Dörfler: “We want to finance the growing investment appetite of domestic companies”

Eight out of ten small and medium-sized enterprises (SMEs), i.e. 85%, have seen innovation pick up speed in the past ten years and feel the need to digitise their business. Given the increasing pressure to innovate, every third SME regards start-ups as competition and considers a strategy that includes cooperation in the coming two to three years as likely. This is the conclusion of a representative IMAS survey of 900 Austrian SMEs on behalf of Erste Bank and Sparkassen.“Investments are important now in order to handle the rising pressure to innovate, and we want to finance them,” says Stefan Dörfler, CEO of Erste Bank Oesterreich.

Better market environment for SMEs

“In order to remain competitive, SMEs want to invest in digitisation and innovation,” says Dörfler. Erste Bank and Sparkassen granted new loans to the tune of EUR 12.6bn to corporate clients in 2017. Companies currently regard the market environment as better than last year: in 2017, three quarters (75%) considered the environment increasingly difficult – in 2018 on the other hand, this percentage has dropped to less than two thirds (59%) of all surveyed companies. This is also reflected in companies’ willingness to invest. Every fourth company (25%) is planning on raising finance. Eight out of ten have been able to implement their innovation projects without a problem in the past; only 15% have failed to implement them. When granting a loan, the bank has to take numerous factors into consideration. The project quality and the business plan are the decisive criteria. “It has to be said though that sometimes limiting requirements or regulatory hurdles enter the picture. Providing finance is our core business, and we implement as many projects as possible with our clients,” as Dörfler points out.

Erste Bank and Sparkassen: EUR 1bn for innovation

“We want to finance the growing investment appetite of domestic companies,” says Dörfler. To this end, Erste Bank and Sparkassen has provided EUR 1bn annually since 2014 to finance innovative ideas, projects, or business models. “Demand is substantial, which is why we have yet again funnelled another EUR 1bn into our innovation fund,” explains Dörfler. This means that as of now, EUR 1.1bn are available for innovative projects again^[1]. Entrepreneurs can submit their projects at http://innovationsmilliarde.erstebank.at.

New finance cockpit for companies: Telebanking Pro

Since companies have increasing requirements with regard to banking services as their degree of innovation increases, Erste Bank and Sparkassen is already working on the development of a new online banking tool for companies: “Perfect financial management is crucial for corporate success. By offering Telebanking Pro, we want to provide companies with more than just banking services,” explains Dörfler. Going forward, the platform will be able to process other transactions such as credit checks quickly and easily. Telebanking Pro is already available, and throughout the year, new functionalities and services will be added to the platform. In contrast to earlier monetary transaction services in corporate business, the platform can also be used from mobile devices.

Banks are first port of call for investment projects

Three quarters (76%) of all surveyed SMEs prefer a traditional bank loan to other forms of finance. This means that banks are still the first port of call for investment projects. Two thirds (61%) of all surveyed SMEs are interested in subsidised loans. About half (54%) of SMEs would consider a capital increase, almost as many would be willing to take leasing into account (50%). According to the survey, crowdfunding is a form of finance that is considered only in selected cases (8%).

Research Report Austria:

In Q1 2018, the Austrian economy was growing by a higher rate than previously expected, supported by all components, especially consumption. The Austrian GDP increased by 3.4% in Q1 (Q4 2017: +3.2%; Q3 2017: +3.1%) and by +0.8% relative to the previous quarter (Q4 2017: +0.9%; Q3 2017: +0.9%). This, in turn, was clearly above the growth rates of the Eurozone (Q1 2018: +2.5% y/y and +0.4% q/q). Domestic demand has provided the strongest growth impulse since the beginning of 2016, when the tax reform and its measures created stimulus for stronger private consumption and investment.  Net exports contributed negatively to GDP in Q2 and Q3 2017, which was due to two factors: political uncertainty and an increasingly strong euro were burdening exports, while at the same time booming investments were boosting demand for imported goods further. For 2018, the analysts of Erste Group expect exports to grow by a total of 5.4% y/y, while for 2019 they envisage a slight decline in growth to 5.0% y/y, in response to the global cool-down of the economic upswing. Although the tax reform in Austria led to a cut in income tax, it remains high in comparison with the Eurozone. According to the analysts of Erste Group, this inhibits private consumption growth also in times of positive economic cycles. The analysts forecast private consumption growth of 1.6% for 2018. For the whole of 2018, we now expect GDP growth of +2.9% y/y, which will fall to a calmer +2.2% y/y in 2019.

SMEs in numbers according to Statistics Austria:

99.7% of all companies in Austria are small and medium-sized enterprises. In absolute numbers, 328,850. Almost 2.0mn people work in such an enterprise; 1.6mn thereof are in employment (i.e. do not own them). SMEs generate more than 60% of sales in the market-oriented economy. Aggregate sales amount to EUR 455bn.

^{The survey: Erste Bank contracted the pollster IMAS for a survey among SMEs. From 5 March to 23 March 2018, SMEs were polled about the economic environment, innovation, and start-ups. A total of 900 interviews were held with SMEs (EUR 2 to 50mn in annual sales) across Austria. The interview partners were mainly directors or financial directors. 100 enterprises were surveyed per province so as}