BANKING INDUSTRY

Prioritizing Partnership

Interview: PRAVEX BANK Management Board member and Corporate Division Head Francesco Lupo

Prioritizing Partnership
About the interviewee: Francesco Lupo is a member of the Management Board and Head of Corporate Division at PRAVEX BANK
Business Ukraine magazine
Tuesday, 18 June 2019 15:50

What key trends have you observed in the corporate customer service segment of the Ukrainian banking sector over the past year?

The main trend that I have observed has been general growth, both in retail and corporate lending. This is a good signal for lending activities. Banks are focusing on enlarging their customer bases and expanding their engagement with domestic corporate and multinational clients along with the SME segment. During 2018, the overall portfolio of loans to individuals in the Ukrainian banking system grew by 27.2%, while lending to legal entities rose by 11%.

Banks remain quite conservative in their approach to corporate lending due to a number of factors. Firstly, this reflects the relatively low number of international companies active in the Ukrainian market. It is also due to systematic problems related to legislation protecting the rights of creditors. In response to these factors, banks are trying to broaden their focus. In addition to large national and international corporations, they are also looking to SMEs and private entrepreneurs.

 

Is it true to say that international companies operating in Ukraine tend to prefer banks with foreign capital?

Yes, international groups really do prefer to work with international banks present in Ukraine. It is easier for them to build relationships with institutions where there is already prior experience of cooperation. It can be quite challenging to begin a relationship with a new bank due to Anti-Money Laundering (AML) and Compliance issues, due diligence, preparation of documentation, and other technical requirements. At the same time, it remains easier for state-owned companies to gain access to state banks. As a bank, we do not give preference to any particular companies. In the second half of 2018, PRAVEX BANK adopted a new business strategy that includes a clear segmentation of customers. The first group is multinational companies and those with ties to Italy; the second group features large Ukrainian companies (including state-owned and insurance companies); and the third segment is the SME sector, where we decided to reengage with a series of specific business propositions and dedicated financial products.

 

How does PRAVEX BANK’s status as part of a major international banking group shape your client portfolio strategy?

We implement the best practices of the Italian Banking Group Intesa Sanpaolo in the Ukrainian market. Intesa Sanpaolo has been one of the leading financial groups in Europe for more than 10 years and is currently among the top five Eurozone banks in terms of market capitalization. Our strategy in Ukraine is the parallel development of retail and the corporate segments. We want to serve not only large corporate customers, but to cover their suppliers and clients, working jointly with the Retail Division to assist their employees by means of cross selling and providing them with dedicated products. We focus on providing a wide range of services to successful companies in the IT sector, food processing, energy, manufacturing, agriculture, logistics, FMCG (fast-moving consumer goods), packaging and more.

One of the key points of our sustainable development strategy is the quality of our customers. We want to provide them with naturally hedged financing structures in order to protect them against any possible adverse market scenarios that may arise in Ukraine. Our target is to become a factor accelerating the business development of our clients. This means being able to rely on people who can work in difficult situations. It means providing clients with services that match their needs. Banks urgently require innovations and the improvement of customer service, but we must also not forget about the importance of a physical presence: it is crucial for us to grant a high quality of service through an adequate number of branches located in the most important industrial and agricultural centers of the country.

 

What services do you see the most demand for in the corporate sector of the Ukrainian banking industry?

We are willing to couple traditional lending activity with a wide range of financial products promoting new services. We are developing trade finance, because Ukraine is a trading country. Trade flows are growing both towards Western Europe, including Italy, and to eastern markets such as China. Many Ukrainian companies in sectors like food processing and construction are choosing to use Italian technologies to develop their business. We try to facilitate these commercial flows. Ukraine’s new currency law has softened currency controls, making it easier for banks to conduct foreign trade operations between Ukrainian and international companies. This leads to a strengthening of trust and helps to attract international investors back to the country. In addition to this, the new generation of consumers expects advanced digital services and online access to banking services.

 

Is the corporate sector in Ukraine ready to make the switch to remote maintenance completely, or is it still important to maintain a branch service?

The Ukrainian economy remains very tied to cash transactions. This is very expensive, as is the paper trail created by the many institutions requiring original documents with accompanying authentications. There is a need to simplify such formalities because they make companies less competitive. Nevertheless, the transition towards digital technologies is unstoppable. Corporate customers already require digital solutions, while individuals and private entrepreneurs become active users of digital services as soon as they become aware of them. In December 2018, PRAVEX BANK expanded its range of online banking services for corporate clients. We updated the list of services provided and additionally developed an English-language interface, because many companies have foreign employees or employees who speak English.

 

What are the key criteria for corporate clients when choosing a partner bank in Ukraine?

I often tell my team: there is no such thing as good or bad weather, only bad clothes. The bank should provide the necessary services to its customers not only in good weather, but also in bad. We have to get used to the fact that instability has become the new normal. When a client chooses a bank, they need to consider the potential it offers for future cooperation. We want to be not only a service provider, but also a partner for our clients. We need to understand their strategy in order to understand how best to support their business. For any client, a bank should be a partner. In terms of international markets, I would even say that a bank should serve as a “passport”. Corporate clients looking to select a bank should pay attention to reputation, to the business model, and to all the main financial indicators that demonstrate the solidity of the banking institution and the group to which it belongs. Let me also emphasize that PRAVEX BANK supports the real economy with particular attention to cultural heritage and educational programs.

 

What are your goals in the corporate sector for 2019?

Our strategy provides for the growth of the bank’s asset portfolio in the corporate business. We had previously slowed down our coverage in the SME segment, but we have now decided to relaunch SME operations. We want to work on financing the supply chain of large domestic and international companies, creating synergies and leveraging the advantages of the Ukrainian economy. Initially, we plan to focus on clients in Kyiv, Dnipro, Lviv, Kharkiv, and Odesa. During the current year, we expect to see the contribution of the SME sector to our total assets and liabilities begin to grow together with that of large companies. We aim to attract the best large corporate enterprises and the main multinational companies. In the SME sector, we want to boost existing cooperation with clients while at the same time significantly enlarging our client base.

We plan to develop new solutions for deposits and trade finance to meet growing demand. We are currently updating our product line to become broader and more flexible, supplemented with customized products that are difficult to find on the Ukrainian market. Plans are in place to increase engagement with core Ukrainian industries such as agriculture, not only with manufacturers but also with traders. Additional targets include telecoms and pharmaceuticals companies, the FMCG sector, IT, and logistics. 

We are studying the possibility of working with renewable energy producers, based on the belief that Ukraine will become more self-sustainable in this sector of the economy. We want to cooperate actively with supranational organizations in order to increase the support we can offer to local and international companies working in Ukraine. As a member of the Intesa Sanpaolo Group, PRAVEX BANK is exploring how to import the best practices of the Group. We are committed to becoming an engine for the growth of the real economy in the medium- to long-term, for both households and corporate clients. In order to reach these goals, we will leverage the advantages of belonging to the Intesa Sanpaolo Group, adopting international best practice along with the Group’s corporate culture and values. We are committed to develop a circular economy model in contrast to traditional linear economy models. We will reach these targets through our people, our values, and our investments in the market.

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