Erste, the
second-largest lender in Central and Eastern Europe, is well placed
to capitalise from the economic recovery. Martin Škopek, board
member at Erste Group, Jozef Síkela, CEO of Slovakian subsidiary
Slovenská Sporitelna and Peter Bosek, board member at Erste’s
Austrian-based unit, discuss strategy.
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Erste Group
posted a resilient set of results for the first three quarters of
2010: net profit rose by 2.3% to €736.8m ($979m).
Net interest income in the
nine months to 30 September rose by 6.1% to €4.08bn compared to the
same period last year, while net fee and commission income rose by
almost 10%, to €1.44bn.
The result was record
operating income for the first three quarters, of €5.9bn; operating
expenses were kept in check and actually fell marginally, by 0.3%
year-on-year.
Other highlights included: a
reduction of 220 basis points in Erste’s cost-income ratio to 48.7%
and a 2.9% increase in deposits in the year-to-date.
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By GlobalDataErste’s most mature markets
in Central and Eastern Europe (CEE) – Austria, Czech Republic,
Slovakia and Hungary – have successfully emerged from recession and
are expected to record at least moderate growth for
2010.
As for 2011, economic growth
is expected to return in Romania and Croatia, in line with the
recovery in domestic demand.
While only 3.1m of Erste’s
17.4m customer base is based in Austria – one considered by many to
be overbanked – Erste has set out ambitious growth targets for its
domestic market.
Erste currently has Austrian
retail banking market shares of 19% and 19.2% for deposits and
loans, respectively and ranks number two by market share after
Raiffeisen.
Peter Bosek, board member at
the bank’s Austrian-based unit responsible for retail banking,
said: “We plan to acquire 180,000 customers every year. The goal is
to become market leader.”
That means ramping up its
efforts to attract account switchers but Bosek has stressed that
market leadership is not defined solely in terms of market
share.
“We simply want to be the
best. Our goal is to be market leaders in terms of quality, and to
acquire as many new customers as possible,” Bosek added.
“We have 15,000 employees in
Austria together with the savings banks and 1,048 branches and no
changes are planned there.
“There are two ways to
increase earnings; either cut costs or acquire new customers. And
our decision is clearly for growth.”
Erste is already
picking up new customers from UniCredit subsidiary Bank Austria as
well as winning customer share from Bawag. During the economic
crisis, Erste attracted €1bn in new retail savings in Austria, as
it built a strong marketing message highlighting its commitment
towards its customers as being a trusted banking
partner.
Erste has also ventured into
new territories in the past year, such as its joint venture with
OMV, the Austrian oil and gas group, to boost its customer base and
distribution network.
Erste customers can now
transact banking services as well as fill up with fuel as part of
the launch of 170 “banking stops” at Austria’s OMV petrol
stations.
“The partnership is designed
to help us become the largest financial retailer in Austria,” said
Bosek.
The bank has rolled out
products including a savings card with special conditions exclusive
to OMV customers, and allows Erste to tap into OMV’s huge customer
base and builds on Erste’s successful partnership with German
retail chain Tchibo in 2009. That is an initiative Bosek has
described as one of the bank’s best marketing successes in Austria
in recent years, quickly attracting more than 10,000 new savings
customers.
Although it is early days,
the OMV deal is already paying off. Since early September, Erste
has been offering giro account packages that include free petrol
vouchers and Bosek estimated that Erste is attracting around 150 to
170 new customers each day via the OMV partnership.
“We are always on the look
out for new partners, mainly retailers from other sectors,” said
Bosek.
“Next year, I can very well
imagine entering a partnership with a company from the telecoms
sector. The idea is to link internet banking to the offering of a
cell phone operator.
“Cooperative ventures with
retail chains are also feasible. Target-group specific actions with
the media are another option.”
Finding products and
processes which can be used in banks of the Erste group on a joint
basis is the main task of Martin Škopek, head of retail at group
level within Erste.
Another
priority for Škopek is to investigate which products can be offered
in more than one market in which Erste operates. Already, Škopek is
looking at the option of Czech Republic-based Ceska Sporitelna’s
recently introduced CS Premier banking product being extended to
other markets.
Other possible cross-border
collaboration within Erste, relates to card processing.
“In most countries we are the
largest issuer of payment cards and also the processor of card
transactions undertaken at vendors,” said Škopek.
“At the same time the sphere
of cards is very standardised across the world. And we have asked
ourselves whether we really cannot link all countries to one
processor which we would create, and thus make interesting
savings.
“By around the end of this
year we want to decide on and draw up an implementation plan. The
advantage of a single processor would be that the functionality of
cards could be shared in individual markets without additional
investments.
“Another example which we are
thinking of involves consumer loans. We offer them in all
countries, but approval takes a different length of time in each
country. Sometimes a loan is evaluated and approved within 45
seconds, sometimes it lasts up to two and a half weeks.
“We are thinking about
creating a standard process which would standardise the time spent
on approval in individual markets. We want an integrated
methodology in other spheres too.”
Meanwhile, Škopek appears to
have ruled out the option of setting up a direct banking subsidiary
for Erste’s CEE markets, along the lines of rival Raiffesien’s
recently established online unit, Zuno (see page 14).
“Apart from extreme rates on
deposits, internet banking does not offer anything which we do not
already know and offer,” he said.
“I had concerns in Austria
where [internet banks] started attracting deposits through large
campaigns. However, when the campaigns ended, the money began to
return to bricks and mortar banks.
“This tells me that clients
have not given us the brush-off and have not given up on
traditional banks in favour of internet banks. Having said that, it
is a good thing to be prepared. We can introduce products in every
country that are capable of eliminating the advantages of internet
banks.”
Jozef Síkela, CEO of Erste’s Slovakian-based subsidiary,
Slovenská Sporitelna, has in his sights new entrants which have
appeared on the market and benefited from membership of the
country’s Deposit Protection Fund.
Síkela said: “We have seen
so-called ‘Mickey Mouse’ banks which strongly advertise an interest
of three% per annum and directly below, you’ll find a statement
that the deposits are protected by the Deposit Protection Fund to
100%.
“It would be fair to add that
this is possible with the friendly support of Slovenská Sporitelna
since we are the largest contributor to the Deposit Protection
Fund.
“Today, people are in a
situation where they don’t have to think about which bank is
stable, trustworthy, with long-term tradition and where this is not
the case. Their decision where they deposit their savings, whether
it is a good or bad one, is 100% guaranteed by the state. And that
is a moral hazard.”
Síkela also has strong views
on the question of fee-charging strategy.
“I keep proclaiming that if
someone decides to provide something for free, it is their
decision,” he said. “What is for free is worthless. In some
countries, a popular topic being discussed is that in Eastern
Europe the fees are higher than elsewhere.
“If we look at the income
structure of banks, the fees income ratio is much lower in the
Eastern European countries than the interest income.
“The reason for this is that
people living in Eastern Europe take advantage of a much smaller
range of bank products.
“Our aim was to make the bank
fees more simple and comprehensible. We want clients to know what
they are buying as well as what they are paying for. It is obvious
that the clients do not want to pay much or anything at
all.”
Looking ahead, Síkela concluded that the measures for
banks’ strengthening their capital base “may mean that traditional
banking that we are doing, ie, providing loans to clients, may be
more difficult in the future than it is now”.
