators of 2.2% and 17.7%, respectively.
While approaching the finish line of 2021, the Moldovan banking system feels very confident. And there is still a month left to record the positive results of the year. //29.11.2021 - InfoMarket.
