Expobank CZ: a banker has to be available 24/7
Banks.eu opens a series of talks with top managers of European banks to unveil all the details in work of credit institutions in Europe and their future plans.
The series of interviews is opened by a "young" Czech bank Expobank CZ, formerly named LBBW Bank CZ that worked in the Czech Republic since 1991. In September 2014 a Russian businessman Igor Kim became the majority shareholder of LBBW Bank CZ. Kim also owns banks in Latvia and Russia. Last December the bank officially changed its name into Expobank CZ, and Maris Avotins, former head of Expobank AS in Latvia, became its Chairman of the Board.
Banks.eu spoke with Renārs Karašs, a member of the bank’s board, who told how Expobank CZ spent its first year in the country, how the Czech banking market is different from that of Latvia, as well as what future he sees for the bank in the Czech Republic.
- What attracted you to Expobank?
- Banks operating under the name of Expobank in different countries have a different business model. The majority shareholder is the same in all of them, but each bank operates as an independent structure. That is, there are no dogmas here, no ready pre-written strategies. Each bank has to find its own approach, client segments, and niches, to become successful in a particular market. This is what attracted me: the possibility to build, to seek a long-term sustainable business model.
We communicate closely with our colleagues from other banks, exchange experiences, share some clients, but as for the strategy and the result, the board of each bank bears this responsibility. It's fun and responsible at the same time. Each market has its own traditions, features and possibilities, which is interesting.
- And how long have you been in the Czech Republic?
- The Bank belongs to the new shareholders since September 1 last, before that we spent here about six months: it was necessary to complete the deal with the previous shareholder, to study the market, the history and the possibilities of the bank, its weak and strong points, to meet the future colleagues.
- Why is Expobank CZ different from other banks in the Czech market?
- On the one hand, all the banks have something in common: they have accounts, cards, transfers, deposits, loans, etc. On the other hand, as we know, no banks are identical. Each of them is still trying to find its own approach.
We have different approaches to client servicing and product offers. Unlike large banks, we have no plans to develop our market share or the number of clients, this is not our main KPI (note: Key Performance Indicators - indicators of the company activity, which help it in achieving its strategic and tactical objectives).
Our main task is to find our niche and segment, where we would be interesting to the clients and where it would be interesting for us to work with them. When such a segment, a niche, is found, we want to be the best there, to offer some "uniqueness" as a component of our product, service or approach to solve a client’s issues. Custom solutions and approaches: this is how we are different.
- And what is the difference between the banking market of the Czech Republic and that of Latvia? Is it true that it is less competitive?
- In any country, there are two to four banks, which together occupy a dominant market share, and there are specialized banks. The same situation exists in the Czech Republic. Summing up, the competition in the Czech Republic is very cruel. For example, see how rates fall in recent years. The rates would not fall if not for the competition. Many banks have begun to reduce commission payments for account maintenance, transfers, cards, they offer more different packages of products, all these because of the competition. However, sometimes too competitive environment is also undesirable and may, in the short term, lead to not viable distortions, but that's another topic to discuss.
As for differences from Latvia or the Baltic States, there are very advanced digital services there. I'm not even talking about cards, because the Czech Republic is the leader in Europe in the use of contactless cards. But if we talk about Internet banking, the Baltic countries are a step ahead of the Czech Republic.
For example, electronic payments make up 99.9% of the total number of transactions in Swedbank Latvia. That is, nobody makes payments in the branches. Thus, is different the proportion of cash payments: less and less people use cash in the Baltic States. Clients come to a branch for some intellectual products: investments or a credit. In different Czech Republic banks I saw special boxes where you can leave your payment in a hard copy.
Ergonomics or ease in use also significantly differs in online banking and services accessible through this channel. For example, in Estonia, you can even fill in and file a tax return via an Internet bank.
Credit products differ too, both in a way of selling and the very "design" of the product. Experts estimate that more than 65% of sales of credit products in the Czech Republic are made with the help of brokers and financial advisors. This is an entire industry, which employs a significant number of people.
The Baltic States demonstrate almost 100% of direct relationship between the bank and the client. In the Baltic countries, you will not find the conventional Czech practice of mortgages refixation in the pre-agreed period. In the Baltic States, if the loan is issued for 20 years, then it is issued for 20 years. If changes are needed in the agreement, the bank and the customer renegotiate the contract.
Here, in the Czech Republic, integrated packages of banking products are very common. This is the specificity of this market. In Latvia I have not seen it. Yes, there were packages of products, but they are not so common and not so complicated.
In Estonia, for example, banks are allowed to create product packages, but if the customer wants, then he can get every single product of the package for the same price, which is indicated in the package. That is, the product packages do not make sense. In Latvia, there are no such rules, but the packages are still not so common.
I do not quite understand how an ordinary person who is not an expert in finance, can choose in the Czech Republic that will be profitable exactly for him. As a rule, there are so many reservations for different packages of products that, in the end, it is not clear what you get and what you pay for. It is neither good nor bad, it is just how the market developed.
Coming from any other market it is wrong to say that everything is better there. We need to understand what people, customers, employees think, how the market developed and why, and only then, using a different experience, it is possible to combine all this in creating new products and services.
- And how did you adapt to under? Did you come up with your packages?
- Yes. We now have, for example, new products for small and medium business; they are Expo Silver and Expo Gold. For individuals we have a new offer too. Knowing that the market is accustomed to packages, why shouldn’t we create them?
But we try to make even this package transparent, to free it from hundreds of conditions, and to creat a clear package understandable to our client. Of course, we look at what competitors offer, ask the people who work here for many years. And before launching a new product we communicate with clients to learn, if the package would be it interesting for them. If everything matches, we launch the package.
- What is the strategy for the development of Expobank in the Czech Republic? Who does it aim?
- We have three large segments, which we are interested in. The first is made by the affluent clients, "VIP" segment and the corporate segment. We try to find something different for clients in each segment to make our cooperation profitable and interesting.
In the segment of affluent clients we go in the direction where one manager serves both the client and his company, if he has one. We have good deposit product, investment products, a "package" for both the company and the owner.
If we talk about the local customers who are interested only in a standard mortgage, other banks will definitely be exactly more profitable for him. If the customer’s income is higher than average, he is interested in investment products and he is also the owner of the company, then it will be very interesting and profitable for him to work with us.
Or another example. A customer, working in Russia, wants to buy a house in the Czech Republic, and we also become interesting for him. We have a partner bank in Russia, through which we can verify the income of the customer in Russia and give him a credit here. This is called specialization.
The same is seen in the segment of "VIPs". Many banks are different from us because of investment products, as we do not offer them. We have many professional partners, and we can offer a customer what is most interesting in his situation. Many banks promote only their products.
In the corporate segment we are interested in clients with the need for non-standard solutions, cross-border transactions, international business, including those connected with Russia and the CIS. As an example, if a customer needs in the Czech Republic a loan, which is related to his work in Russia, for example, the security of assets in Russia, then we can offer him unique creative solutions that are unlikely to be offered by other banks.
As for overall performances, our strategy is to maintain the inherent performances, set by the regulator, significantly higher than the norm is (liquidity, capital adequacy). The share of overdue loans, now and in the future will be very low, significantly lower than in the market. In other words, the high security of business is a part of our business model.
- Are you aimed at attracting particularly Russian clients?
- Our goal is to find a specific niche situations and services. Russian-speaking clients come to us because our staff is Russian-speaking, we have documentation in Russian, we work with a partner bank in Russia, and we are able to offer non-standard products, quick decisions in cross-border or complex transactions, personal approach, etc. This is a natural process. At the same time a certain number of customers who speak a particular language it is not our main goal. The main objective is to create mutually profitable relationship, cooperation between the client and the bank.
We are currently servicing about a thousand of Russian-speaking customers, both private individuals and company owners. But at the moment most of our customers are still Czech, as the bank has been working here since 1991, we did not start a year ago, we have an already existing database. Among our customers there are those who speak Russian, English, German, Spanish, Slovak, etc. For example, in the Department of Private Banking our managers speak six or seven languages. In our Supervisory Board there are citizens of Germany, Russia, the United States and Finland. We are an the international bank.
We do not publicly disclose the figures for the number of our clients, but the exact number of active clients, including, of course, Russians, has increased this year.
- What is the difference in working with the Russian-speaking clients and working with people of other nationalities?
- Russian-speaking customers are much more demanding. Especially if we are talking about the "VIPs" and those clients for whom the Czech Republic is not a permanent residence. And not in the sense of profitable rates. Rates are also important, but it is not the most important for them. The rates in Russia vary from 10 to 20%, and here they make 1-3%, so it is not so topical for them. But the Russian-speaking customers are very exigent to attitudes, to the speed of decision-making, to the individual and clear communication. They want to be helped not only in banking affairs. For them a banker must be available 24/7, as it goes.
Just recently I had a situation where our customer rented a car that later broke down. He comes here for two weeks in a year and does not know how to act in such situations. What can he do? He calls his manager and asks for help. Such situations require an unconventionally thinking manager, who must want to help a client in any situation. And this is the most important thing.
Our managers must understand more than a "standard" operator in a large bank. And not just because we have different customers, but also because we service both individuals and their companies with the help of a personal manager. This means that the banker should be more open and able to learn new things all the time, and what is most important, to truly want it.
- What are the difficulties that Expobank CZ faced in the Czech Republic? How did it overcome them?
- Probably the most difficult thing for me as I was born and raised in another country, is to understand how people here think, how they deal with specific situations, the market practice. For me it was important to gain the trust of older employees. They probably thought I was going to come and teach them to work, that I will tell them do so and so. But that is exactly what I did not do. When we started to work here, no one taught anyone, on the opposite, we listened to each other for a long time to understand how people work here, how they think, what their strong and weak points are. Only after understanding these issues, you can start working, adding your expertise to the local experience.
- Whom is your advertising in the Czech Republic aimed, if any?
We have very little advertising. There is targeted advertising on the Internet. Sometimes we do targeted advertising for a particular customer segment. For example, at the beginning of the year, we developed an interesting offer for lawyers to serve escrow accounts (a trust or a trust account). I mean, that is a very narrow targeted offer. To inform them about this offer we gave them a call, sent information about us, came with presentations. The number of customers in this segment is growing to this day. We almost never do advertising in the media, though.
- How did the Czech Expobank CZ feel the introduction of financial sanctions against Russia?
- In no way at all. We are a Czech bank, not a Russian one. Our majority shareholder is a private person. Yes, he owns banks in Russia and Latvia, he may soon come to other states, but as I said at the beginning of the interview, these banks operate as separate businesses. Of course, his colleagues in Russia are living in an exciting time now, there are a lot of changes, new challenges and opportunities, but it does not affect us.
- And has the financial crisis in Russia had any influence on Expobank CZ work?
- Not at all. We've been engaged in direct communication with clients, telling who we are, what our philosophy is, how we work and what our financial situation is. I guess it worked. All the major parameters of our bank are significantly better in the Czech market than the regulatory requirements are. We are going to maintain them in the future. Expobank is not going to leave either the Czech Republic or Latvia, it’s quite the contrary. Our shareholders have the desire to enter the markets in other countries. Now we are actively seeking acquisition targets.
- And is there a great demand for digital services among your customers? Do you offer them anything new in this area?
- This year we have introduced a contactless card and we were already late with this innovation because such cards have long been present on the Czech market. Currently we are working on a new Internet bank. We will introduce completely new understandable and easy to use Internet banking, including that in Russian. We will most likely cooperate with a company from the Baltic States, because of the experience it has in these countries, which I mentioned at the beginning of the interview. Along with the new Internet Bank we will introduce a mobile application.
- Recently, the EU authorities have become more serious about introducing of a new bank tax, that on financial operations. How can such a tax affect the European banking market in general and, in particular, the Czech market?
- Any new tax brings costs of course. And no one is happy about it. I can not now comment on the tax on financial operations, because it’s already being discussed for a lot of years, but there is still no consensus in this matter.
- Now the Czech Republic is actively discussing the increase in fees for the use of ATMs, as large banks intend to implement their competitive advantage in these services. What will Expobank CZ do, if the fees will be increased, as the bank does not have its own ATMs?
- It is a difficult question. In Scandinavia, banks, and not only, are working to reduce the cash turnover in general. Many bank branches do not work with cash. For banks, cash is one of the most expensive products.
I once counted how much an average bank loses on servicing cash transactions. After all, cash should be several times counted, packed, transported to the Central Bank, etc. For example, if customers brought the bank 500 coins of, for example, 1 euro, the bank in transfers has only 491 coins in equivalent. Money, of course, is never lost; the difference is made by the bank costs in working with cash. And that's even without counting the losses from counterfeiting.
In each bank or state numbers may vary, but the principle is, I think, clear. A part of the bank expenses, of course, is trying to pass on to the customer in the form of fees. But I do not think that the banks are happy about it. It is just that cash is "expensive".
It turns out that the reduction of cash turnover is interesting for almost all the participants of this process. Therefore, the share of non-cash payments in the Czech Republic will definitely grow, and cash turnover will decrease. Cash is still needed: not all shops accept cards. But the fewer they are, the less will be the bank costs and the less they will shift them on customers.
According to the specific situation in the Czech Republic, I mean ATM transactions for us – it is not a business. It is more a service that just has to exist. We try balance the costs of these operations in the way to get a zero result for the bank.
If banks ATM operators will raise prices dramatically, we will think then. We will either compensate a part of the price ourselves, if prices rise too much, as customers are human beings, too. Or we will revise the pricing, renegotiate contracts with partner banks.
- In the post-crisis time, the authorities of both the EU and other countries have become much more active in regulating the banking sector. Give us your personal forecast: what should we expect in the near future?
- The regulation of the banks will be more and more rigid. It will be harder and harder for banks to earn, and even to survive for some of them. Perhaps some services will become more expensive for clients. But the financial markets, as well as life and economy, are cyclical. Now regulatory pressures are increasing, but some time later they will weaken again.
In the next 3-5 years it will not be easier for banks to work, the rules of the game will be tightened. This will lead to consolidation and specialization of banks. Actually, we can already see it in the Czech market: some banks have announced mergers and purchase transactions. Partially this is the result of pressure from regulators.
- Do you feel any competition from financial technological start-ups?
- Now we do not feel any. But in general, the banking sector is really afraid of all these innovations, because maintenance of payments, transfers, and so on is a big part of banking activity. And now there are companies that say: why should a bank do it, let us do it. Of course, banks are afraid of it.
On the other hand, many banks also do not wait and try to ensure that transfers and other daily banking services to be held in an electronic form and as comfortably as possible. Banks also invest those products that financial technological start-ups just will not organize, such as leasing, investment services, loans, complex transactions.
Credit can also be granted through the Internet, but then it must be completely standardized. If a person requires any deviations from the standard, as many clients do it, and wants to precisely understand the nuances of all the decisions, then there is a need in another person with whom to discuss it. Intellectual products with many possible variations that are effective and understandable to a client, will not be sold through the Internet for many years to come. Standard, compact services, yes, probably, Google and Apple will provide them even better than banks.
- Would you invest any startup?
- Why not? For me it would be very important to talk with the owner, to understand how he thinks and why he believes that he will succeed and be the best, what client he is focused on, and why a client will pay him. If our visions matched, then I’d probably invest.
- What is the future Expobank CZ sees for itself in the Czech Republic?
- A good one. We have no ambition to win a market share, we strive to become profitable through our specialization. The first year in the Czech Republic was good, the prospects are good too. We just have to work!
Anna Afonina held the conversation specially for Banks.eu
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