Societe Generale – Foreign Player Developing Montenegro’s Banking Sector


The American Times receives a strong perspective on the Montenegrin marketplace from the country’s foremost manager in the banking sector, Ms. Branka Pavlovic

Why did Societe Generale decide to enter the Montenegrin market?

Societe Generale is one of the major European banks which successfully implement its Universal banking model in 76 countries, with more than 148 000 employees servicing more than 32 million clients. Some 15 years ago, the Group started to spread presence in south east Europe and end of last decade Societe Generale presence was established in Serbia, Slovenia, Romania, Czech Republic, Montenegro, Macedonia, Croatia, Albania, Greece. So, Montenegro was consecutive part of the region. With such presence, SG was able to perfectly cover international and local clients with activities in the region which positioned our bank as first choice bank for such clients.  Regarding Montenegro – even relatively small – market is very dynamic with still lot of opportunities for the further development.

The American Times Presents: Societe Generale Montenegro, General Manager, Ms. Branka Pavlovic

Since 2005 when Societe Generale entered the Montenegrin market – our positioning on it has been changed. During the big investment and real estate bubble in second part of the last decade, assets based financing dominated the market. Being conservative, with business based financing principals and prudent risk culture, our bank held sixth or seventh position among eleven banks depending on the category while our market share was 4% in deposits, 6% in loans and 7% in total assets. When the crisis hit the market some five years ago, and NPL started to grow even over 20%, we have recognized our chance to make the breakthrough. Regarding quality of the portfolio – we were not affected by NPL thanks to our risk and lending policy and we maintained such risk culture. But we did several important strategic moves.

First of all – we have adopted our business model by putting the client in the center of our activities and attention. It means that we changed organization in order to be more efficient, we have optimized the network and introduced new products. Also, we were working hard to change the image and public perception of the bank which was, in the past, considered as rigid, a bit bureaucratic and not so efficient. Such activities were followed by moving from inadequate building to the newly constructed modern head office in business center of Podgorica, and by re-branding and changing the name of the bank with the clear message that we are part of the big, successful European bank. Our CSR activities and recognized practice of gender equity were also helping us to change the image.

All those moves brought us to the comfortable positioning: we are now at third or fourth place in the market depending on the category, with 12% market share in deposits, 14% in loans, and 12% in total assets, recognized as solid and stable bank, first choice of foreign investors, with faithful client base and excellent profitability. Our long-term strategy is to continue with already established trend of growth both in loans and deposits, to offer perfect products for each segment, to keep conservative risk policy and to continue with good profitability. Our performance indicators for first six months in 2014 already confirm that the strategy we have adopted for growth in this year is well forethought, and we are sure it will continue.

What were and are some of the positive experiences of the ease of starting up and conducting business in Montenegro? What are some of the challanges?

Even though Societe Generale acquired former state-owned bank and so for us it wasn’t a real start up we may say that “doing business” in Montenegro is quite favorable comparing with other countries in the region. Since regaining its independence in 2006,   Montenegro is implementing structural reforms and favorable tax policies at national level (corporate income tax rate 9%, VAT 19%) aimed to create business and investment framework to encourage economic growth and investment inflows. Monetary and political stability and advancing in EU accession process continuously improves international image and risk perception of the country.  Although the continuing transition has not yet eliminated all structural barriers, there are noticeable results in improving the business environment. It is also recognized in relevant international surveys,  and according to the World Bank’s Doing Business 2014, Montenegro has made significant progress in  improving its business environment over the years relative to its regional peers, which ranks Montenegro in 44th   place,  out of 189 economies surveyed  (ex. regional peers Croatia : 89th , Serbia 93th , Bosnia and Herzegovina 131th ).

Montenegro has enacted investment related legislation also outlining guarantees and safeguards for foreign investors which allows for the free transfer and repatriation of profits and dividends, provides guarantees against expropriation, and allows for custom duty waivers for equipment imported as capital-in-kind.  Bankruptcy laws have been aligned to simplify liquidation of a company, accounting standards have been brought up to IFRS, and custom regulations have been simplified. Foreign and domestic investor and companies have equal treatment. Foreign entity can own 100 percent of a company and can own land without limitations in Montenegro. International arbitration is allowed in commercial disputes involving foreign investors. Referring to the registration requirements, procedures have been simplified to such an extent that it is possible to register a company for 1 euro in procedure that takes up to 10 days and construction permits and registering property procedures are significantly improved. Continued structural reforms are being implemented also through adopting more than 20 business-related laws which is resulting in improved environment for conducting business, all in accordance with EU standards.

 What factors have contributed to Societe Generale’s success and profitable status?

There are few basic business principles which we in Societe Generale Montenegro always follow and which contribute to our success and profitable status.  The first is client satisfaction. The creation of a stable base of clients is the foundation of a bank’s development and it can be achieved not only by kindness and favorable interest rates but also by understanding the needs of the clients and striving to react to their demands in the most optimal manner. The second, equally important principle is the satisfaction of our employees. The Bank is composed of people. They are its main and basic force and if they are not motivated or loyal, then no plan and program can succeed. We pay great attention to sharing the values of Societe Generale with all employees which are: professionalism, team spirit, innovation and responsibility, and we invest a lot in trainings of our people. The third principle is the optimization of all processes and operations – it is the only way to provide proper services of high quality to our clients with minimum costs. And last, but not the least, the fourth principle is the prudent risk policy. This has been a basic banking rule for hundreds of years and it has turned out to be resistant to all the crises and challenges of modern banking. It may not be popular in a period of high economic growth, but certainly, it is a guarantee of sound long-term business, which is our goal.

We noticed you’ve had some tremendous accolades bestowed upon you over the past year or two; including, an award as “Best Manager” SocGen Montenegro also ranking as “Best in Region”. Can you elaborate on the path to those achievements?

Societe Generale Banka Montenegro is proving that it is possible to have conservative risk approach – and still to grow in loan portfolio, to efficiently serve clients needs – and still to be very profitable, to apply modest interest rate on deposits – and still to increase the deposit portfolio.

Such results in previous period were awarded by two world finance top authorities: Euromoney and The Banker for The Best Bank in Montenegro. Also, beyond the borders of Montenegro – Bank got the award as the best bank in the region which is great achievement having in mind number of European and regional banks also present in the same region. I was also awarded as the Best Manager in Banking in the Region which I see not only as my personal achievement, but also as great recognition of Societe Generale values as well. This award and Women of the Year – award given by EBRD for excellent achievements in banking are very important and valuable for the whole team of SGME and of course for me personally. They represent confirmation that we are developing in good direction and that our hard work and engagement is recognized beyond the market of Montenegro. Awards also oblige to continue and we are proud to confirm that all performance indicators are continuously improving. I want to add that we are proud also on two other awards we received – Award for the philanthropy on national level, and Award for best promotion of Gender Equity.

Please give us a brief regarding competition in the Montenegrin financial market.

Banks that operate in Montenegro are very different one from another. There are no state owned banks. Among 11 banks that exist in Montenegro, there are few local private banks, few foreign private banks; few of them are subsidiaries of European banks concentrated with their presence in the region. Some of them have been struggling in the recent past with quality of portfolio, but currently, after increasing of the capital base they are all now very active in the market. What is very important is that all banks are liquid and solvent and in good shape. Montenegrin Banking Market, although limited and relatively small - is very open. Even though 11 banks that exist are considered to be more than enough, recently, new bank has got the green field license. So, competition is severe and with further development of the country – it will be even stronger.

 Personal message

Common understanding is that hard work and persistence will sooner or later bring success. And this is true. But I would add something very important which makes the difference between good and great achievement. It is personal involvement. If you work not only because your superiors are expecting that from you, not only because it is in your job description, not because there will be a reward after, but because you care, really, personally – then you can move the mountains. It worked for me. And, after so many years – it still works.