Holm Bank: banks need to change their attitude to increase investment confidence of companies

According to a survey organised by Holm Bank, companies don’t complain about the poor economic health of their business activity. However, many Estonian companies consider today’s economic environment more unstable for making investments than at the beginning of the coronavirus pandemic. Viljar Lillemägi, Head Of Business Banking at Holm Bank, finds that all banks that finance companies should start looking for ways to make lending to business clients more flexible while strictly following the principles of responsible lending.

Sixty per cent of the companies that participated in the survey consider the present to be somewhat or much worse for investing than two years ago. Only 4% of the respondents consider today more favourable for contributing to business projects than before. According to Lillemägi, the survey did not indicate that the size of the company would influence the attitude of the companies – cautious attitudes towards investments were expressed by the CEOs and CFOs of micro and small enterprises as well as medium-sized and large enterprises.

“Such a high degree of uncertainty is somewhat surprising because the companies that participated in the survey are moderately positive about the general condition of their business. More than half of the entrepreneurs confirmed that their company is doing better today than at the beginning of the coronavirus pandemic. Thirty-nine per cent of respondents assessed their company’s financial health as worse than two years ago,” he says.

According to him, the optimism is reflected in the fact that entrepreneurs are increasingly thinking about including new employees and are not considering redundancies; furthermore, increasing salaries is on the agenda in more cases than reducing them. The feedback from more than 300 entrepreneurs shows that this year’s economic forecast is quite good according to many companies.

“Approximately 40% of the companies believe that their turnover will be similar to the year before and a third of the respondents foresee an increase in turnover. Only 15% of the entrepreneurs who participated in the survey believe that 2022 will result in smaller turnover than last year,” adds the representative of Holm Bank.

However, only a quarter of the companies that participated in the survey confirmed that they plan investments for 2023. According to Lillemägi, the events in Ukraine and price increases have affected investment confidence as well as Euribor, which is on the rise again after many years.

“Banks have a huge responsibility in today’s situation. It is within our power to support the economic growth and success of companies – we can help finance business plans that open up new markets to companies, take on development projects that reduce expenses and ensure sustainability. Banks must become more flexible and acknowledge that in today’s volatile circumstances it is not possible to assess business clients based on the template that was valid for years,” he says. However, he adds that this does not mean banks should encourage clients to make thoughtless loan decisions.

“On the contrary – banks are definitely moderately conservative when assessing the sustainability of the plans today as well as in the future. Business loan managers and other top specialists supporting the issuance of loans must know how to assess the economic conditions of any sector and analyse the opportunities and risks of each business plan. We must do everything in our power to ensure that companies have the courage to implement the projects that support their business, but we must also take care that the financial situation of companies remains good and they will not have difficulties with the repayment of loans,” he adds. Holm Bank AS is an Estonian-owned bank with an operating licence issued by the European Central Bank. It operates under both the Liisi and Holm trademarks. Its services include term deposits, physical and virtual credit cards, private and business client financing and hire purchase. The bank also offers term deposits in Germany and Austria via the Raisin platform and is the sole owner of Holm Bank Latvia SIA, which operates as a financial services provider in Latvia.