Erste’s ambitious international expansion programme of
the past decade has resulted in more than 3,000 branches and over
16 million customers in eight countries, but it remains well placed
to target market share growth in its domestic Austrian market.
Douglas Blakey talks to Peter Bosek, board member for retail
banking.
While Erste Bank’s earnings will inevitably be
affected by the economic downturn, it has confirmed it is on target
to achieve group operating profits growth of around 15 percent for
fiscal 2008 and, looking ahead, is forecasting an improvement in
operating profit of around 10 percent in 2009.
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The bank’s view remains that, despite a worsening economic
climate in its Austrian and Central and Eastern Europe (CEE)
markets in 2009, its core markets are better positioned to come out
of recession than those markets in Western Europe. Erste’s
international expansion of the past 10 years has resulted in
customer numbers growing from 600,000 in 1997 to 16.6 million at
year-end 2008, while its branch network now exceeds 3,000 in eight
countries (Austria, Czech Republic, Slovakia, Romania, Hungary,
Croatia, Serbia and Ukraine).
At the heart of its long-standing domestic Austrian success is
the bank’s partnership with the country’s more than 50 savings
banks. According to Erste’s board member responsible for retail and
private banking, Peter Bosek, the current challenging market
conditions mean it is a good time to be a savings bank with a
strong, respected brand.
“I am happy with our Austrian performance in 2008 when we
increased our retail savings volumes by around 8 percent, a little
bit above the market. One of the main reasons for this was the
trustworthy brand of Erste, which gave us a competitive advantage
last year,” Bosek told RBI.
Combined with the country’s savings banks, Erste has a retail
savings market share of around 24 percent and Bosek said there
remains scope for this figure to grow, despite the competitive
nature of the Austrian retail market. Traditional rivals include
Raiffeisen Zentralbank Österreich, UniCredit’s subsidiary
Bank-Austria Creditanstalt and BAWAG (now owned by US private
equity group Cerberus).
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By GlobalDataBosek said: “The year 2009 will be the same as the closing
months of 2008 on the products side in Austria – with all banks
trying to target increased savings volumes while on the securities
side, products will be very conservative.”
Erste’s concentration on customer service and investment
products has paid off in terms of attracting deposits: in private
banking, for example, it leads the field with more than €27 billion
($35.8 billion) in managed assets. But the bank lags its main
rivals in consumer lending, with a market share ranging between 12
percent and 15 percent. One recent marketing hit Bosek is keen to
build on in 2009 is the bank’s successful partnership with German
retail chain Tchibo (see RBI 585). Initiated last January,
the retailer offered a bundle of products in a number of its
Austrian stores including an application brochure for a savings
account.
The package, referred to by Erste as “the bank product you can
touch,” cost €7.90 and included a toy, a coffee mug, two vouchers
to be redeemed for coffee in-store and an application form for the
bank’s Kapital savings account. Also included was a €15 voucher
that could be redeemed if the buyer opened a savings account.
Bosek described the initiative as one of the bank’s best
marketing successes in Austria in recent years, quickly attracting
more than 10,000 new savings customers. And now Bosek is on the
outlook to sign up with another retailer, perhaps a
telecommunications partner, to try and repeat the success.
“I love the Tchibo co-operation. It gives the opportunity to get
in the mind of the customer but I would never choose a deal where
another retailer is really selling our product… it is very
important that the customer has to come back to our branch because
otherwise, one could say why do you need the branch,” he added.
On distribution, Bosek has strong views about the importance of
the branch, arguing that Erste’s approach gives it a competitive
advantage over a number of its rivals which he sees as too quickly
shifting customers on to direct and self-service channels.
“I do not agree,” he said. “We should say to customers we are
always here for you but it is not always easy to convince my own
people that they should now do more than they did in the last 10
years for clients when they enter the branch. I think this is Erste
going against a market development. If we go too far in this
direction then people will wake up at some time in the future and
say we do not need bankers.”
As for the possibility of Erste introducing mobile banking,
Bosek is short and to the point: “M-banking is not on the agenda,
it is not an issue in Austria.”
In terms of the current economic turmoil, Bosek has a number of
personal observations. He argues Erste will benefit from its early
decision to agree a cash injection of up to €2.7 billion from the
Austrian Government. It has not however yet taken up the funds and,
with a Tier 1 capital ratio of 7.7 percent without the injection,
there remains the possibility the full amount will not be taken up.
“We were the first Austrian bank to say we would be interested in
support and were really transparent in our communication with our
customers. In retail banking this year, there will be an advantage
in transparency; it is a question of credibility.”
|
Lending |
|
|
Erste Bank – retail market shares |
|
|
% |
|
|
Czech Republic |
30.0 |
|
Slovakia |
24.5 |
|
Romania |
21.2 |
|
Austria |
19.6 |
|
Croatia |
12.0 |
|
Hungary |
11.6 |
|
Serbia |
2.8 |
|
Ukraine |
1.4 |
|
Source: Erste Bank |
|
