BT products and services take into account the trends, needs and lifestyle of the customers

Gabriela Nistor, Deputy General Manager Retail Banking, BT, recently gave an interview to the online publication Banking News in which she addresses the subject of the trends observed in the field of lending and the forecasted estimates in this sector for 2022. I've taken over the full interview below, enjoy! 😊

How are banking products and services for the population transformed as a result of the impact of the health crisis generated by the pandemic, what needs do customers have at the new juncture and how does Banca Transilvania respond to the new challenges?

Products and services must take into account trends, needs and lifestyle. And what we saw in 2021 in our customers was the need for mobility of the banking services offered – remote banking, because that's how the times are, new functionalities, but also online safety. Products are transformed either through upgrades or by launching digital versions, such as cards – which, besides being in the wallet, can now also be in the phone. This is how we, BT, have responded to the new challenges: through new ideas, adaptation, exemplary mobilization of the team and through investments in technology.

How prepared are Romanians for the adoption of digital banking, how familiar are they with digital transformation and what measures are needed to speed up digitalization in Romania? What news does Banca Transilvania have from this point of view?

Romanians have taken steps forward in this regard and clearly, this is the way, whether we are talking about banking or other areas. Those most familiar with digital transformation are those in the private sector who set the tone in this regard years ago, teams that generate and contribute to the recalibration of business models, day by day. And the population is the beneficiary of this transformation. For example, at BT, out of the more than 3.2 million customers, over 2.5 million, or almost 70%, are digitized. And here I am referring to both individuals and companies. What does this mean? That they use at least one of the bank's digital solutions – either mobile applications or Internet Banking. In 2021 we continued to launch solutions for remote banking, most of them related to BT Pay. This would be the possibility to get the 100% STAR Forte shopping card in about 10 minutes, through the application. Or the launch of the option to pay invoices through BT Pay, as well as the payments through Alias Pay, through which our customers can make payments using the mobile phone number instead of the IBAN. Regarding the digitization of Romania, fortunately, companies went on this road quite a few years before the pandemic, and the pandemic has only accelerated digitalization in the private sector. Basically, it has spurred companies to look for new solutions to respond to the context. All our admiration, as a bank of entrepreneurial people, for entrepreneurs who understood that digital transformation can contribute to the relaunch of the business or to sustainable growth. We are already seeing that the public sector is contributing more and more to digitalization, through the digitization of flows – which will not only ease interactions, but will essentially contribute to increasing the level of digitization in Romania. An essential contribution can also come by reducing the digital gap between urban and rural, as well as from digital education and the development of competences in this regard. Romania's paradox is that, although we have a large number of IT graduates and we are in the top 5 in the European Union from this point of view, we still have a deficit, which limits the ability to take advantage of the advantages of digital transformation.

How has the lending of the population evolved in the portfolio of Banca Transilvania and what expectations do you have for the next period? What impact will the increase in interest rates, the increase in inflation, the energy crisis and the political instability have on the bank's activity in the retail segment? What solutions do debtors have at hand who may face problems in paying the installments in the next period, for which the forecasts are not the most optimistic? How does Banca Transilvania relate to saving and what evolution has the deposit portfolio registered?

If we look at the BT figures from January to November 2021, we can say that the world has continued to have plans, and this makes us optimistic. Specifically, we have over +60% loans granted compared to 2020. If I refer to the balance of loans granted to individuals, including here we have an increase: +12% compared to the level recorded in November 2020. For 2022 we expect to continue the credit cycle for individuals with robust annual rates. There are favorable prospects for productive investments, with positive implications for the labor market climate. From what we see, in terms of the evolution of retail lending at the level of the banking system, in 2022 we estimate an increase of over 9%. For customers who are still facing personal problems that could influence the possibility to pay the installments, our bank can offer solutions to restructure the loan, such as rescheduling the balance over an extended credit period or reducing the monthly payment obligation for a certain period. The clients in question must address the bank as soon as possible in order to find solutions together and thus not to accumulate many arrears. Regarding savings, the balance of term deposits registered a moderate growth, year on year, in line with the evolution of the market. Banca Transilvania encourages both the classic savings model through term deposits, but also through alternatives from the range of investment funds offered through BT Asset Management. Also, through BT Capital Partners we are among the participants in the issuance of government securities issued by the Ministry of Finance.

What expectations do you have regarding the evolution of the risks that contribute to the composition of the financing costs for the Romanian population? How will 2022 unfold in terms of risks and how will financing costs evolve at the level of the local market, taking into account the uncertainties and risks that hover over the local economy?

If we look at interest and risk, which forms the cost of financing, we can also draw our estimates. In the last 6 months, we have seen a trend of increasing financing costs – I mean interest, government bond yields, and this will increase costs for customers. But we hope it will be a short-term trend. If I refer to risk, it is hard to predict the effect in the cost of financing, but we hope to maintain it, even if the purchase value of real estate has increased quite steeply lately.

The coronavirus pandemic has not produced a blockage of lending, on the contrary, the real estate financing segment has registered an evolution far beyond the most optimistic expectations. How do you comment on this acceleration of mortgage lending in the last year and a half and what was the basis of the effervescence on the market? What influences will the health crisis have, what needs has it generated among the population and how will this mortgage lending change in the coming years? What is the situation of the mortgage loan portfolio at Banca Transilvania and what are your objectives for the next period?

Mortgage lending continued the upward trend after the onset of the health crisis. The evolution was supported by the government's First Home/New Home program, as well as by the low level of real financing costs. It has contributed to the growth and rapid recovery of the economy and the positive climate in the financial market sphere. At Banca Transilvania, at the end of November 2021, the balance of real estate loans, including the First/ New House, registered an increase of 15% compared to the end of 2020. For next year we propose an evolution similar to the one estimated for the banking system. But it's difficult to predict what the post-pandemic world will look like – and not even when it will start.

What is the profile of clients who have accessed a home loan – income, advance, loan amount, interest type. What kind of houses do they opt for and which are the areas (cities) with the highest levels of demand?

In general, those who access a home loan are 35 to 40 years old, income of about 5,000 lei, married / yourself, with higher education and a job in the private environment. The average advance is 24% and corresponds to a guarantee consisting of a two-room apartment in urban areas. If I refer to the areas where most such loans have been accessed, the ranking includes: Bucharest, Cluj, Timis, Constanta and Iasi.

What advice do you have for Romanians who are considering the opportunity to apply for a home loan? What are the elements they should analyze and what are the aspects that can largely certify them if they are prepared for this step? What features of the product should they follow in the credit selection process?

Buying a house is certainly an achievement and we all dream of this moment, especially since we, the Romanians, have a developed sense of ownership. But also because having your home is somewhat part of our education, it's a milestone, a sign of accomplishment, of stability. However, they are the longest-lasting credits, they stretch over many years, the period during which ups and downs can occur – that's why the decision must be weighed very well, so it must be a responsible one. Each installment must be seen as a contribution to that property, and the bank, a partner in the realization of a dream. If I were to give some advice on what customers interested in mortgages should look at, I would refer to the Annual Effective Interest Rate. For comparability it is important to follow the same coordinates in terms of amount and period. The total cost of the loan is important, especially when we are talking about a credit period of decades, but it is good to consider including the following aspects: how long the loan is received; minimum payment / month; the insurance component of the building; early repayment without commissions, but also the relationship I have with that bank, a plus being if it is already a client. Last but not least, customers need to look at the following perspective information: income, rate, estimates on the financial situation or the possibility to repay the loan in advance. We have to think that in 20 – 30 years a lot can happen and we don't have to stretch ourselves more than we can carry. If we talk about the loans through the government programs First House or New House, guaranteed by the state through FNGCIMM, the main characteristics of the loan regarding the price, the advance, the maximum amount and the currency, these are regulated and provided by law. With this in mind, banks have very little room to maneuver to really differentiate their offer. For this reason, the APR for the First House or the New House will have very similar values from one bank to another.