Raiffeisen CEO Herbert Stepic
tells Duygu Tavan why the bank was so keen to snap up Polish-based
Polbank and how the deal will enable the Austria-based lender to
grow its retail banking operations in the CEE’s largest market.
That deal coincides with ambitious expansion plans for online
banking unit, Zuno.
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With GDP growth forecast to
reach 4% in 2011, declining unemployment and relatively low banking
penetration, Poland’s banking sector provides a fertile market for
banks’ retail banking units.
So when Greece’s debt-ridden EFG
Eurobank opted to sell its 70% stake in Polish subsidiary Polbank,
there was no shortage of interest.
On 3 February, Central and Eastern
Europe’s (CEE) third-largest bank by assets, Raiffeisen, emerged as
the winning bidder, seeing off rival bids from BNP Paribas and
Intesa SanPaolo.
Herbert Stepic, CEO of Raiffeisen
Bank International, told RBI why the bank bid exhaustively
to beat competing offers and agreed to pay €490m ($668m) for a
controlling stake in loss-making Polbank.
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By GlobalData“Unlike the top positions we hold
in our other networks, we were niche-players in Poland until now
and chiefly focused on corporate banking,” Stepic said.
“Poland was one of the few
countries, where we, in terms of pursuing our general corporate
strategy of offering universal banking services across CEE, saw a
catch-up potential in the retail banking sector.
“Our ambition is to establish a
universal bank in all our networks to cater for all customer
segments. This wasn’t our strategy in Poland in the past.”
Retail lending, for example,
currently constitutes only 16% of Raifeissen’s existing Polish
unit’s loan book.
“The purchase of Polbank allows us
to pursue our strategy,” Stepic said. “That is why the acquisition
is a perfect strategic fit and that is why we intensively bid for
Polbank.”
Stepic said that Raiffeisen would
be competing with all major players in the banking sector in
Poland.
For Stepic, the timing is
opportune:
- The National Bank of Poland
forecasts unemployment to fall to 10.9% from 12.1% in 2011 and
decline further to 9.4% in 2012; - GDP growth is estimated to
exceed the European average. Raiffeisen estimated 3.4% growth in
Poland against 3.2% for CEE, versus 1.2% in the
Euro-zone; - Average gross monthly wages
increased by 6% year-on-year in the fourth quarter of
2010.
“Poland is an incredibly
interesting country and one has to be present in Poland,” Stepic
said.
In addition to the economic metrics
of the country, Polbank’s retail customer base and branch network
were particularly appealing to Raiffeisen, according to Stepic.
He added that there were very few
overlaps between the Polbank and Raiffeisen branch networks, but
was unable to estimate the number of branches that would have to
close as a result of the deal.
The Raiffeisen-Polbank merger will
create Poland’s seventh-largest bank by branches (see
‘Liabilities’ bar chart above), the sixth-largest by assets
and the fourth-largest by retail lending.
As part of its strategy to cater to
all business and customer segments, Raiffeisen will continue to
offer the same product lines that Polbank has offered, Stepic
emphasised.
Mortgages, which account for 66% of
Polbank’s asset base, and consumer loans, which account for 19% of
Polbank’s total assets, will continue to be the two main product
lines, complemented by credit cards.
“In addition to the synergy
potential, there are annual savings of about €60m, because we can
merge several organisational segments such as the legal and
accounting departments and the head office.”
Looking outside of Poland, Stepic’s
stance on Raiffeisen’s CEE network is less cheery: he said he
expected non-performing loans (NPL) to peak this year. Such an
outlook is markedly less optimistic than two of Raiffeisen’s
biggest rivals in CEE, Erste and UniCredit, both of whom declared
that the worst was over in terms of NPL ratios.
“I have not made that comment
yesterday, or even last year. I said it at the beginning of the
financial crisis, after it became clear just how big the crisis was
going to be,” Stepic said.
“I stand by that comment. I predict
NPLs to peak by the middle of the year and then expect them to fall
immediately. The markets will prove whether I am right or wrong – I
hope I will be right and there will be no more peaks.”
Once the NPL ratios start to
decline, Stepic said he expects profits from Raiffeisein’s business
in Ukraine – during the financial crisis he described it as a
‘problem child’ as it has the group’s highest NPL ratio of 32.9% –
and Hungary to pick up again.
He added: “I see potential in all
our networks.”
As for the possibility of another
deal this year, Stepic was blunt.
“No. We have finished our expansion
for now,” he said. “We will grow through our existing network, not
through further acquisitions.”
That includes Turkey, a market
which has been notable for Raiffeisen limiting its presence to a
representative office.
“The Turks don’t need us, they are
very good bankers by themselves,” Stepic added.
“We would not offer any added value [with an acquisition in
Turkey]. The know-how transfer, which we have in CEE, is limited in
Turkey. Thus, we will continue to operate our representative office
in Turkey.”
See also:
Zuno to
target young, modern, urban clients in CEE
