The loans to deposits ratio is around 90%. This means that 90% of deposits have been given as loans to citizens and companies. “There is a sufficiently dynamic turnover of money in Bulgaria. Don’t imagine some mouldy gnomes hiding wads of money in the banks’ basements”, said Levon Hampartzoumian, MB Chairman and CEO of UniCredit Bulbank on the national TV show “The day starts with Georgi Lyubenov“. He was guest of the TV show on 6th December, when traditionally bankers celebrate their professional holiday. Topics of the conversation were interest rates, loans, the condition of the banking sector, wealth, etc. The banker greeted his colleagues in the sector and explained the role of financial institutions.

“The bank’s service to people is financial intermediation. You give your money on deposit for 6 months or 1 year, and the bank gives it to you or to another customer for example as a mortgage loan for 25-30 years. The role of banks is to support the movement of this money”. In the spirit of the holiday of St. Nicolas, when people traditionally eat fish, the host asked whether banks’ customers are easy fish coming to the net. “If anyone counts on growing with naive customers, this cannot last long and ends badly”, said Levon Hampartzoumian.

“What should we do with today’s lower interest rates?”, asked the TV host. “Take loans or not?” Hampartzoumian pointed out that currently there is a discussion of introducing new EU directives on loans which put special focus on the pre-contract information, on what is going on prior to the conclusion of the loan contract itself. “They will make official certain good commercial practices, some of which are applied by banks even today. The investigation of the client’s creditworthiness is of use to both parties in the process. Bulgarians like to say “save some for a rainy day“, so never take a loan on the verge of what you can afford to repay. This serves nobody’s interests. Both parties should act responsibly. Tomorrow interests could be lower but could also be higher. One should take a loan when they really need it, know what they will use it for and are certain of their capability to repay it”, commented Hampartzoumian.

“The profit of a bank is formed by services, not by activity. This is the role of financial intermediation. The prices are determined by the market competition. (editor’s note: competition is growing also because clients can already use various financial services not only from banks)“, said Hampartzoumian. He reminded that years ago when no debit cards were in the picture, taking a salary advance or payment took half a day waiting on queues, signing, cash in envelopes, etc. “Now this service is one click away. One click is also enough to shop on еBay, Amazon, pay bills, etc. Banks are not just a vault. Contactless cards are also already here, you can go down into the subway of Sofia buying a ticket for seconds by such a card, and so on. All these things are part of the financial intermediation service and these services go for a price – cents, etc. – which form the profit from the activity, like with every business”, Hampartzoumian explained. “Millions are made of dollars, dollars are made of cents“, the banker reminded a popular American saying. He pointed out that it was good if the system generated profit, in order to invest in such new services and bring convenience to customers.

“Is it better to see a loss of 4 billion covered by the money of people who had nothing to do with it, than a normal commercial profit of 900 million lev? (editor’s note: the banks’ assets under management are worth 85.5 billion lev as at the end of October 2015 according to the Bulgarian National Bank, and the profit is slightly over 900 million lev)“, commented Hampartzoumian when asked whether a profit of 900 million lev for banks is too big. “Banks cannot be better off than their customers. In the crisis years of 2008 – 2010 for example the performance was different. In case of a crisis in the economy, the sector is affected. Now the country’s economy will be growing by 2% a year”, Hampartzoumian explained. He specified that this growth is felt more by the educated people with professions in demand.

To the question whether the crisis with Corporate Commercial Bank will be repeated, the banker said that probably exactly this kind of crisis would not happen again, because after each crisis there are taken measures to prevent that in the future. To the question whether there is enough money in the deposit insurance fund, Hampartzoumian explained that it doesn’t matter how much money there is in the fund, because the payment obligation lies with the state. “The fund is only an instrument used by the state”, he explained.

The banker also explained the essence of the bank’s stress tests, which are expected in 2016. “The stress tests are hypothetical simulations of different negative scenarios and how they would affect banks considering their actual condition at the time of testing. It could be done with any bank and if necessary, prescriptions may be given on how certain risks can be avoided. It is important to know that we are speaking of hypothetical risks.”, Hampartzoumian said.

Asked about mergers in the sector, the banker summed up that there are economic grounds for potential consolidation. “This is not a process at any cost, it should make economic sense for the participants to do it.”, he added.

At the end of the programme, Georgi Lyubenov invited his guest to tell a bankers’ joke. Hampartzoumian said that during the global financial crisis when many bankers around the world lost their jobs, there was a joke that an optimistic banker was one who ironed 5 shirts on Sunday.

More information for media:

UniCredit Bulbank, Identity & Communications Department

Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch