The history of cdbbank, formerly the Cyprus Development Bank, stretches back more than 50 years but, despite changes of ownership, it remains true to its founding principles of operating as a small, flexible and prudent organisation. Acting CEO George Spyrides explains how the Bank found its own niche early on and has continued to focus on looking after corporate clients with great success ever since.
GOLD: cdbbank has over 50 years of history but it has changed a great deal since its establishment in 1963 as the state-owned Cyprus Development Bank and is arguably one of the best examples of a successful privatisation in Cyprus. Would you agree with that description?
George Spyrides: We were the first bank in Cyprus to deal with project financing and we also offered valuable advice to the Government on numerous infrastructure projects, which have added value and contributed to the growth of the economy over the years. Business proposals were always evaluated according to their financial and economic viability and we were possibly the only state-owned development bank in the world which was operating profitably. Our culture was always results-oriented and we do indeed consider that the Bank’s privatisation in 2008 to be a success story as it enhanced our professional culture and developed it into a more market-oriented approach.
Gold: There is an interesting continuity, too, in the fact that, 25 years ago, the European Investment Bank became a shareholder in the original Bank and earlier this year it signed a €15 million loan with cdbbank to support local companies. How important is this recent collaboration?
The European Investment Bank was a shareholder in the Bank, initially with a 5.5% stake in 1991, increasing to 12% in 1996, which it held until the Bank’s privatisation in 2008. This relationship has proved to be very beneficial to the Bank, as it gave us the opportunity, from our early stages, to familiarise ourselves with how European Institutions operate. We are happy to continue our cooperation with EIB through the recent granting of the €15 million facility for the support of local businesses. It will enable the Bank to pass on to these enterprises the benefit of lower interest rates for new business opportunities. Furthermore, an additional benefit of 0.5% may arise for enterprises that employ young people, which is an extra incentive to them and an opportunity for the Bank to assist with the serious problem of youth unemployment.
Gold: Some years ago, prior to privatisation, the Bank had set out a new strategy to “remain a small, flexible financial institution, without an extensive branch network.” Does that still apply to today’s cdbbank?
Yes, this is our “modus operandi”. We remain a small, flexible, prudent organisation with a lean cost structure, dedicated to offering comprehensive, specialised advice and services suited to the specific needs of our clients. Apart from our Nicosia HQ, we have an additional business centre in Nicosia and we recently established one in Limassol to service our clients’ needs in the country’s two main business areas.
Gold: cdbbank is dedicated to supporting corporate clients. Do you envisage any change to this in the foreseeable future where the bank might look at the retail market or is it already saturated?
As I have already mentioned, our focus remains on servicing the needs of corporate clients as we consider that this is where the Bank enjoys a comparative competitive advantage. This, of course, relates to our services regarding the funding of business-related activities. However, we do offer a full range of competitive deposit products to individual retail clients or to more sophisticated investors as well as to institutional clients like pension funds, provident funds, corporations, and the general public. As for additional branches, for the time being we feel that the business centres in Nicosia and Limassol are adequate.
Gold: The bigger banks in the local market naturally want to attract corporate clients. Apart from your focus on this particular sector, as you just mentioned, where else do you see cdbbank as having a competitive advantage over the main players?
We consider that the Bank is able to provide flexible, integrated financing solutions and our aim is to be close to our customers and proactive as regards their needs, providing professional service and responding quickly to their requests. At the same time our clients have direct access to, and attention from, more senior and experienced managerial levels, which ensures that they will be offered suitable solutions that cater to their specific needs. The trend in retail banking may be towards online transactions and a lack of what we might call the ‘old-style’ personal touch but corporate clients still prefer things this way.
Gold: Is your clientele composed mainly of SMEs or do you serve major corporations too?
Our clientele includes both SMEs and major key players in the respective segments of their operation. We focus on attracting quality clients with an emphasis on sectors of the economy that outperform average GDP growth. Apart from tourism, we consider such sectors to be services, education, health, wholesale and retail and green/clean energy projects.
Gold: We know what happened to the big players in the banking sector in 2013. How was cdbbank affected by events at that time?
After March 2013, we acted immediately by directly contacting our clients to evaluate their problems and consider how the Bank could provide assistance. By September 2013, we had effected restructurings in the region of more than 60% of our active banking portfolio, which was seen as a great success. In 2014, the Bank proceeded to inject €26 million of additional capital and, at the same time, took measures to secure its liquidity through the expansion of its depositor base by attracting more deposits from individual retail domestic customers and we were very successful in this too. In addition, we significantly reduced our operating costs and improved our internal processes and human resource management.
Gold: Did you have a problem with non-performing loans like that of the island’s two main banks?
All banks with a long presence in Cyprus were unavoidably affected by the crucial issue of non-performing loans. As mentioned earlier, the Bank reacted immediately to the events of 2013 and effected a significant number of restructurings. Our aim has always been to provide viable restructuring solutions to our clients taking into account their operations and their repayment capability. We have been sensitive to their needs and accommodating to their problems, by granting them adequate time to improve their distressed situation and thus be able to service their future loan obligations in a timely manner. The issue of NPLs still remains but, given the type and quality of our clients, we consider that, with our support, this issue will be resolved to a large extent over the next two to three years.
Gold: Now that Cyprus has exited the Troika’s economic adjustment programme, is cdbbank seeing tangible improvements on the local business scene?
Recent statistics and macroeconomic projections indicate that the economy is recovering. Increasingly, clients are approaching us for new business opportunities which suggest a change of sentiment in the market, and this is one of the key factors signalling an improvement in the business climate. Also, we are increasingly seeing a strengthening of clients’ repayment ability as regards their loan servicing obligations.
Gold: What are your short- and long-term aspirations for cdbbank?
As in all successful organisations, our focus is on the preservation and efficient allocation of our resources, both capital and human. In this respect we shall continue our prudent and supportive policy of ensuring that our clients are and remain healthy. Being a small institution gives us the flexibility to quickly offer innovative products and services that add value to our domestic and international clients alike. In this regard, our aim is to enhance our response time to clients through further automation, the introduction of state-of-the-art IT systems and the streamlining of our processes. For example, we have recently introduced – and we are continuing to enhance – a new e-banking system that addresses, in a very user-friendly manner, not only the needs of individuals but also the requirements of our corporate clients with respect to effecting electronic transactions and enquiries specific to their own organisational structure and needs. You mentioned online banking earlier but it’s not as easy for corporate as it is for individuals who can simply enter a username and password. Our new system is flexible and goes some way to making things easier for our corporate customers.
In the long term, we want to continue being a one-stop shop that caters for all the funded and non-funded needs of our clients’ businesses by addressing their particular specialised needs with a high level of professionalism. We have no plans for any kind of major expansion. Our intention has always been to grow with our clients.
