euinside

Cause and Effect in European Politics and Law

The Black Sea Trade Bank is looking for growth potential in the region

Ralitsa Kovacheva, March 21, 2011

Mr Andrey Kondakov is President and Chairman of the Board of Directors of the Black Sea Trade and Development Bank (BSTDB). We met for twenty minutes inbetween his many meetings with Bulgarian authorities and business. Mr Kondakov came to Sofia for two days on March 10-11 to discuss with Bulgarian officials the Bank's new strategy for the country. 11 countries in the Black Sea region are members of the BSTDB: Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Ukraine, Moldova, Romania, Greece, the Russian Federation and Turkey (the last three are the main shareholders with 16.5% each)

euinside: You said that there was a bigger potential for funding of Bulgarian businesses by the Black Sea Trade and Development Bank, why was it not used before?

Andrey Kondakov: It is a very good question. After Bulgaria has become a member of the European Union, Bulgarian companies and enterprises got access to much cheaper financing. It was hard for us to compete, mostly in terms of interest rates we charge on our loans, so it was a big challenge. Now we became more mature. There was an important decision to increase our subscribed capital by two times. We improved our rating - last September the rating of the bank was increased by Moody’s to A3 which is a big achievement for the bank. So with these positive improvements we hope to become more competitive and more affordable for our clients.

euinside: Do you mean that in this sense the crisis was good for you?

Andrey Kondakov: I wouldn’t say it was good for us; the crisis was an important time to take a more proactive approach and we became more competitive. Over the last two years of the crisis we doubled our portfolio and we have big plans for the future.

euinside: Greece is one of your main shareholders, how would you comment on the situation there?

Andrey Kondakov: The situation is very difficult. What is important is that the government has taken very unpopular but necessary measures to put Greek economy back on track. These measures are implemented in a credible manner. Most of the parameters of the four-year plan, agreed with the international lenders, were achieved. We expect first positive signs and first moderate growth of the Greek economy to resume in 2013. But this year and the next year will be very difficult.

euinside: Given the news about the downgrading of Spain, the market situation has worsened for the peripheral economies in the euro area.

Andrey Kondakov: Yes, their possibilities to go to funds are becoming more and more difficult and somehow it may, hopefully not, but it may have at least psychological effect on us, because one of our shareholders is in a difficult situation. But up to now it didn’t have any effective - Greece was already downgraded by the time when we received our upgrade. Despite series of downgrades of the sovereign ratings of our shareholders we were upgraded and this is the big result for the bank and for the shareholders - by pulling resources together they achieve higher rating than separately.

euinside: Russia, Turkey and Ukraine are the best performers in using your funding opportunities, what is the reason for that?

Andrey Kondakov: A lot of growth opportunities, a lot of proposals and may be a bit more mature clients in some cases. What is required for us to start financing is a good business plan and audited financials. And sometimes it is difficult to find companies in some other countries of the region with audited financials, according to international standards. We go where we see real growth opportunities and good business prospects. In case of Bulgaria we have financed so far 23 projects totaling 210 million euro which amounts to 10% of our overall portfolio.

euinside: What are the priorities in your new strategy for Bulgaria?

Andrey Kondakov: We are discussing it now, Bulgarian authorities are very supportive of us to finance more infrastructure projects, more energy projects with an emphasis on energy efficiency projects. They want us to be more actively involved in financing of manufacturing. SME financing was always an important part of our activities here in Bulgaria and we will continue provide financing to this. Trade finance is an important product that we offer to our clients. So far it accounts for 10% of our portfolio and we want to increase trade finance and to promote regional cooperation because this is an important instrument. I should also mention equity financing: we invested in three equity funds that cover Bulgaria and we have identified additional possibilities to be more actively involved in equity financing. Cultural tourism was something new for us and it was also a good suggestion of the Bulgarian authorities.

euinside: What are the opportunities for cross-border cooperation and do you have special products aimed at stimulating it?

Andrey Kondakov: We have a lot of projects which promote inter-regional cooperation because the second part of our mandate is to promote inter-regional cooperation. For example, a very good project of which we are proud of is a Greek investment in Albanian private hospital. There are also several investments of Turkey to Caucasian Republic, or Russian investment to Armenia.

euinside: What are the biggest challenges facing the Black Sea region?

Andrey Kondakov: The Black Sea region used to be one of the fastest growing regions in the world up to 2007 - it demonstrated consistently average growth rate of 6%. But from 2008 and especially 2009 the region was the hardest hit compared to other regions as the growth rate went down 6%. Now the growth is gradually resuming and we hope that average growth rate up to 2013 will be 3.5 to 4% and hopefully the region will demonstrate again dynamic rates of economic development. We see an improvement of situation in almost every member state of our bank including in Bulgaria.