Profit: Mr. Shagidze, under your leadership, maib ended the year 2021 with sound results, showing sustainable development in the main areas of activity. Could you please tell us what was special and important for you during the first year at the helm of the bank?

Giorgi SHAGIDZE: First of all, I would like to stress one important thing - during the past year we have become a united and cohesive team. For the bank, it is very important that the whole team works together for the final result which is the sustainable development of maib.

You know, there are cases when companies have very good staff members but, when a new CEO is appointed, there is no unity around him or her. This may happen because of various reasons.  Fortunately, that was not my case - we quickly found common language and became a united team.

The second important thing is what I call a clear understanding of maib's development strategy by the management team.  It means that we all understand what we want to achieve. If you talk to any member of the maib management team, each of them knows the tasks the bank is faced with at this particular stage. The same goes for the bank's medium-term objectives.

I think this is fundamentally important for any company, not just our bank.

We have yet to conduct an external audit that will confirm the financial results achieved in 2021. We have made great strides in serving small and medium-sized businesses, providing them with a wide range of special products and services. I see this as a great merit of both our old and new management teams.

I would also like to note that in 2021 maib's share of this market segment grew by 4%. I think this is important as this growth has helped the economy through the development of our clients' businesses.

Profit: In what other areas has the bank achieved growth?

Giorgi SHAGIDZE: We have significantly increased the share of mortgage lending to the population. The bank has opened a modern mortgage centre and updated its line of products for this type of lending. Thanks to this, the bank recorded a significant raise in mortgage lending in 2021, which, together with a hike in consumer lending, helped maib increase the market share.

Last year, we closely followed the bank's profit figures and were pleased to see them growing each month. Some indicators were affected by different seasonal factors but, if we exclude them, then we can say that the bank's key performance indicators went up every month.

I very much expect this trend to continue in 2022, as this is equally important for the bank, clients, shareholders and the country as a whole.

Here, I would like to mention that in 2021 we introduced the useful practice of holding regular meetings with shareholders. I meet with 20 to 30 shareholders every three to four months to brief them on our achievements, challenges and plans for the future.

And, of course, I am excited to share with you the progress we have made in preparing to issue IPO. We organized the Capital Markets Day at the London Stock Exchange in November 2021. Since then, our team has had over 40 meetings with potential investors and the feedback we have received is very encouraging and, I would say, above our expectations. This makes us more confident about what we will propose to shareholders so that they give us permission to prepare the bank for an IPO. If we get it, then it is quite realistic that we issue IPO in 2023.

Profit: Many have expected this long-awaited event for Moldova, the issue of IPO by a commercial bank, to take place in Frankfurt or Warsaw if not in New York or London. But it seems that the event will take place at the Bucharest Stock Exchange. Why?

Giorgi SHAGIDZE: I would like to emphasize that it is up to maib's shareholders to decide on the issue of the IPO.

Here there are two important aspects. First, who will our investors be? Judging by the feedback we have received at meetings in Bucharest, London and Prague, they will be high-quality investors with good reputation at the international level.
Most of them are from New York and London. It means that if we place the IPO, maib will become a well-known public financial company. Its shares will be bought by portfolio investors known all over the world. Such investors are very important for both the bank and the country as they will make Moldova more attractive for other companies.

As regards the stock exchange through which international investors will come to maib, we have studied in details the opinion of potential buyers and came to the conclusion that the Bucharest Stock Exchange is a very good choice. There are there many potential portfolio investors, in particular pension funds, which would be happy to invest in maib.

Yet, I reiterate that shareholders will have the final say on the stock exchange.

Profit: Stock exchange fees will also probably matter, right?

Giorgi SHAGIDZE: No, these costs will not be particularly important when choosing the stock exchange. There are other more important things such as the size of the bank and the volume of the IPO. maib will be among the top companies listed on the Bucharest Stock Exchange. Yet, this will not be the case if we choose another platform. As for the fees, they are not very high be it in London or Bucharest.

Profit: In 2021, maib reported record high indictors, for example profit. Which financial results achieved by maib last year please and inspire you and which results you find less satisfying or deserving more attention?

Giorgi SHAGIDZE: In the Moldovan banking sector there is strong competition in terms of salaries. Last year, where possible, we raised salaries of qualified bank employees. This year we will review our salary policy for specific positions.
This is an ongoing process which does not depend on the quality of the bank's management. We have to create good conditions for our employees, so that they feel comfortable financially. But here there are things that we can and we do them now, and there are things that we will be able to do only in the years to come.

We have already done a lot in this regard and we will continue doing so in 2022. When talking about costs, it is necessary to understand the situation correctly and call things by their proper names. It is impossible to go through such serious and large-scale transformation without costs incurred.

As for 2022, we will focus on digital innovation.

We now introduce a new principle called agile, which fundamentally changes the very philosophy, understanding and approach to conducting the banking business. With the help of this principle, we change the staff structure into small teams focused on solving specific tasks and obtaining expected results. This year we also plan to complete the construction of and move to a new HQ, where we will actively implement different agile-approaches representing a totally new direction in Moldova.

Leading international companies and consultants now help maib to achieve a complete transformation. I would like to stress that all successful international companies and banks have already completed such transformation or are in the process of doing it. I hope and believe that we will start to see good returns from maib transformation already by the end of 2022. Foreign banks that have gone through such a process successfully have had solid results. I believe that a modern bank will find it difficult to compete without this.

Profit: Could you please give us details about bank's profit, loan and deposit portfolios in 2021?

Giorgi SHAGIDZE: As I've already mentioned, we managed to increase the loan portfolio by more than 4 billion lei in 2021, increasing our market share even more. Our deposit portfolio reached 28.6 billion lei, which is 31.7% of the total deposit portfolio of the banking system. This indicator soared by 19.8% in 2021. The net profit was 721.8 million lei or 198 million lei more than in 2020.

Profit: What can you tell us about bank's return on equity (ROE)?

Giorgi SHAGIDZE: We managed to increase the ROE by 2.76% last year to reach 13.81%. This figure is based on data that has not been audited yet.

Profit: What does maib lack to achieve a ROE of 20% which is considered a good investment?

Giorgi SHAGIDZE: In my opinion, we are confidently moving towards such a ROE but, as you know, this cannot be achieved overnight. With a stable social and economic situation and a stable exchange rate, we believe that the cost of capital of Moldova's big banks is around 15%.

A ROE of 20% in the medium term would mean, among other things, that the bank becomes very attractive for international investors. In the bank, we have a clear understanding that we need to achieve such a ROE, however difficult it may seem today.

Profit: Maintaining a qualitative loan portfolio is a key priority of any bank. In the case of maib, what is the "acceptable" size of non-performing loans?

Giorgi SHAGIDZE: According to international standards, any figure below 5% is good. Last year, when the bank's loan portfolio soared by 4.1 billion lei, of which 1.8 billion lei was placed in the real sector of economy, non-performing loans accounted for a little over 8%. The figure was slightly higher than in 2020. But I am confident that the quality of our portfolio will improve in 2022. We are now doing an in-depth analysis of risks. We are also introducing modern loan software – both should help the bank avoid risks and make the right decisions when granting loans.

Profit: Are you satisfied with maib's investment portfolio?

Giorgi SHAGIDZE: Maib leasing and MoldMediaCard are subsidiary companies and, therefore, an integral part of the maib business model. We do not look at their results from the position of a classical portfolio investor. For us, it is important that these businesses participate as effectively as possible in enhancing the customer experience of the entire maib group. The managers of these companies are among those almost 100 team members who, among other things, are united by financial incentives in achieving the bank's strategic goals.

Our entire group of companies is focused on the top priorities: new standards of services for our customers, digital innovation and a successful IPO. For the time being, we do not plan to invest in other assets.

Profit: When you say that maib offers a "team spirit" to its customers, what exactly do you mean?

Giorgi SHAGIDZE: It's very simple - it means that each team member knows and has a clear idea of what we, as a team, want to achieve. And together we achieve these goals or, for some reasons, we do not.

We are introducing agile approaches, as a result of which there will be no individual goals, but clear team goals and objectives. I am convinced that today it is difficult to achieve good results without team spirit and business mindset of each of the team members.

I believe that "team spirit and cohesion" is one of the key values at maib. We actively cultivate, develop and strengthen them. This is not something new to our bank for a long time.

Profit: What is the bank doing to grow its loan portfolio and prevent a decline in deposits amid the growing inflation?

Giorgi SHAGIDZE: There are good models that help a bank in situations when the market environment changes rapidly as is the case now when the cost of money is constantly increasing. It is clear that the National Bank’s recent decision to increase the base rate by 2% to 10.5% will affect the price of loans. But we spare no efforts to make sure that only part of the rising rates is reflected in the price of loans.

At the same time, businesses have to understand that, given the latest developments, banks will not be able to lend on the same conditions as a year ago.

Profit: It means that the interest rate on deposits will also change, won't it?

Giorgi SHAGIDZE: That's right, we have significantly increased deposit rates in response to the changing market situation. It means that if the deposit rate is, for instance, 6%, then the interest rate on loans would also go up.

Profit: What do you mean by "quality services" at maib? How can the bank, with the help of such services, maintain its leading position on the market and remain a reliable partner of its customers?

Giorgi SHAGIDZE: The main objective pursued by "quality services" is to generously share our expertise with customers. It is based on transparency, innovation, flexibility, professionalism, trust and "team spirit".

Every day, we strive to be more than just a bank, but a partner to our customers - to be there for them, their families, their businesses, whatever they do and wherever they are in the world. Maib's banking services and products have one important goal - to make the bank's interaction with customers easier, simpler, more convenient and faster, which is actually very important for people today.

Profit: What do "suitable internal and external conditions" mean, especially since they are so necessary for a successful IPO?

Giorgi SHAGIDZE: First of all, I would mention here the progress Moldova is making in all directions of its development. A foreign investor needs it to plan its activities. All goals can be successfully achieved in a country with a predictable business environment!

Government officials have attended all the events that we have so far organized for potential investors. Their participation is important as investors get first-hand information about the challenges facing the country and the goals pursued by the authorities. This helps them to better understand and have a clearer picture of the country they plan to make investments.

In my opinion, it is very important that the lion's share of Moldova's exports, up to 70%, goes to the EU - a large, stable and predictable market with around 550 million consumers.

Yes, we understand that there are geopolitical aspects which are not directly related to Moldova and which may have a negative impact on maib's intention to issue IPO. If they persist by the time of the IPO, then we will wait and see until the situation improves.

 
Profit: The bank is now actively updating its units. When will they become competitive abroad?

Giorgi SHAGIDZE: I believe that our branches could operate in Romania as the services they provide meet the standards of similar bank units operating in the neighboring country.

Yet, I would like to stress that we do not plan to be physically present abroad. Our strategy is to provide digital services so that Moldovans working all over the world could have access to them.  

Profit: Shareholders have proposed that managers get incentives, including bank stock, in addition to salary. This is something new for Moldova. When does the bank plan to introduce these incentives?

Giorgi SHAGIDZE: This is a very important and effective incentive system which motivates managers in the long run and combines their interests with those of shareholders. Many banks around the world are using this system and I am very grateful to maib's shareholders for supporting the introduction of this practice in our bank.

The very fact that the system will involve around 100 employees distinguishes maib from other regional financial institutions. As I understand it, no bank in Moldova has such a system yet.

It is remarkable that now the main objectives of around 100 employees are almost the same as those of the bank's CEO. Although we have different wages, in strategic and tactical terms our goals coincide 100%.

Profit: You said this system includes around 100 personnel - is this a small of a big number for a bank like maib?

Giorgi SHAGIDZE: I think that, in our case, this is the optimal figure.

Profit: The market price of maib shares soared to a record high of 4,000 lei (around $220) since you have been at the helm of the company. To what extent does this price reflect the real value of the bank's stocks?

Giorgi SHAGIDZE: Certainly, the growing price of shares is a positive factor. Shareholders, and those who buy shares at this price, believe in what we do and how we develop maib. I will not talk about the impact of this price on the value of the asset. But I am sure: closer to the time of the IPO, we will have a good opportunity to talk about the right market price of maib shares.

Profit: Upon your arrival in Chisinau a year ago, you compared Moldova with your native Georgia. The two countries have almost the same population size, their economies and financial markets are also comparable. Yet, there are differences as well. After a year in Moldova, could you please tell us why TBC Bank, where you worked before, has a profit of over $200 million, and maib only $40 million?

Giorgi SHAGIDZE: First of all, for maib this means good perspectives and opportunities as it shows us, the managers, what financial results we should strive for.

Secondly, the profitability of a bank depends on many factors. For example, in Moldova  the ratio of bank loans to GDP does not exceed 24%, while in the region the figure varies between 50% and 70%. This suggests that the banking system and maib have real conditions for dynamic growth in the near future.

Profit: Does maib plan to pay dividends for 2021?

Giorgi SHAGIDZE: Under the development plan approved by shareholders, the bank will pay dividends in the amount of 30-50% of the profit earned in the previous year. We will try to comply with this decision. I very much hope that dividends for 2021 will be much higher than for 2020.

But first we have to conduct an external audit that will confirm our financial results. Then we will ask for the National Bank's permission to pay dividends.

Profit: Could you please share with us your impressions about Moldova: its culture, traditions, cuisine, people and business environment?

Giorgi SHAGIDZE: I have to admit that even before coming to Chisinau I had heard a lot about the kindness and hospitality of Moldovans. Over the past 12 months I had the opportunity to see with my own eyes what good, sincere and responsible people Moldovans are.

I have discovered Moldova's regions which I like to visit again and again, being attracted by the beautiful nature, delicious cuisine and excellent wine.
As for Moldovan businesses, I would like to emphasize the high level of exports to the EU, which is significantly above Georgia's. At the same time, in Georgia the tourism sector is more developed and this has a positive impact on the country's GDP.

Profit: Thank you for the interview. We wish you success in the implementation of your plans for the great transformation of maib!■