Financier strengthens arm

On their 10th Anniversary, BSTDB are looking to the long term

April 19, 2010

In 2009 the Black Sea Trade and Development Bank celebrated ten years of operational activity. These years have proven to be a great success for the cooperation of the countries in the Black Sea Region. The bank has experienced substantial development since its establishment and compares favourably with peers in many respects. It has achieved both a sound operating structure and a balanced portfolio and it has demonstrated a capacity to grow and fulfill its dual mandate to support the economic development of the member countries and regional cooperation. While it is still a relatively small development financier in the region, mostly due to its young age, the bank has the potential to become a prominent player.

During the period of high demand, larger than anticipated operation size, and benign market conditions that prevailed in the region in between 2000 and 2008, the bank demonstrated rapid portfolio growth and increasing profitability while maintaining conservative provisioning procedures and excellent portfolio quality. At the end of 2008 the bank had an outstanding portfolio of 94 operations for a total value of $950m.

As the global financial crisis precipitated a regional economic crisis, the climate of insecurity and uncertainty has greatly shaped the bank’s operating outlook. Not being a triple-A rated institution, BSTDB found itself in a more challenging position with respect to securing financing and facing larger spreads than do other IFIs. On the other hand, the freezing up of credit markets increased demand for the bank’s financing from regional banks and firms. At the same time, BSTDB had to be careful to protect the quality of its portfolio and to safeguard its rating. This inevitably led to a slowdown in lending activities, but the bank posted a positive net profit in 2009 for the sixth consecutive year.

In June 2009, BSTDB adopted its Long-term Strategic Framework 2010-2020, which lays out an ambitious agenda for development of the institution in this decade. The bank’s vision for this period is to become recognised as the prominent development finance institution for the Black Sea region providing well-focused development assistance and solutions. As such BSTDB would become a preferred partner in the region for multilateral and bilateral donors and for other partners in development. Among the BSTDB key strategic goals are to:

– Obtain a credit rating of Aa3 (AA- equivalent) from Baa1 currently.
– Increase overall outstanding portfolio of operations to SDR 2.5 – 3bn (about $4.5bn) by 2020.
– Increase the share of public and quasi-public sector operations (backed and non-backed by sovereign guarantees) in the outstanding portfolio to 25 percent by 2020 from 11 percent currently.
– Focus on financing operations in sectors with high development impact, such as: physical infrastructure and related services; social infrastructure; renewable energy, power generation, transport and distribution; municipal services; and environmental protection.