Volksbank sets its sights on renewed growth
What are the main strategy changes that Volksbank Romania has had to employ in order to cope with the effects of the economic recession?
The global financial meltdown brought on new set of challenges to the whole banking sector. The crisis has created a better understanding of the need to support clients in difficult times and this has been mirrored in the restructuring of loans. It is better to have a client whom you help overcome a difficult period, than to have a client who is very seriously hit by the crisis.
What are the main market segments that Volksbank Romania plans to focus on in its development in 2011?
We will focus on existing clients, who can use also other financial products. We have to strengthen our relationship with our customers by offering quality products and services.
What is your view on the level of competition in the Romanian banking segment and what services and products could give Volksbank Romania an edge against the competition?
The Romanian banking system has demonstrated a sustained development over the last years. It is prepared to continue its expansion, proving to be a reliable partner to the real economy both in terms of the proposed financial solutions and the perception of risks incurred by various economic activities during this entire period. Market maturation, together with the specific requirements of retail and corporate customers, has entailed a high degree of sophistication for banking products and services. So, no doubt about it, the Romanian market is a competitive one. What we want to achieve through the new business strategy is to offer our customers a solid partnership, to reward their loyalty through various fidelity programs. For new and existing clients we want to offer easy-to-understand products at a fair price.
How many branches and subsidiaries do you have in Romania and what are your expansion plans for 2011?
Right now we have 155 branches. For 2011 we do not plan an expansion in our branch network but an optimization of our actual network in terms of a new visual identity.
What is the level of loans that your bank expects to grant by the end of the year? Which lending products will be in high demand this year? What was the total volume of loans in 2010?
Mortgage financing and consolidation of loans will be in focus. We expect a 2011 year-end figure slightly above our 2010 level of 3.109 billion Euro.
What was the value of the bank’s assets at the end of 2010 and how will this indicator progress in 2011?
Assets totaled 4.8 billion Euro and for the current year we expect no dramatic changes.
What was the return on equity last year and what are your expectations in this respect for 2011?
As previously announced, Volksbank recorded losses of 36 million Euro in 2010, following the creation of provisions amounting to 155 million Euro. This year we expect to cut provisions by half and to return to profit.
How has the corporate lending segment developed over the last few years and what measures have you implemented in order to encourage growth in this segment?
When the economic crisis hit, the corporate portfolio had an unbalanced exposure towards real estate projects. The first measure was to stop lending in that sector and focus on others in order to achieve a better structural balance. During the last two years, we have continued to prudently lend to SMEs and corporate clients, which have become our main focus, as it is traditional for Volksbank. At the same time, we have taken internal measures to set early warning signals and restructuring methods and procedures in order to limit loan loss provisions.
Also we have noticed that during the years of aggressive growth the bank did not put enough effort into developing the services and operational part that have to accompany relationships with corporate clients. We have refocused our sales force and product development department in order to give the correct importance to transactional business.
Nowadays, following disinvestment and a tight monitoring period during the crisis, the bank is facing a new challenge. Rebuilding the bank’s portfolio and increasing the number of active clients have become our main concern. So we are now prepared to increase the market share in overall, corporate banking business and bring the weight of corporate in the bank’s total lending portfolio to 30-35 per cent in the years to come, from 20 per cent in 2009.
What is the volume of investments earmarked for this year and what are these funds going to be invested in?
The main investment target will surely be our new HQ, but we should not forget our long-term investment in training, IT and product quality.
What is your view regarding the evolution of the Romanian banking system in the current economic backdrop?
Well, I think the entire market has reshaped its priorities and values. I think the crisis has changed leaders’ way of thinking as well as the perception of our clients.
What are the main difficulties that your bank is facing in this market?
I would not call them difficulties, but challenges and our main challenge is to drive this bank from a focused ‘households mortgages’ business model to an universal bank model. That will involve actively offering all our other services such as deposits, cards, transactions, so we can become a ‘Home Bank’ for our clients.
What are your expectations regarding Romania’s economic prospects?
If investments in infrastructure begin to take shape eventually, I am pretty optimistic that the country will gain very fast a solid basis for a long term path of growth.
What was the volume of non-performing loans in 2010 and what is the expected level in 2011?
Non-performing loans increased at the end of 2010 to nearly 14 per cent of our portfolio, which is slightly above the market average. Due to successful restructuring and the launch of forced execution procedures, we expect only a moderate increase for the year-end.
What segment was the main source of non-performing loans? Do you think the hike in the volume of non-performing loans was the result of excessively liberal lending policies?
As retail orientated bank, the bulk of our non-performing loans came from that segment. Over the years, Volksbank has been a very active player and we have grown significantly faster than many of our competitors especially in the mortgage sector. This was not the result of too liberal lending policies, but rather of our favorable pricing combined with fast decision making. After the economic downturn, a lot of our clients suffered from decreased incomes, which eventually led to delays in repayments.
What was your biggest professional success before you took over the current position?
From 1996 until 2010 I was in charge of Volksbank’s subsidiary in the Czech Republic. During my stint there, together with a strong team I built a very successful bank, which regularly outperformed the market in terms of client satisfaction and profitability.
What is your main professional target at this stage?
My main target is to bring Volksbank Romania back on track, which means making it a profitable bank, where clients feel understood and their problems are turned into solutions. Our goal is a long term relationship in creating a win-win situation.
Media reports claim that Sberbank of Russia has allegedly expressed interest in taking over a majority stake in Volksbank International. In what way would such a transaction affect the operations of Volksbank Romania?
As it was announced at the end of the last year, Volksbank AG has publicly expressed its intention to explore sales opportunities for Volksbank International, which also includes Volksbank Romania.
For us it’s business as usual. Our primary target is to keep the bank efficient and sound, and serve our clients in their daily operations. Of course, the more solid the bank becomes, the more attractive we might be to a potential buyer.
The global financial meltdown brought on new set of challenges to the whole banking sector. The crisis has created a better understanding of the need to support clients in difficult times and this has been mirrored in the restructuring of loans. It is better to have a client whom you help overcome a difficult period, than to have a client who is very seriously hit by the crisis.
What are the main market segments that Volksbank Romania plans to focus on in its development in 2011?
We will focus on existing clients, who can use also other financial products. We have to strengthen our relationship with our customers by offering quality products and services.
What is your view on the level of competition in the Romanian banking segment and what services and products could give Volksbank Romania an edge against the competition?
The Romanian banking system has demonstrated a sustained development over the last years. It is prepared to continue its expansion, proving to be a reliable partner to the real economy both in terms of the proposed financial solutions and the perception of risks incurred by various economic activities during this entire period. Market maturation, together with the specific requirements of retail and corporate customers, has entailed a high degree of sophistication for banking products and services. So, no doubt about it, the Romanian market is a competitive one. What we want to achieve through the new business strategy is to offer our customers a solid partnership, to reward their loyalty through various fidelity programs. For new and existing clients we want to offer easy-to-understand products at a fair price.
How many branches and subsidiaries do you have in Romania and what are your expansion plans for 2011?
Right now we have 155 branches. For 2011 we do not plan an expansion in our branch network but an optimization of our actual network in terms of a new visual identity.
What is the level of loans that your bank expects to grant by the end of the year? Which lending products will be in high demand this year? What was the total volume of loans in 2010?
Mortgage financing and consolidation of loans will be in focus. We expect a 2011 year-end figure slightly above our 2010 level of 3.109 billion Euro.
What was the value of the bank’s assets at the end of 2010 and how will this indicator progress in 2011?
Assets totaled 4.8 billion Euro and for the current year we expect no dramatic changes.
What was the return on equity last year and what are your expectations in this respect for 2011?
As previously announced, Volksbank recorded losses of 36 million Euro in 2010, following the creation of provisions amounting to 155 million Euro. This year we expect to cut provisions by half and to return to profit.
How has the corporate lending segment developed over the last few years and what measures have you implemented in order to encourage growth in this segment?
When the economic crisis hit, the corporate portfolio had an unbalanced exposure towards real estate projects. The first measure was to stop lending in that sector and focus on others in order to achieve a better structural balance. During the last two years, we have continued to prudently lend to SMEs and corporate clients, which have become our main focus, as it is traditional for Volksbank. At the same time, we have taken internal measures to set early warning signals and restructuring methods and procedures in order to limit loan loss provisions.
Also we have noticed that during the years of aggressive growth the bank did not put enough effort into developing the services and operational part that have to accompany relationships with corporate clients. We have refocused our sales force and product development department in order to give the correct importance to transactional business.
Nowadays, following disinvestment and a tight monitoring period during the crisis, the bank is facing a new challenge. Rebuilding the bank’s portfolio and increasing the number of active clients have become our main concern. So we are now prepared to increase the market share in overall, corporate banking business and bring the weight of corporate in the bank’s total lending portfolio to 30-35 per cent in the years to come, from 20 per cent in 2009.
What is the volume of investments earmarked for this year and what are these funds going to be invested in?
The main investment target will surely be our new HQ, but we should not forget our long-term investment in training, IT and product quality.
What is your view regarding the evolution of the Romanian banking system in the current economic backdrop?
Well, I think the entire market has reshaped its priorities and values. I think the crisis has changed leaders’ way of thinking as well as the perception of our clients.
What are the main difficulties that your bank is facing in this market?
I would not call them difficulties, but challenges and our main challenge is to drive this bank from a focused ‘households mortgages’ business model to an universal bank model. That will involve actively offering all our other services such as deposits, cards, transactions, so we can become a ‘Home Bank’ for our clients.
What are your expectations regarding Romania’s economic prospects?
If investments in infrastructure begin to take shape eventually, I am pretty optimistic that the country will gain very fast a solid basis for a long term path of growth.
What was the volume of non-performing loans in 2010 and what is the expected level in 2011?
Non-performing loans increased at the end of 2010 to nearly 14 per cent of our portfolio, which is slightly above the market average. Due to successful restructuring and the launch of forced execution procedures, we expect only a moderate increase for the year-end.
What segment was the main source of non-performing loans? Do you think the hike in the volume of non-performing loans was the result of excessively liberal lending policies?
As retail orientated bank, the bulk of our non-performing loans came from that segment. Over the years, Volksbank has been a very active player and we have grown significantly faster than many of our competitors especially in the mortgage sector. This was not the result of too liberal lending policies, but rather of our favorable pricing combined with fast decision making. After the economic downturn, a lot of our clients suffered from decreased incomes, which eventually led to delays in repayments.
What was your biggest professional success before you took over the current position?
From 1996 until 2010 I was in charge of Volksbank’s subsidiary in the Czech Republic. During my stint there, together with a strong team I built a very successful bank, which regularly outperformed the market in terms of client satisfaction and profitability.
What is your main professional target at this stage?
My main target is to bring Volksbank Romania back on track, which means making it a profitable bank, where clients feel understood and their problems are turned into solutions. Our goal is a long term relationship in creating a win-win situation.
Media reports claim that Sberbank of Russia has allegedly expressed interest in taking over a majority stake in Volksbank International. In what way would such a transaction affect the operations of Volksbank Romania?
As it was announced at the end of the last year, Volksbank AG has publicly expressed its intention to explore sales opportunities for Volksbank International, which also includes Volksbank Romania.
For us it’s business as usual. Our primary target is to keep the bank efficient and sound, and serve our clients in their daily operations. Of course, the more solid the bank becomes, the more attractive we might be to a potential buyer.
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