Investbank is a modern digital bank

Mr. Milanov, at this point in time, what gives you the confidence that Investbank is a successful bank?

The financial results of Investbank AD are proof of this - the bank ranks in the top 10 of the most profitable credit institutions, and at the end of 2022 we reported a record growth of key indicators since the creation of the bank. The good result is mainly due to the growth of the loan portfolio and the securities portfolio and confirms that thanks to good management and the efforts of all employees we are moving in the right direction. Compared to a year ago, the bank's gross loan portfolio grew by BGN 116 million (12.15% growth) and as of December 2022 is in the amount of BGN 1,071 million - this is historically also the highest amount the portfolio has reached at the end of a reporting period to date.

A good return on investment is a guarantee of improving the quality of services. In recent years, the bank has not distributed dividends, but has fully used the favourable annual financial result to strengthen its capital position through profit capitalization and investments to improve its services. The latter is also one of the factors that gives us confidence, especially in the field of digital channels, where the improvements are most visible. In March, Investbank won an award for an innovative project in the second edition of the Digitalk&A1 Awards. We were awarded a prize in the category "IT solution implemented in an enterprise" for our "Multibanking" service. This is yet another digital service award that the bank has won, and I mention it because such a serious recognition shows the level and scale of our transformation from a traditional to a digital bank.

Investbank is the first Bulgarian bank to offer the multibanking service. Let's explain what this service is, what type of customers it is aimed at, and why it is worth having.

Let us specify that we are the first fully Bulgarian bank to offer this service and we are the first to provide it in its full functionality. This service is an opportunity for the bank's customers to easily monitor the availability and movements of their accounts in other banks and conveniently operate with all their funds from one place. Having their payment accounts in different banks, through the platforms of Investbank - desktop and mobile - customers save time and receive up-to-date information about their financial situation and facilitate their banking.

Our Multibanking service is unique because it can be used by both individuals and legal entities. In addition to their accounts from other Bulgarian financial institutions, customers can operate with their funds from Romanian and Greek banks, as well as with their assets in Revolut. This service is a great convenience for our corporate customers. A huge percentage of them work with several financial institutions, and with Multibanking, the hassle in keeping track of available funds and received payments in different bank accounts has been reduced many times over. In practice, any manager, financial director or operational accountant can, with just one click, see the complete up-to-date financial picture of the company, which is the basis of the effective management of cash flows.

Will you share some of the corporate development plans?

In recent years, environmental and social impacts have become increasingly important for the investment decisions of clients and shareholders. This, in turn, leads to the emergence of new risks that require regulation of the financial sector. It turned out that the lack of information about the risks arising from climate change, resource depletion and other social problems threatens both the financial health of a given company and the achievement of global environmental goals. In this context, Investbank is increasingly aware of the risks associated when considering ESG (environmental, social and governance) factors in risk management. Integrated consideration of these factors allows us to identify potential problems and take a proactive approach to addressing them. It will improve the efficiency of the process through better monitoring and visibility of the potential long-term impacts of our investment portfolio. The integration of the ESG framework into the risk management processes allows the bank to strengthen its social responsibility to the public, which in turn contributes to strengthening the stakeholders’ trust as well as the sustainable development of the regions. Our ESG reporting stance, together with the processes we are putting in place to manage our overall strategy, aim not only to bring us into compliance with the regulatory framework, but also to prepare and position us as one of the leading business brands.

What else is coming up?

Another important direction in which we are moving is the finalization of the implementation of a digital wallet, the so-called Wallet, through the Apple Pay and Google Pay platforms. This new service will upgrade the bank's mobile banking functionality and enable our customers to make payments using their smart phone.

Digitization seems like an irreversible wave now. What digital conveniences does Investbank offer to its customers?

In 2022, we significantly upgraded our digital products and services and enriched that segment’s portfolio. At the core of Investbank's strategy lies the improvement of the customer experience by offering faster and more secure services to clients. Now, with just a few clicks from any point with internet access, our customers can easily open a deposit and current account, apply for a credit card or credit entirely online. Investments in the improvement of our digital services are an important factor without which the transition to Open Banking could not take place. We will continue to develop in this direction, combining traditional services and innovative digital solutions.

What's next for the instant payments service?

This year, in addition to Multibanking, which is already available to our customers, Investbank will soon join the Blink instant payments system. This will allow our customers to make instant transfers that are processed in seconds through mobile and internet banking.

What drives this e-change - the identified needs of your customers, the general trend for digitization of banking services, the views of the professionals that your bank relies on, or something else?

Undoubtedly, customer needs are the main factor that continuously fuels the digital transformation of banks. But these needs are also determined by the very new reality in which we live. Just a few decades ago we watched TV on black and white screens, and now our TVs are smart, connected to the Internet and have many additional functions. Something similar has happened with banks - from classic financial institutions with a branch network and services requiring physical presence (of both employees and customers), now everyone can manage their money from anywhere, with just a few clicks, through various devices. The catch here is that anyone can do this as…if they want to. So, customer needs are in the first place when we talk about the need for changes and improvements, but this process is also a combination of several other factors that are no less important - competition is a serious driving force, and without the opinions and studies of professionals, we wouldn’t be able to offer services that distinguish us and help us apply an individual approach - a trademark of Investbank.

Digitization means convenience. But how do you ensure the security and impenetrability of systems, and therefore of data?

Information security, storage of personal data and banking information are a challenge for all companies, not only for financial institutions. At Investbank, a system for managing the security of the information system has been developed and implemented, and absolutely all regulatory requirements, both national and European, have been complied with. Ensuring a high level of banking security is an absolute priority for us. All communication in our digital channels is encrypted. Access to them is protected with two-factor authentication. Card payments on the Internet are made with a 3D password. All improvements in security are inextricably linked to technical innovations and solid investments in this area, which introduce new approaches and ensure the improvement of structures.

What economic and financial cycle are we currently inhabiting?

A better question is what comes next, because the expectations for this year were that after the market turmoil of 2021 and 2022, the real economy would begin to experience serious difficulties. However, the data refutes this and in practice we see that the financial indicators of the business sector are improving and the sector is growing. I expect that in 2023 we will enter a new economic cycle, different from the one we have seen in the last 10 years. This is related to the so-called "cheap money", handed out interest-free or with minimal interest. Factors like inflation and gradual increases in interest rates are already involved, so if we don't want to lose, we have to prepare. I believe that the process is irreversible, but this is not necessarily scary - the interest on deposits, for example, confirms it. I am an optimist, the banking sector is well capitalized and we are ready to meet the challenges.

How do you view the ECB's policy to address the biggest challenges that are currently suffocating businesses and people alike?

The ECB strives to reduce the level of inflation and in the long term the strategy is correct. High interest rates will persist, but more interestingly, it turns out that economies can function well even at these interest rates. The sharpest increase in interest rates in the last 30 years is a fact, but even so, predictions of a recession are not coming true at this stage. A possible increase in unemployment would create a problem, but at the moment there are no prerequisites for this.

Could you make an allegorical prediction about banks and the purchasing power of money?

Inflation levels will continue to be the challenge in the coming years, which will significantly affect the purchasing power of money. However, this is not unexpected. The focus here is different - the current inflation, accompanied by the solid amount of printed money put into circulation, combined with the increasingly limited production of energy resources, is a dangerous combination. And here comes the role of ESG. To talk about ESG is to talk about risk. Risk to the planet, risk to human well-being, risk to ethics, credit risk. Risk and ESG are inextricably linked. ESG positioning helps illuminate critical factors. For example, how switching to renewable energy sources will affect costs, or how natural resources will affect sales. Organizations use this information to transform their operations and business models into ones that promote and achieve sustainable development goals. After the digital transformation of the banks comes the turn of the ESG transformation. Banks have come a long way, and Investbank is no exception. In 2024 we will celebrate our 30th anniversary. Looking back, I dare say that we have transformed from a traditional bank into a modern digital bank that offers a wide range of products and services.

In numbers: INVESTBANK AD

Balance sheet indicators, BGN (thousand), as of 31 December 2022.

• Total assets 2,842,847
• Securities portfolio 678,871
• Gross credits 1,071,059
• Deposits from customers other than credit institutions 2,482,357
• Total Equity 306,946

*Financial result/average value of total assets 1.82%

**Financial result/average value of total equity 17.41%