Loucas Marangos: The trend for bank acquisitions and mergers will continue
07:19 - 19 January 2024
The assessment that the trend for bank acquisitions and mergers will continue in 2024, has been expressed by cdbbank CEO Loucas Marangos.
He also pointed out that, in a year of challenges, such as 2024, banks cannot remain unaffected.
In an interview with InBusinessNews, in the context of "IN Business Forecasting 2024," Maragos indicated that banks must remain alert in order to make decisions with prudence and foresight.
According to cdbbank's CEO, the banking sector is also expected to continue to be profitable and perform well.
"Banks will continue to operate in a high interest rate environment and therefore," he underlined, "must constantly evaluate their customer data and update their strategy, so as not to be faced with a new increase in Non-Performing Loans (NPLs)."
Loucas Marangos talked about a series of issues that the industry is facing and that should be subject to immediate regulation, so that banking institutions can continue their smooth operation.
Indicatively, according to him, increased supervisory requirements raise the cost of regulatory compliance, in a way that becomes disproportionate, especially for small banks.
Referring to cdbbank's plans and strategy, the CEO lists the three pillars emphasided in his mid-term plan for the bank.
How do you see the economic environment shaping up in 2024, in light of inflationary pressures, high interest rates and unpredictable ever-changing geopolitical developments?
Although 2024 is predicted to be a better year than 2023, the global and by extension the Cypriot economy will face a series of challenges arising from the ongoing geopolitical crises, such as the war in Ukraine and the conflict in the Gaza Strip, combined with reduced but still significant inflationary pressures, and high interest rates.
As far as geopolitics are concerned, I would say that Cyprus has largely adapted to the new conditions that have emerged since the start of the war in Ukraine.
We have already gone through 2022 and 2023 with sanctions against Russia and our economic ties with the country have weakened substantially.
Nevertheless, I believe that the conflict in the Gaza Strip brings Cyprus face to face with more significant effects in the short term, since the possibility of affecting the tourism industry and the strategic investments we attract from the neighboring country remains open.
At the same time, the possibility of a generalized conflict in the region with unpredictable consequences remains open. Nevertheless, I believe that in the long term Cyprus will probably be affected positively, since it is emerging as a pillar of stability in the region.
It is difficult to make safe predictions, however we can act wisely, identifying and exploiting those opportunities that will contribute to the development of the Cypriot economy.
The challenges for the Cypriot economy
What do you consider to be the biggest and most difficult challenges that the Cypriot economy will have to face?
The next period is anticipated to be particularly demanding, with the course of the Cypriot economy mainly depending on what the European and international economy will follow.
The increase in interest rates, on the one hand, has contributed to the reduction of inflation levels, however, it has also put a brake on the growth rate of Cyprus, while sooner or later it is expected that there will be some impact on the construction sector as well. In addition, the Cypriot economy has to face other important challenges.
As an example, I mention the increased cost of energy, the rise in prices and the difficulty of finding specialised personnel in specific professional sectors, such as IT and tourism.
Additionally, the need to acquire new or upgrade the skills of the existing workforce is deemed imperative.
Would you say that, taking into account the latest upgrades, the Cyprus economy is now well on its way to growth?
In recent years, a major effort has been underway to strengthen and modernise the Cypriot economy, which now stands on much firmer foundations, and is much stronger than in the past.
This is also confirmed through the recent upgrade to the investment grade of the rating agency Moody's, as well as the estimates of the European Commission for the next year, in terms of the improvement of the growth rate, the reduction of inflation levels, the percentage of public debt in relation to GDP and the unemployment rate.
The outlook is certainly more favorable, but a prudent fiscal policy is needed to maintain and further improve the good indicators of the economy.
With the shield of adaptability, flexibility and the ability to quickly respond to changes, I am sure that this time also the Cypriot economy will be able to successfully cope with any difficulties and challenges.
In fact, in this project, I have no doubt that the Cypriot business community will contribute as much as possible, as it has done again in the past, contributing to the smooth development of the country.
The course of the financial sector
What do you think the course of the sector in which you operate in 2024 will be?
In a challenging year such as 2024, banks cannot remain unaffected. Therefore, they must remain alert to make wise and insightful decisions for the day ahead.
The industry is expected to continue to be profitable and perform well.
Banks will continue to operate in a high interest rate environment and therefore need to constantly assess their customer data and update their strategy so that they are not faced with a new increase in Non-Performing Loans (NPLs).
What are the biggest industry trends/changes you anticipate in 2024?
For 2024, it seems that the trend for bank mergers and acquisitions will continue, while the need to successfully transition into the green era by moving forward with the necessary digital upgrades is also considered important.
Recognising the importance of the green and circular economy, which is high on the EU's goals, banks are being asked to adopt and integrate green banking practices into their culture and at the same time to record effective performance in the indicators related to ESG criteria (environmental issues, society and corporate governance), both in terms of their operating model and the grants they give.
In this effort, priority should be given to the more effective utilization of human resources, the adoption of modern practices through the use of technology and digital media - with the most recent example of Artificial Intelligence - as well as the enrichment of the range of products and services that are provided to effectively support green entrepreneurship.
The sector’s most significant problems
What are the most important problems plaguing the sector today, and do you see solving them as a priority for the new year? If you could ask the Government to take specific measures or formulate policies to support/strengthen your sector, what would they be?
A robust banking sector is necessary since it can play a decisive role in the path towards development and can contribute the most to the prosperity and progress of the country.
A number of issues that the sector is facing have been identified and should be subject to immediate regulation, so that banking institutions can continue their smooth operation.
For example, increased supervisory requirements raise the cost of regulatory compliance in a way that becomes disproportionate, especially for small banks.
The issue of time-consuming legal proceedings also needs an immediate resolution, since the trial time is so long that it ultimately serves the strategic non-payers.
Equally harmful are the discussions about the context of divestments, creating a climate of uncertainty. After the passing of the relevant bill in December 2023, the discussions serve no purpose and I believe they should be ended once and for all.
cdbbank's plans and strategy
What are your organisation's plans/strategy for 2024? Should we expect new products/services/developments and your further consolidation in the market? Will it be a year of growth/expansion or of maintaining your existing market position? Can you tell us about any of your plans in more detail?
With a history spanning more than 60 years, cdbbank is one of the most reliable financial institutions on the island. As a perennial supporter of the Cypriot economy, the bank has a clear goal and orientation:
Therefore, to contribute practically to the development of our country, essentially supporting Cypriot entrepreneurship and society, the bank's medium-term plan has been formulated, emphasising the following three pillars:
1) Technological upgrade with significant investments that will change the Bank's digital infrastructure and allow it to move with even greater flexibility, offering personalised service and ensuring the best customer experience,
2) The management of NPLs, which, although they have decreased significantly, we still consider them to remain at high levels,
3) The gradual, prudent and targeted increase of our loan portfolio, thus strengthening the effort for prosperity and development of the Cypriot economy.
We listen to the needs that arise and support our customers practically and effectively, offering specialised solutions as well as a wide range of competitive products and services.
Technology and the banking sector
What role does technology, such as artificial intelligence, play and what changes is it expected to bring about in your field?
The changes brought about by technology are rapid and continuous and contribute to the evolution of the sector, but also to the transition to digital banking. I believe that in a decade's time, the application of new technologies, such as artificial intelligence, will bring about radical changes and reshape, to a great extent if not completely, the way banks carry out their operations.
Among other things, new technologies are expected to contribute to the upgrade of the customer experience, providing banks with the possibility for greater flexibility and more immediate response to constantly changing needs and requirements, the automation of data processing, the effective assessment of risk and the timely taking measures, as well as to the overall improvement of the level of service offered.
Additionally, in the near future we may see an expansion of partnerships between banking institutions and technology (FinTech) companies.
The development of technology has, on the one hand, indisputable advantages, but on the other, it requires even more measures to be taken to strengthen cyber security and the protection of our customers' personal data, since it is almost to be expected that the risks will also multiply.