Tourism has brought structural improvement of the economy

Interview with Christian Canacaris, CEO of Raiffeisen Bank Albania

The high rate of tourism progress has influenced a structural improvement of the Albanian economy and its external position. Christian Canacaris, CEO of Raiffeisen Bank Albania, tells "Monitor" that tourism has increased exports of services and, in parallel, has stimulated a chain of public and private investments in tourist infrastructure, including the construction of hotels, restaurants, transport infrastructure and tourist attractions. Tourism has increased the demand for real estate, created opportunities for new investments and financing in the banking sector. Regarding the ongoing challenges of the sector,Mr. Canacaris states that the adoption of technology requires increased attention to strengthen information systems and associated processes for higher security, but also educating the market to receive online banking services.

How do you assess the progress of the activity of Raiffeisen Bank Albania during the past year? What were the most important developments for the banking sector in 2023?

In 2023, Raiffeisen Bank has recorded an excellent performance and we are pleased to share these positive results with you. Raiffeisen Bank expanded its activity in 2023, increasing assets by 7.0% compared to a year ago. The bank's key financial performance indicators remained healthy, reflecting a successful and sustainable business development strategy.

At the same time, the expansion of credit in total and the growth of loans to individuals segment by 7.9% shows an increased confidence of customers in our products and services. This is the result of our commitment to provide financial solutions suitable for their needs. We remain the largest bank in the market for loans granted to individuals with about 19.9% of the market. It should be mentioned that the devaluation of the Euro currency has played an important role in the restrained growth of business loans, given that this portfolio contains a significant part in foreign currency, mainly Euros.

The volume of deposits has recorded a moderate increase of approximately 4% during 2023, supported especially by the increased liquidity of businesses at the end of the year, showing a high level of trust of our customers and partners in our bank. Even in this case, the devaluation of the euro has played a key role in the growth rate of deposits.

An important aspect is our commitment to digitization and innovation. We have continued to invest in information technology and the development of digital platforms to improve the customer experience and provide innovative solutions. This includes the provision of banking services through mobile applications and other service platforms.

We are also proud to announce that we have certified our information security management practices to the international standard ISO 27001. This certification demonstrates our continued commitment to protecting customer data and providing a secure and reliable environment for all stakeholders.

Another very important project that Raiffeisen Bank carried out during 2023 that I want to mention is the cooperation and support of the Albanian Energy Exchange, ALPEX. Through this cooperation, Raiffeisen Bank became the first banking partner in Albania to offer settlement and transaction clearing services to its customers engaged in the energy market. This not only contributes to the development of the energy sector in the country, but also marks an important step towards the modernization of the financial market in Albania.

This initiative was widely hailed as bringing new opportunities for investors and companies operating in the sector. In general, the positive results of 2023 indicate a stable performance and a continuous commitment to provide quality services to our clients, including the use of information technology, information security management according to international standards, as well as the provision of innovative products such as Flash Loans.

The banking market has also experienced a period of growth and significant changes in 2023. The performance of the banking sector in 2023 has been characterized by a steady increase in assets, deposits and profits, expansion of credit with special emphasis on credit for individuals and improving bad loan performance from 5% of total loans in 2022 to only 4.7% in 2023. The capitalization level of the banking system continued to increase this year, to 19.6%, increasing the stability and safety of the banking system. All together these developments point to a strong sector and prepared to respond to market challenges and possible risks.

In addition, banks are advancing in the digitalization of services, investing in mobile platforms and applications to improve the customer experience and ensure an easy and fast access to their services. Also, there is an increase in interest in financing sustainable and environmental protection projects. Banks are developing new products and services to help clients finance such projects and make sustainable investments, responding to the challenges of time and their impact on the environment. Banks are engaged in the implementation of the concept of "open banking", they are working to develop and implement new systems of fast payments (Instant Payments), allowing immediate transfers of funds from one bank account to another. The banking sector has invested in new platforms and applications to facilitate and speed up the process of opening bank accounts, making it fully digitized and sustainable until the contract is signed. The banking sector has supported the implementation of the new law on electronic identification and digital signature, facilitating the process of verification and authorization of documents and transactions through electronic means.

Overall, the banking sector has made significant strides towards digitizing and modernizing financial services in 2023, improving customer experience and adapting to changing market trends and demands.

After the pandemic, a significant increase in the role of tourism and the real estate sector in the economy is being observed. How are these developments affecting the banking sector?

Yes, the tourism sector, with the accelerated increase in the number of tourists after the pandemic, has been one of the main drivers of the real growth of the gross domestic product in the post-pandemic years. Due to the excellent performance of tourism, exports of services have increased a lot and for the first time in the third quarter the current account was positive, and seeing its steady improvement in recent years, we can say that we are doing more a structural improvement of the economy and the external sector in particular. The high rate of tourism growth has caused an increase in public and private investment in tourism infrastructure, including the construction of hotels, restaurants, transport infrastructure and tourist attractions.

Tourism has increased demand for real estate, such as villas, apartments, and land in popular tourist destinations. This has affected the real estate market, increasing property values and creating opportunities for new investments and financing in the banking sector.

The real estate market in Albania has seen a significant growth and has become a key factor in increasing foreign direct investment in the country. For the first time in 2022, the real estate sector was the sector with the largest flow of foreign direct investments in the country, with an amount of more than 290 million euros. This sector continued to be the most attractive sector for foreign investors in the first three quarters of 2023, with an inflow of 222 million euros.

The growth of tourism and the real estate sector have created a large number of jobs, including not only the tourism sector, but also other sectors related to infrastructure, services, construction and restoration. This has helped to increase income and employment contribution, influencing the volume of deposits and lending in banks.

In fact, in 2023, mortgage loans for individuals and real estate loans for businesses have been the main drivers of credit growth.

The growing role of tourism and the real estate sector has a significant impact on the banking sector, bringing new challenges and new opportunities for banks to exploit the potential of these sectors. Banks may experience an increase in credit extended to businesses in the tourism and real estate sectors to help develop infrastructure and support their activity. But on the other hand, this requires banks to take special care in risk management and in providing stable credit for these businesses.

What do you think will be the main challenges for the banking sector in 2024?

Seen in the context that we expect monetary policy to continue its path towards normalization to respond to internal inflationary pressures stemming mainly from dynamics in the labor market, the demand for financing may mark a slowdown in 2024, and the need to maintain a healthy levels bad credit will require increased care to finance projects with positive perspectives.

The development of technology and innovation in the banking sector is growing in Albania. Banks are investing in new and advanced technologies to meet customer expectations for faster, safer and more convenient services and products. Thus, the adoption of information technology requires increased attention to strengthen information systems and associated processes for higher security, also there is the need for a larger financial education of the market.

Different regulatory requirements put banks under increasing pressure for increased capital and investments to meet the requirements and standards required by local and international regulators.