Andreas Petsas: The physical and personal element in banking will always be needed

New-generation consumers and companies who are constantly advancing in technology seek efficiency and better banking services through digital channels but, says Andreas Petsas, Senior General Manager at Eurobank Cyprus, the physical and personal element in banking will always be needed and, indeed, demanded by clients.

Here, in an interview published in the 2024 edition of The Cyprus Journal of Wealth Management, Petsas discusses Eurobank’s “phygital” approach (blending physical and digital processes) while also broaching sustainability and the green transition.

In 2023, Eurobank Cyprus reported a profit of €199.4 million, marking a 111% increase over the 2022 figure. What factors contributed to this substantial growth and which revenue streams were most influential in driving this increase?

2023 was a good year for the Cyprus economy, which remained on a sustained growth path. All sectors, especially tourism and construction, delivered very good results in terms of both volume and profitability. In this environment of strong performance, the Bank’s profitability was positively affected by the increase in the healthy volume of loans extended, greater deposit activity and more client investment portfolios. The rise in profitability is mainly attributed to increased net interest income, supported by healthy commission income. Main contributors include interest income from the conservative employment of the Bank’s excess liquidity, due to the increase in the ECB Deposit Facility Rate, higher average balances of credit facilities extended to customers and interest income from the Bank’s own Bond portfolio. Following an unprecedented long period, when banks earned close to zero and even negative interest on their excess liquidity and similarly paid close to zero rates to depositors, the rapid increase in ECB rates finally created a profitable position on this excess liquidity. This, of course, leaves a question mark over the whole sector as to how its profitability will be affected now that interest rates have effectively started to decline, something that markets anticipate this year. We will need a greater effort aimed at business development and cost effectiveness in order to keep as much of this increased income as possible, although it is expected that, ultimately, we will see a reduction in the level of the Bank’s profitability.

Cyprus has seen a surge in headquartering, particularly with tech companies establishing bases on the island. Have you been able to capitalise on this trend?

The headquartering surge has been uplifting and has created demand for office space and residential properties but it has also led to an increase in the population. These individuals, with above-average income, are driving the demand for schools, healthcare and consumer products. Being part of the Cyprus economy and with a strong footprint in servicing High Net Worth Individuals, we have been able to attract our share of these clients and meet their increased demand for banking services.

Eurobank has embraced the “phygital” approach (blending physical and digital processes) on in its own transformation journey. What motivated this decision and do you foresee a future where the physical component might become redundant?

In our Group, the term “phygital” refers to the effort in making all our processes digital while maintaining physical contact with clients. It combines the convenience, efficiency and accessibility of digital banking with the personal touch and trust of traditional in-person interactions. The decision to adopt “phygital banking” was motivated by the fact that the new-generation consumers and companies that are constantly advancing in technology seek efficiency and better service through digital channels. This demand will continue to increase and reach maximum levels with regard to day-to-day operations. However, I do not expect that the day will come when the physical approach will no longer be needed or demanded. Clients will always request in-person meetings with their banking officers to discuss their lending and investment decisions. Banks will continue to visit and examine on-site projects, factories and warehouses before they are able to form a clear picture of the risks and opportunities they are undertaking when deciding on a business loan, especially the larger tickets. Moreover, the ability to offer clients a physical contact channel will convince them of the effort we make to deliver service of the highest possible standard and I believe this will always be appreciated.

How has Eurobank updated its governance structure and operating model to align with sustainability goals?

At Eurobank Cyprus we are committed to Sustainable Development and the achievement of Europe’s climate goals. The Bank established its Governance Model on ESG issues in September 2022 with the set-up of a new ESG Management Committee chaired by the Bank’s CEO, showing our commitment at the highest level. Responsibilities have been assigned across all units and divisions of the Bank. Moreover, the Board of Directors monitors ESG developments on a regular basis, including our actions to address climate-related and environmental risks. In 2023 and 2024, the Bank continued its efforts aimed at minimizing its environmental footprint and promoting a green economy. In this context, the Bank has adopted and promotes environmentally friendly practices on energy consumption, renewable energy sources, greenhouse gas emissions and paper and water consumption. Our actions to reduce our environment footprint include:

• The installation of solar panels and other energy-saving systems and practices such as the use of energy-saving LED lamps and motion and lighting management sensors.
• The upgrading and replacement of electronic devices/cars
• The replacement of consumables with reusable, recyclable and biodegradable materials.
• Raising staff awareness and endorsing an environmental culture (minimising paper waste, reducing water consumption and recycling).

What are Eurobank’s financing solutions and products that are designed to support the green transition?

At Eurobank, we see Sustainable Development as a major driver that leads to progress and prosperity. Change requires both productive economic structures and a responsible attitude towards the environment and society.

To achieve this in practice we:

• Apply an enhanced appetite and priority for providing financing solutions that assist clients in their green transition.
• Encourage financing (co-financing) aligned with the various government and EU programmes including the Recovery and Resilience Plan (RRP).
• Offer financing solutions with embedded incentives (in financial terms and conditions).
• Provide training to our employees to better understand the green transition in terms of client engagement and financing offerings.

Finally, are there any new products or financing solutions – green or otherwise – that the Bank is planning to introduce in the near future?

In 2022, the Bank initiated the development of its Sustainable Finance Framework, the scope of which encompasses a wide range of ESG lending sustainable financial products and services offered to clients, where specific conditions apply for granting lending sustainable financial products. We are gradually integrating the Sustainable Finance Framework into our core operations and we intend to maximise the financing of new “green investments” such as renewable energy projects, energy-efficient buildings, net zero emission logistic centres, etc., while avoiding industries that produce high emissions. On a broader level, we are constantly monitoring developments in all sectors of the economy and the needs of our clients. The business model of our Bank has been built on the wholesale banking perspective that serves Corporate Banking, Wealth Management, International Business clients and Capital Markets. In recent years, we have added the new line of Affluent Banking that services clients complying with broader wealth criteria but this has not brought any deviation from our basic model. In cooperation with the specialised units of Project Finance and the Syndications Desk, we are looking into large-scale green projects and offering a range of financial solutions. This business model allows us to be versatile and enables us to quickly introduce new and innovative solutions that meet the specialised needs of our growing clientele.

(This article first appeared in the 2024 edition of The Cyprus Journal of Wealth Management, commissioned by Eurobank Cyprus and published by IMH. Click here to view the article. Click here to view the entire magazine online.)