INTERVIEW - Serbia’s Opportunity Bank Sees Return to Net Profit in 2010

“We’ve made a lot of provisions this year, so the bank will make an operating loss after provisions. We’ve made a lot of provisions because one of the real risks facing Serbia is high delinquency rates next year,” Voorhies told SeeNews in an interview.

"I think the banks are well positioned for it and everyone’s taking a really conservative approach. So we’ve done that this year and then we expect to be profitable again in 2010."

The bank turned to 105 million dinars ($1.6 million/1.1 million euro) in pre-tax loss through September from a pre-tax profit of 13 million dinars a year ago. It ended last year with 4.4 million dinars in net profit.

Opportunity Bank, which primarily lends to farmers and small and medium-sized enterprises (SMEs), plans to expand its lending portfolio next year by 10 million euro ($14.4 million) to 38 million euro, depending on Serbia's economic growth.

“We’ll be really happy to see a positive growth in the economy and if that’s the case we should be able to make those numbers,” Voorhies said. Serbia’s economy will grow by 1.5% next year, the country’s central bank has said in its latest economic forecast. 

Opportunity Bank plans to increase the number of its business clients to 10,000 next year from current 7,000, Voorhies said. He said earlier this month the bank’s client base grew by 32% in 2009.

The bank has set up a number of credit offices in small towns in rural areas over the year, aiming to boost its presence across the country. 

“We increased our lending staff by 30%. And that’s really to put more people on the ground. We began to put more seminars and fairs and other things to really get to reach these people that don’t have full access to banking services,” Voorhies explained. 

“A lot of banks last year and the year before were offering investment credits or seasonal credits, so farmers could get their seed and fertiliser financed or their long-term tractor. But what people wanted was something in-between, something to help them with their working capital or a small business they were running in their household,” Voorhies said. He added an average loan extended by the bank is in the amount of 2,500 to 3,000 euro.

Most of the bank's clients are located in central Serbia.

“A lot of the bank’s bigger clients are from [the province of] Vojvodina but the smaller farmers are from southern and central Serbia, and I think those are the areas that have proved really good for us,” he said.

Vojvodina is Serbia’s bulkiest economic muscle. The autonomous province  attracted some 70% of the 1.6 billion euro in foreign direct investment that flowed into the EU-aspiring country last year. The most developed sector of Vojvodina's economy is the food industry thanks to the province's fertile soil.

Opportunity Bank has increased its share of loans to SMEs and farmers in Serbia to about 4.5% in 2009 from 3.0% last year, the bank's executive board member Vladimir Vukotic said earlier this month.

Voorhies said earlier that the overall asset size of the loans has not grown as fast as the number of clients due to the economic slowdown n 2009.

Opportunity Bank, based in Vojvodina's administrative centre of Novi Sad, has lent close to 85 million euro to micro and small companies in Serbia since it started operations in the country in 2002. It ranked 32nd among 34 banks that operated in Serbia at the end of September with total assets of 4.3 billion dinars, according to Serbian central bank data.

Opportunity Transformation Investments Inc., which holds equity in Opportunity Banks around the world, owns 63.51% of Serbia’s Opportunity Bank, followed by the EBRD with a 19.11% stake. The Netherlands Development Finance Company owns 12.74%, while the remaining 4.64% is owned by privately held Oikocredit Financing Cooperative that lends money to SMEs involved in agriculture, trade, services and manufacturing.

(1 euro=95.9120 Serbian dinars)