M. Kammas: The new generations are changing the banks

& nbsp & nbspΘεανώ Θειοπούλου & nbsp; & nbsp;

Banks on the one hand must continue and expand their investments and therefore their services provided through digital solutions and at the same time focus on emerging sectors for the Cypriot economy, says Michalis in his interview with “F” Kammas, general manager of the Association of Banks.

Regarding the movements of the banks, he notes that “I would not rule out, I would probably expect, in the coming years to create new, larger banking schemes, through mergers that will have a positive effect on bank balance sheets through synergies, economies of scale and optimizing the performance of financial institutions. ».

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Competitive pressures on banks

Banks today have strong capitalization, significant liquidity to withstand pressures on their balance sheets and fewer non-performing loans. But how can they be highly profitable with today's low interest rates?

In addition to the period of low interest rates we are going through, we must take into account a number of other important factors, both in Cyprus and abroad, that affect banking operations and especially their core, which is market financing. The most important ones have to do with non-performing loans, which, although gradually declining, remain a significant weight on bank balance sheets. At the same time, the new lending mainly concerns local businesses and households, which are clearly in a market with a high rate of private and public lending, which affects and limits the lending prospects. In addition to these parameters, banks are under competitive pressure from companies and technology platforms operating mainly in the field of electronic transactions and payments, at lower costs, aiming at a market share maintained by banks for years. In addition, banks apply a more complex and stringent regulatory and regulatory framework, which increases their operating costs. & Nbsp;

Taking into account the above data, I see that banks on the one hand must continue and expand their investments and therefore their services provided, through digital solutions and at the same time focus on emerging sectors for the Cypriot economy. For example, young, small businesses, young people, are looking for funding to implement their business plans, which involve either technology or even a new generation of people who have significant knowledge and are more scientifically involved in the primary sector. At the same time, potential options inside and outside the country and participation in lending to large companies and projects through syndicated loans should be considered. & Nbsp;

There has been a lot of discussion about increased bank charges, which offset part of the lost revenue. Is it estimated that we will see regular changes in the pricing policy of banks, in order to show profits?

First of all, let us clarify that as an Association of Banks we do not have any relation regarding the pricing policy of each bank. Such issues do not fall within the activities of the association. However, if it is something we observe from the revised charges of some banks – and not this year, but as a trend recorded in recent years and not only in Cyprus – it is a direction to reduce the physical presence in the branches and promote alternative service channels. their customers. For example, a series of services is provided much cheaper or even free online, unlike the branch, precisely because there is the goal of gradually transferring basic tasks and services from live to electronic. It is no coincidence that now eight out of ten customers of large banks maintain and use electronic accounts for most of the services they traditionally received from stores. & Nbsp;

Also, the Single Supervisory Mechanism (SSM) publicly but also through its suggestions to the banks, points out the need to reduce costs, increase revenues and maintain profitability. This essentially means redefining the business model and strategy of the banking institutions. & Nbsp;

One last question is whether the banks are allies or competitors with FinTech. How much revenue can the banks lose from these companies and how do you see the Cypriot banking system adapting to the new data?

The answer I would say to your question is both yes and no. Yes, because clearly the environment that has been created at international and European level in recent years favors the creation and operation of FinTech companies, which focus on the field of electronic transactions and payments. These have traditionally been services provided mainly by banks, so yes, they operate in competition with the banking sector, providing the same services but in a more relaxed supervisory and regulatory framework. This raises the issue of equal treatment and provision of services on equal terms between banks and these companies.

On the other hand, however, we see tremendous reflexes from banks, despite the plethora of other challenges they face. We have seen significant investment and progress in a range of services, which have now been transferred or provided electronically. Now, the basic need of the market is to process its transactions in the shortest possible time, safely and at the lowest cost. Consequently, developments in recent years, mainly due to European directives and regulations, have led to a transformation of the field of payments, transactions or trade, which has given rise to investments and the launch of technologically advanced solutions by banks as well. .

Reducing operating costs

What is the key component of the strategy that bankers will follow in the coming years to reduce operating expenses? & nbsp;

The answer to your question I believe stems from the very developments, trends and requirements of the market, ie the citizens. We notice that the younger generations handle technology with incredible comfort and look for whatever they need electronically. Older people also try and gradually adapt to new data, as we have seen during the pandemic. Therefore, the use of digital solutions is increasing dramatically and at the same time the need for physical service is reduced, something that shapes the work model of the banks themselves and their services, through alternative channels. At the same time, the percentage cost of banks to cover labor costs is significant, which is desirable to reduce, maximize the benefit of technology and at the same time effectively manage the branch network for physical customer service. & Nbsp;

These trends will gradually become the norm in the economy, which will lead to banking operations in the new database. This, of course, requires investment, but in the medium term I believe that this will help reduce costs, increase productivity and therefore optimize the banking services provided, as well as the financial results.

The chances of mergers

Do you think, Mr. Kamma, that the challenges that banks are already facing and are expected to intensify, will lead to mergers?

The scenario of the creation of ever-increasing banking organizations at local and transnational level is always on the table of discussions, thoughts and encouragement even from the EU supervisors. The past 10 to 15 years have been a catalyst for developments in the banking scene in Europe. and there was, if you will, a lag in terms of reaction capabilities and rapid recovery compared to the US. At the same time, it is noted that the cost of services provided by banks is increasing due to regulatory and supervisory requirements, while at the same time competition is intensifying and market trends are different. & Nbsp;

Based on these data, I would not rule out, I would probably expect, in the coming years to create new, larger banking schemes through mergers that will have a positive effect on bank balance sheets, through synergies, economies of scale and optimizing the performance of financial institutions.

Restriction of squares for new homes

Continued rise in prices for construction materials has begun to affect the real estate market, creating problems for land developers and demand mortgages?

First of all, it should be noted that so far, despite the significant increase in the cost of construction of new homes and wider buildings, due to the increase in international prices of construction materials, fuel and transport, the domestic market seems to have moved satisfactorily in 2021. One in three loans given were for households and mainly for the purchase or construction of a new home. Therefore, we have two facts before us: On the one hand it is the timelessly strong culture for home ownership that exists in Cyprus and on the other hand the cost that clearly affects the capabilities of households. Something I see being recorded in the near future is the reduction of square footage for new homes. I do not see, for example, a strong tendency for rent versus private housing. Also, the current high price on important construction materials is considered temporary and we will have to look in the next period how the specific prices may differ or for how long this internationally recorded inflation trend will last. & Nbsp;

Source: www.philenews.com

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