Transcript OIHOUS 2003

Real
Real Estate
Estate Financing
Financing
Standing
Standingits
itsground
groundin
inaachallenging
challengingenvironment
environment
Anna V. Ivanova
Anna V. Ivanova
Eurobank EFG Bulgaria
Eurobank EFG Bulgaria
St.Petersburg,
Peterbourg,14-15
14-15May
May2009
2009
St.
Global Markets Instability and Risks
Significant degree of uncertainty in commercial real estate markets
Increased volatility of prices & values expected whilst the market
absorbs various issues and reaches its conclusions
Lack of liquidity in the capital markets
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Property Market Structure & Trends in Bulgaria
Privatization process
practically completed
Interests turning to RE
investment
Bulgaria has recently
joined the E.U. as a full
member
Further reinforces
demand for prime
location property
Bulgarian property
market immature
Opens up new
perspectives
Stable macroeconomic
environment
Currency board in place
FDI inflows
Increased confidence
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Macroeconomic Environment
Although the credit crunch undoubtedly
affected the banking and RE sectors, its impact
tend to be much softer than in other SEE
countries due to:
GDP Real Growth
7.0%
6.6%
6.2%
6.3%
6.2%
6.0%
6.0%
Stable macroeconomic environment
5.0%
Still decent GDP growth
Inflation slowing down (to 4.9%
YoY at the end of Q1 ‘09)
4.0%
2004
2005
2006
2007
2008
FDI in Real Estate and Construction
Significant CAD improvement (by
55% YOY in the end of Feb ’09)
Stable public finances (3% planned
budget surplus)
mln €
3000
2505
2000
1900
1778
797
1000
Inflow of FDIs
(Traditional
focus
on
RE
and
construction; in 2008 they amounted up to
40% of the total FDIs)
534
216
82
501
465
172
0
2004
2005
2006
Real Estate
2007
2008
Construction
Page 4
Latest RE market challenges in Bulgaria
The financial crises will have a sobering effect on the RE market reducing
the number of projects that are developed, as well as pressuring the market:
Approximately 15 projects for shopping centers and retail parks have been
postponed throughout the country, mainly due to lack of debt financing;
Rental levels on the high street of major Bulgarian cities have decreased by
5-15%;
The vacancy levels of shopping centers in some secondary cities is still
relatively high;
Many planned office projects have been put on-hold while others have been
frozen during the rough construction process;
The overall vacancy rate for office space continued to increase;
Residential properties market slowed down and prices went down;
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Banking sector adapting …
… in an exceptionally challenging operating environment
Review interest rates
Balanced lending growth
Intensified deposit gathering
Focus on credit risk
More conservative approach
Review of credit criteria (much more selective in terms of ‘fit’
customers)
Lower loan-to-value ratio
Restructuring and renegotiation processes started throughout
the banking sector
Strengthen collection activities
Redeployment of resources
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Residential property loans: 4 phases
Phase 1: Fueling the market (2003-2005)
Increasing loan-to-value ratio
Decreasing interest rates
AVG Interest Rates, New Mortgage Loans to Individuals
12.0%
+156 bps
Easing collateral rules
10.46%
10.5%
Phase 2: Price competition (2005-2006)
9.20%
8.85%
9.0%
8.00%
0% rates for the first year
9.20%
10.76%
9.37%
9.06%
8.27%
8.12%
7.5%
Lower introductory fixed rates for the first
1-2-3 years
Financing of properties under construction
Phase 3: Focus on profitability and customer
6.0%
H1 '07
H2 '07
H1 '08
BGN denominated
H2 '08
Q1 '09
EUR denominated
Phase 4: Focus on credit risk (2008-2009)
service (2006-2008)
Higher interest rates
Promoting floating rates for the entire period
Strict requirements for income proof
Longer tenors
Lending at lower LTV
Cross-selling (credit cards, consumer loans)
Restructuring & Collection activities
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Reaching the limits … and back to basics
Size
Int. rate
Tenor
LTV
No limit
6.4-7.9%
5-35y
70-100%
Until H1 ‘08:
Debt to
income
60-70%
Fees
1-2.5%
Since H2 ’08:
Quick response time
(2-3 days for initial approval)
Bundling (credit cards, additional
consumer loans, internet banking)
No documentary proof of income
(for BG citizens only)
Product standardization
(lack of promotions)
Going away from risk (higher risk
premiums, no prepayment fees)
Upper limit set at EUR 100 000
(with income proof only)
Size
Int. rate
Tenor
LTV
Limited
9.8-11.6%
10-25y
60-80%
Debt to
Income
30-40%
Fees
1.5-3%
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Banking sector priorities
Survival of the ‘fittest’
To sustain and improve pre-provision earnings capacity
(loan margin, fee business, cross-selling, cost containment)
To further strengthen the Risk management process
(underwriting, collection, conservative provisioning policy)
To improve the effectiveness of balance sheet management
(further strengthen capital position and liquidity management)
Crisis is an opportunity to strengthen the value of our franchise
(Stand by our client – deepen relationship)
Page 9
EFG Eurobank – a regional banking group
Total assets amounting to €82.2bn and PAT reaching €652 mln
A force of more than 24 000 people in 8 countries throughout CSEE
A distribution network of over 1 700 locations
Universal Bank
(London Branch)
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Postbank – a member of EFG Group
Leading universal bank
Established in 1991
99.7% owned by EFG Eurobank
Eurobank EFG acquired DZI Bank
in Sept ’06
Postbank – DZI merger in 2007
Present in more than 220 locations
Workforce in excess of 2 700
Strengths: Local knowledge, good
brand recognition, wide range of
services
Sister companies – Leasing,
Factoring, Investment Banking,
Card operations, Business services
and Property valuation, advisory
and management.
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