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Banks need to shape up and truly invest

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Bank managers are desperately trying to project a positive image of their institutions with shareholders cringing at the thought that profits are not yet healthy enough to get a return on their investments.

Staff too are walking in and out of branches like zombies, hoping that they will get a lucrative exit package.

This is the situation with the banking sector at large, already under heavy public criticism for introducing charges, often exorbitant, imposed on ordinary customers who are frustrated and steadily losing confidence in their lenders.

Public opinion is that these high fees are only in place to support the salaries of the unproductive and bloated workforce.

This is why online services continue to charge similar rates as over-the-counter transactions, instead of encouraging more and more customers to switch to digital platforms altogether, which in other countries carry zero or next-to-nothing fees.

The 9-month results announced by both public banks – Bank of Cyprus and Hellenic – showed a depressing picture as regards income, with the numbers remaining static year-on-year and nothing new or exciting to report on.

This is unsurprising as banks, currently flush with cash due to negative interbank rates that do not generate income, basically have no other significant source of revenue.

It also explains why they want everyone to get a new car loan or a flashy new credit card to have more to spend with and them to earn more from card and loan fees.

Both public banks rely on profits earned from their insurance subsidiaries, have minimal exposure to financing the shipping sector and have taken no risk in recent years to invest in new growth areas, such as the energy sector.

The biggest burden the banks continue to carry, even the smaller ones, is the stubbornly high rate of non-performing loans (and ‘exposures’ to include other instruments), mainly driven by mortgages on homes and facilities to large corporates.

The first category of NPLs was created from the greed to dish out money by the bucket load for property, with branch managers giving false or exaggerated supporting data as regards collateral, while primarily in the property sector, mega-developers simply renegotiate their terms of repayment; in other words, it’s the same money going around.

With the ‘golden visas’ and passports-for-investments scheme starting to dry up, and foreign depositors already taking their money to other financial centres, so to will the income of banks continue to shrink, as there is no real policy to support promising small-to-medium sized enterprises (SMEs).

Furthermore, the trend of ‘investing’ in start-ups has never picked up, with those with truly innovative ideas having so many other fund-raising channels to choose from, all outside of Cyprus.

Unless schemes are put in place via pressure from the employers and business chambers for micro- and small-sized loans to SMEs that remain the driving force of the economy, no new investment is on the horizon.

On the contrary, similar to the myth that low-cost airlines will, someday, charge for the use of toilets inflight, banks too, will introduce coin-operated doors, charging customers €3 or €5 just to enter the branch and face the gloomy faces of bank staff, whose salaries are paid for out of fees collected from customers.

Whereas the rest of the world is fast moving to digital banking services, we continue to find creative ways to sustain an unproductive workforce in yet another sector of the economy. No wonder cash is still stuffed under mattresses.