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June 30, 2008updated 04 Apr 2017 1:14pm

The cutting edge of retail banking

Tony Turner, CEO of HSBC Georgia, wants to get the bank up to speed quickly aiming to achieve as much in the first three years as was accomplished in 12 years at neighbouring HSBC Armenia

By William Cain

HSBC has started operations in Georgia, the 84th market in which the group now operates. Tony Turner, CEO of HSBC Georgia, wants to get the bank up to speed quickly – aiming to achieve as much in the first three years as was accomplished in 12 years at neighbouring HSBC Armenia. William Cain reports.

HSBC has launched banking operations in the ex-Soviet republic of Georgia, with a three to four year target of gaining 10,000 customers and $300 million in assets.

Tony Turner, CEO of the new Georgian franchise, said the bank can develop much more quickly than its neighbouring Armenian business, which took 12 years to reach the same benchmarks, largely because of political complications.

Turner, who ran HSBC Armenia for two years before taking the Georgia job, said the economic and political outlook for the country is much brighter than it was for Armenia when HSBC first set up there.

Georgia is currently regarded as one of the most promising of the ex-Soviet states, with a population of 4.5 million, real GDP growth of 12.4 percent in 2007 and foreign direct investment inflows of $1.6 billion, compared to $542 million in 2005.

Turner added the bank was aiming more widely than its traditional mass affluent segment, claiming he would “not like to restrict [the business] in those terms”.

He told RBI: “It’s worth pointing out here that our main strategy is retail. We will be serving the commercial and corporate space as well, but the heart of the bank will be retail. HSBC Group is at its core a retail bank, which is where most of its income and profit comes from. The retail proposition is at the heart of what the group does in emerging markets.”

One of the areas Turner needs to develop first is distribution. The bank has to battle on until the end of the year with just one branch and no internet or call centre offering ready, although a second branch is in the pipeline.

He said: “Distribution is something we have to address. We could have waited until we had five branches and the internet channel with call centre ready, but we have to go with what we have got. The branch we have is a big one, with 40 staff and 13 tellers.”

If the economic situation remains supportive, the bank wants to establish five branches in the country over the next five years. He said he doubted whether more than 10 outlets in a country of Georgia’s size would be cost effective once the bank had implemented its internet banking proposition and telephone channel.

Challenging tasks

Finding the right premises, implementing systems and co-ordinating design and construction were all challenging tasks in the country, he added.

Georgian GDP per capita is $4,700, limiting the retail banking products likely to be successful. Turner said two basic consumer banking products would be introduced: a credit card product and a variable rate mortgage – both of which he said would be firsts in the country. On the liability side, the bank has a broad range of products which enable clients to save and invest in the local currency as well as US dollars.

The variable rate mortgage, which was also the first of its kind when introduced in Armenia two years ago, is a straightforward product similar to the one the bank offers in the UK.

Banking products geared to more wealthy customers tend to take off in countries when the economy hits a GDP per capita figure of around $7,000. In establishing its presence in Georgia ahead of that figure, HSBC is hoping to position its brand for when demand grows significantly for products like pensions, insurance and investments.

The credit card product is, according to Turner, the first genuine credit card product in Georgia. Many of the local banks, he added, market credit cards but they only function on the closed Georgian system and cannot be used for internet purchases. He said HSBC’s credit card facility would be “a genuine payment tool through any channel”.

“It’s a fairly standard product range for a fairly unsophisticated market. We can help our clients with our international products but I doubt there will be much demand given local currency savings rates, which are 7.9 percent here. We have to recognise the market we’re in – but we are able to respond quickly to demand from clients.”

Marketing HSBC should not be too difficult a task – the bank is widely acknowledged as having one of the world’s strongest financial brands.

Turner said: “It’s amazing how prominent the brand is and how good the name recognition is already. It’s well known in the [capital] city of Tblisi. But we need to be cautious about a knock-out marketing blow because we are restricted [in capacity].”

He said the bank had set aside “several hundred thousand dollars” to market its presence in the country in its first year, which would be “similar and more” in the year after. The bank is running a TV advertising campaign as well as press and advertising banners in Tblisi which build on its ‘world’s local bank’ marketing tagline.

The launch in Georgia brings the number of markets in which HSBC now operates to 84.

MARKET PRESENCEHSBC – countries in which it has one branch • Algeria • Palestinian Autonomous Area • Cook Islands • Georgia • Thailand • Kazakhstan • The Netherlands • Kuwait • Venezuela

Source: HSBC

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