Belgium’s KBC has added
Romania to its portfolio as it continues the strategy of entering
high-growth emerging economies. Douglas Blakey talks to Bart
Vanhaeren, CEO of KBC Consumer Finance, about the group’s plans to
become a major player in a market becoming overloaded with foreign
competitors.

The potential offered by Romania’s fast-developing
consumer banking market has lured another foreign group, KBC.
Following the likes of ING and Erste Group, Belgium’s third-largest
financial services group has set up a consumer finance business in
Romania and has said it is on the look out for consumer finance
opportunities arising in other Central and Eastern European (CEE)
markets. The new operation will complement the bank’s existing
consumer finance operations in the region, notably in Poland, the
Czech Republic, Slovakia and Hungary.

KBC - net profit by division (€m)While the Romanian banking system remains relatively
concentrated, (the largest five banks – Erste-owned BCR, Société
Générale controlled-BRD, Raiffeisen, Alpha Bank and Banca
Transilvania – represent around 60 percent of the sector’s total
assets) it is the biggest banking market in south eastern Europe.
It is also one of the fastest growing consumer banking markets in
CEE, with 48 percent annual growth in 2007, with a relatively low
banking penetration rate – 66 percent of total assets to GDP.

“The consumer finance market in Romania is a very competitive one,
but at the same time has tremendous potential. We expect the market
to grow by 15 percent to 20 percent annually and could exceed €30
billion [$46 billion] by 2011,” Bart Vanhaeren, CEO of KBC Consumer
Finance, told RBI.

Vanhaeren is adamant that strong growth in consumer spending and
personal consumption will generate increased demand for financial
products and services such as personal loans and consumer
finance.

“Looking at the dynamic macro-economic outlook, growth of the
economy of more than 6 percent in combination with soaring growth
rates in personal loans and consumer credits, we believe the
Romanian market is healthy and will continue to develop at a good
pace. New loans in 2007 grew by approximately 70 percent, bringing
total loans to consumers of RON71.5 billion [$635 million], but
consumer loan penetration [total loans/GDP of 37 percent in 2007] is still low compared to other CEE countries,” he added.

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Initially, KBC’s product line-up in Romania is focused on cash
loans, credit cards, and instalment loans in-co-operation with
Romanian retailers who have joined KBC’s Business Partner
Programme.

Confident about credit quality

According to Vanhaeren, KBC is confident about the overall credit
quality in the Romanian market, and he stresses KBC is opening up
shop in the country because the company believes the average level
of risk in the consumer finance market is “acceptable.”

In particular, he is optimistic about gaining market share in the
growing credit cards sector of the market. “The cards market is
developing very rapidly in Romania, albeit starting from a lower
base, compared with other CEE countries. We believe that Romanian
customers will find our innovative card programmes attractive,
allowing us to grow our card portfolio rapidly.”

He adds: “We will continue to launch new products and open up new
channels.”

In terms of distribution, KBC has kicked off its Romanian operation
with a multi-distribution platform with its own network of loan
shops, agents, brokers, telesales, online as well partnerships with
retailers. As for KBC’s efforts to differentiate itself in Romania,
the bank has invested in an integrated marketing campaign to
announce its arrival.

“We will use TV, radio, and billboards to promote cash loans, car
loans and cards and direct marketing channels will also be heavily
used, in particular direct mailings and the internet.”

Vanhaeren is also confident the bank’s customers will act as
ambassadors to promote the KBC brand. “We rely on customer
advocacy, word of mouth, to spread the news that KBC Consumer
Finance – ‘a new and different credit solution provider’ – has
entered Romania. We are convinced our products will be successful
because they are designed with the customer in mind. The mission
statement of KBC Consumer Finance focuses on
customer-centricity.”

Room for another lender

Market research undertaken for KBC in Romania suggested there was
room in the market for another lender. “Research told us people are
interested in fast approval processes, attractive offers and
flexibility in servicing the loans and our products are designed to
do just that,” says Vanhaeren.

The growing importance of KBC’s Central & Eastern European
division is evident from the bank’s 2007 results, with around 21
percent of group net profit derived from the region – a figure
investment bank Keefe, Bruyette & Woods estimates will increase
to over one-third by 2010.

KBC – divisional contribution to net profit, 2007