Following seven years of
profound change and growth, Česká Spořitelna, the Czech subsidiary
of Austria’s Erste Bank, has become the largest retail bank in the
Czech Republic. Jiří Škorvaga, director of retail banking, says the
bank is continuing to focus on loyalty and product innovation.
Douglas Blakey reports
Go deeper with GlobalData
Since its acquisition by Erste Bank in 2000, Česká Spořitelna
(ČS), the Czech Republic’s second-largest bank by assets and the
country’s largest retail bank, has undergone a significant
transformation. In the year leading up to its sale by the Czech
Republic government to Erste, ČS lost CZK6 billion ($292.6
million), 45 percent of its loans were non-performing and many of
its ATMs failed to work properly.
Soon after acquisition, Erste implemented a modernisation programme
for ČS, and in 2000 its Czech subsidiary broke even; in 2001 it
reported profits of CZK1.8 billion and by financial year 2006 its
net profit amounted to CZK10.3 billion. ČS recently reported
first-half 2007 net profits of almost CZK5.3 billion, an increase
of 7.3 percent compared with the same period last year.
Staff numbers have been reduced from around 15,000 in 2000 to fewer
than 11,000 in the first half of this year. An unsustainable
cost-income ratio of 68.6 percent in 2001 has been reduced each
year and is now a more manageable 52.8 percent.
ČS has benefited from favourable economic conditions in the Czech
Republic, and the consequent rise in demand for financial products
in a market which was under-penetrated. For example, ČS had a mere
28,000 credit card customers as recently as five years ago: it now
has more than 537,000 cardholders, up by 37 percent year-on-year,
and a credit card market share in excess of 50 percent. The bank
has targeted 1 million credit card customers by the end of
2008.
It has also invested heavily in its distribution channels,
particularly telephone and internet banking services. Since 2002,
for example, it has increased its internet banking customer numbers
from 370,000 to almost 1.1 million and is aiming to increase this
figure to 1.3 million by the end of 2008. Internet banking
transactions grew by 43 percent to 30.9 million in the first half
of 2007.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataCultivating relationships
Jiří Škorvaga, director of retail banking at Česká
Spořitelna, told RBI that the robust Czech economy would
help fuel further growth for ČS. “The economy is growing quickly.
Many clients are getting wealthier and starting to think about
investments for their future. Clients are interested in asset and
wealth management products [but] it is not sufficient any more to
attract a client and just sell him or her a product,” he
said.
“What has become more important is the cultivation of relationships
with customers, offering relevant products and services and being
able to explain and give fair advice. ČS was the first bank in the
Czech market that set up an ombudsman for its clients, something
Erste had experience of for many years but it was totally new in
the Czech market.”
Škorvaga acknowledges the significant part played by international
banks in the development and stabilisation of the Czech retail
banking market. The market is dominated by three banks: ČS;
Československá Obchodní Banka, which is owned by Belgium’s KBC; and
Société Générale’s subsidiary, Komerční Banka. These three together
manage 54 percent of total bank assets, 58 percent of client
deposits and 49 percent of net client loans in the Czech
Republic.
“Today, the Czech retail banking business is all about tough
competition. All banks offer a comprehensive range of products and
services. What matters [now] is quality along with innovativeness
and value-for-money,” said Škorvaga.
A key element of ČS’s
efforts to differentiate itself from its rivals has been the
introduction last year of its First Choice service programme,
designed to increase customer satisfaction and loyalty, as the bank
targets a cross-sell ratio of 3.0 products, from its current level
of 2.5. First Choice is composed of seven components: services and
products; processes; service management; culture; branches; social
responsibility; and clients, their rights and financial
education.
“We believe that high client satisfaction is a loyalty indicator
and we have to fight for it with full strength,” said Škorvaga.
“That is why we pay such attention to this issue within the First
Choice concept. During the last measurement of client satisfaction
among 1,200 clients, 90 percent said that the services at their
branch are very good or good and 75 percent perceived the bank’s
services in general as very good or good. The results are good but
there is definitely room for improvement and we are working on that
hard.”
In the second half of the year, the bank will install an additional
100 ATMs, target a maximum waiting time for customers in its
branches of 7 minutes, refurbish 100 of its 636 branches and invest
heavily in product innovation. “We have already extended opening
hours at our branches, shortened waiting times [and] plan to open
new specialised satellite branches or stands in city centres for
fast service. We have conducted a series of minor improvements at
branches to increase client comfort, such as coffee machines, free
newspapers and water,” he said.
Customer service in the bank’s branches is also subject to a
thorough evaluation process. ČS has developed what Škorvaga’s
describes as a sophisticated way of measuring each branch, using
mystery shoppers to maintain branch standards.
“We measure, each quarter, each of our 636 branches and every six
months we measure the bank as a whole compared to the market. The
measuring gives us a good comparison of where individual branches
stand in customer satisfaction and where we as a bank are compared
to the competitors. On an ad hoc basis we run interviews
and various focus groups throughout the year,” said Škorvaga.
Important feedback
The bank also measures what it terms “short-term
satisfaction”. “We contact our clients two weeks after they visited
a branch and ask whether they were satisfied with individual
services, products on offer and also ask about the branch layout
and organisation. This brings a very valid feedback,” said
Škorvaga.
Last year, ČS heavily targeted the mortgage market, introducing its
Instant Mortgage product, which enables a potential customer to
ascertain the approved mortgage amount he or she can be granted at
the first meeting and the option to sign the loan contract at the
same time. This initiative helped the bank to sell mortgages and
housing loans totalling CZK44.5 billion in 2006, a record for ČS.
The value of mortgages to private individuals increased by 42.6
percent year-on-year to CZK95 billion in the first half of 2007,
with the overall volume of the bank’s mortgage portfolio reaching
CZK133.2 billion, an increase of 38.4 percent compared with the
same period last year.
In the second half of this year, the bank is promoting a new
bundled account, the Česká Spořitelna Personal Account. “It is a
brand new type of a transaction account,” said Škorvaga. Customers
will be able to choose from up to 30 different levels of products
and related services, such as a debit card, unlimited free
withdrawals from ČS ATMs, an unlimited number of debit card
payments inside the Czech Republic, the bank’s Servis 24 internet
offering, an overdraft facility and insurance.
The bank tested the new bundled account during a pilot study
involving 30,000 customers from June to early August in part of its
branch network; one-fifth of those in the study chose to open the
account.
“There will also be several innovations in our card business,
focused on user friendliness and customer benefits, and we will
come up with new wealth creation solutions and more types of new
non-life insurance products,” added Škorvaga.
Insurance is an area the bank has been targeting and ČS now claims
to rank third in the country in terms of market share, up from 9
percent last year to 12.4 percent in the first half of this year.
In the first half of the year, the bank’s insurance income
increased by 25.6 percent year-on-year to CZK160 million.
According to Škorvaga,
the bank is looking at the possibility of rolling out
environmentally themed retail banking products. “Currently we are
evaluating the possibility of co-operating with a retailer on an
environmentally friendly initiative. Customers can already donate
points that they have earned within our loyalty programme to
environmental initiatives. We also have a series of special green
products that we offer our clients in the SME and micro companies
segment that are active in the field of environment protection,” he
said.
The segmentation strategy pursued by ČS is one of the main reasons
for the bank’s recent success, said Škorvaga. “We have at least one
banking contract with half of the population of the country. There
are segments where growth potential is the biggest and segments
which are current cash generators. Continuous focus on the right
segmentation of our clients and other people in the market is
crucial to us,” Škorvaga said.
