Interview with Dimitar Kostov, Deputy Executive Director and Member of the Managing Board of First Investment Bank. He is responsible for corporate banking, SME banking, liquidity, dealing, sales and asset management.

How do you evaluate the work of Fibank with the National Guarantee Fund?

This year will be the third in which we work with the National Guarantee Fund (NGF). We have countersigned our agreement with them, which gives us the opportunity for flexible funding schemes. This is, at the same time, a good reference for us to our customers, the investors and the general public as a whole. Except the National Guarantee Fund we also have lines with the Bulgarian Export Insurance Agency and the Municipal Guarantee Fund to promote small and medium enterprises (SMEs). All of the three lines are in support of such enterprises which are the backbone of the Bulgarian economy.

What are the concrete results of your activity in this field?

The purpose of this line is to stimulate start-up enterprises and to grant primarily investment credits. A concrete example - last year we have financed a start-up company which has been producing pellets, where over 70% of the production is export oriented. The new thing about the line this year is that it allows banks to secure their guarantees with counter guarantees by NGF, which in return gives us more opportunities for various credit facilities.  I.e. if up to date we have been giving only investment and working capital loans, now we are able to issue bank guarantees for advance payments and for European funds subsidies. We have such a case with a livestock enterprise, which received its grant in advance, for which we have issued a bank guarantee, secured by a counter guarantee of NGF. The purpose of the line is to encourage SMEs and to give opportunities to projects that would otherwise seem risky because of an insufficiently collateral.

What is the average period for which such guarantee lines are taken?

It depends on the credit`s function. Working capital loans are for a period up to 3 years, and the investment ones - about 5. As the period of time may also be a little longer, but the usual practice is the period of return of this type of investment to be limited within 5 years.

Is there any statistics how the companies which use this mechanism carry off?

Yes. These borrowers who have a guarantee by NGF are doing very well. There are no guarantees for payment upon presentation by the guarantee fund, i.e. the overdue there is zero. Of course the volume of this portfolio is not large - about 10 million levs.

What is the share of the bad and restructured loans as a whole for Fibank?

The share is below 4% and it can be said that it will remain so. By this component we are well below the banking sector, where this percentage is about 11, 9%. The trend of deterioration of the portfolios, not only of the bank but of the banking sector as a whole have stopped. My expectations for 2011 are for improvement of this ratio. It is going to be valid for the whole sector, in connection with the revitalization of the economy.

Let`s talk about the bank's financial results for 2010. A slight decline in the profit and strong growth in the assets, reaching nearly 5 billion levs. What caused these results?

The growth in assets is a component which is affected also by the liabilities. In 2010 the bank managed to attract deposits mainly from individuals, which puts us on second place by deposit base immediately after DSK Bank. This resource must of course be used for something like credit destinations and securities portfolio of the bank. The growth in loan granting, particularly for corporate loans is about 15%, while for the banking sector it is just over 3%. At the end of 2010 we took fourth place in the corporate lending with a market share of 8%. Taken as a whole a revival of the market has been seen since the middle of the last year. The business has been activated, the demand for loans has increased. We were very cautious in the years before the crisis. We see signs of economy revival at the moment and we are placing all of the accumulated resource in profitable loans. We are growing faster than the banking sector in the lending field and we are planning the same for 2011. With regard to the financial results, it is a slight decrease of around 6% on a consolidated basis, while the banking sector falls by an average of about 20% in the profit. This is due to the good management of our assets and to the growth in lending respectively.

And from which sectors of the economy is the biggest demand for corporate loans?

The export-oriented sectors are something which we totally support. The production, the industrial production, this is the engine of the Bulgarian economy, so if there is a manufactory company and a part of the production has found place abroad, we are delighted to support this kind of business. This is a good reference for the business itself, because it manages to take place among foreign competitors, improves the country balance of payment and it means that the company has a diversified customer base. The other thing which is pretty much reviving recently is the toll manufacturing. This was a sector which in the recent years and even during the economic boom, nearly disappeared. It was due to the increased global consumption and the outsourcing of the production to China and India. Currently the European market needs again a similar type of production but not on such a scale, i.e. the consumption is compressed. Because of this the  manufacturing in Bulgaria, where the transport costs are much lower, and as a part of the EU, is regarded as beneficial. We give credit to companies that sew for world famous brands such as Boss.

What are your plans for 2011?

There is a revival in the business and this can be seen by the number of the new loan applications. Our focus will be on granting loans to SMEs. According to Fibank`s criteria, such enterprises have a turnover up to 5 million and tangible fixed assets up to 1 million. We are also traditionally strong in corporate banking and granting loans to bigger companies. This is as well our main share in the credit portfolio so there we also expect fulfillment of the budget planned.