Further development is being planned, says the director of Banka CREDITAS in an interview
In the near future, Banka CREDITAS plans to launch new unit trusts, a banking identity, instant payments in euros and wants to expand onto the Slovak market, as explains Vladimír Hořejší, Chairman of the Board of Directors and CEO of the bank, in an interview.
What are the central plans of Banka CREDITAS for this year?
We definitely want to concentrate on expanding the range of investments in funds. Our bank has been involved in the appreciation of clients’ savings since its entry into the market, and I think we have been able to make a name for ourselves in the market, particularly thanks to savings and term deposits. Now we will be doing the same in the area of investments. It is not only the fact that our investment company has been granted a licence that spurs us on, but also the fact that, in the current period of high inflation, it is a service our clients expect from us.
We also want to continue to actively arrange mortgages, which we started last year, and the result has exceeded our expectations. At the same time, we have started to prepare unsecured consumer loans, although we will initially proceed very cautiously when arranging them.
In corporate lending, though, I expect stagnation. I believe this will be true not only for our bank, but for the whole market as well. Banks will have to be more careful when doing business with companies. They will wait to see how the situation develops further in view of high inflation and high rates. I, personally, am quite pessimistic. I think we are entering a period of stagflation. That is, a period of low GDP growth, high inflation and high unemployment.
The outbreak of war in Ukraine can be viewed as a “black swan”, which had a significant impact on the situation. To what extent has this affected your plans and expectations? Does that have any impact on your day-to-day business?
Let me begin by saying that we feel enormous compassion towards the innocent people who have been and are being affected by the war. We were quick to abolish foreign payment fees to Ukraine so that people could send their support more easily. We have also abolished payments in rubles and ruble accounts.
Banka CREDITAS has a Czech owner and 100% Czech capital. We do not operate in Ukraine or Russia, so neither the conflict as such nor the related sanctions affect us. As far as the impact on the Czech economy is concerned, some trends and factors that had already been present will probably intensify. For example, rising energy prices, which are fuelling inflation and making it harder for firms to do business. In addition, the broken supply and demand chains in which Russia has been involved also play an important role. To some extent, the arrival of people who fled the war can be positive for the Czech economy – I assume they will find work here very quickly.
You have already mentioned your plan on expanding the range of investments in funds. You currently offer only one fund to retail clients, namely investments in real estate, while for more experienced and qualified investors you provide two funds – CREDITAS ENERGY for the energy sector and CREDITAS LOAN for loans offered to various companies, for example, in the field of real estate development. What is your next strategy in retail funds?
We plan to open at least two new funds for retail clients this year. At this point, we already know what these funds should be, but for now I can only reveal that one of them should be a mixed unit trust, i.e. a mix of bonds and exchange-traded shares. Within three years we would then like to offer retail clients a total of approximately ten funds. We would like to sell them to clients personally at any of our branches or through our digital apps, as well as through regular investing.
You said you wanted to start offering consumer loans. When do you plan to introduce them? Will you – following the example of some of your competitors – initially focus mainly on refinancing, i.e. transferring and merging loans from other banks, or will they be entirely new loans?
This year we would like to launch consumer loans in a pilot project, the definitive start is set for next year. In the first phase, we want to target CREDITAS clients who have a mortgage with us and need additional money, for instance, to furnish their apartment. Additionally, it should mean clients who have savings with us or invest through us, who need to have a certain period of time financially covered, and do not want to withdraw their fixed-term deposit before the due time. In the subsequent phase, we also want to provide consumer loans to those who are currently not our clients. Thanks to PSD2, we are able to check their creditworthiness from their current accounts at other banks – provided, of course, that they give us their consent.
Are you also considering credit cards? So far, CREDITAS only issues debit cards linked to a current account.
We decided not to offer this product. Credit cards are definitely on the decline in the Czech Republic. Banks have replaced this demand with consumer loans. The credit card market is too small to be worthwhile.
The Czech market is consolidating – banks are merging and the number of banks on the market is declining. How will it impact the competition between banks? Will it decline, as many clients fear?
Last year, three banks exited the market in this way – the retail part of ING, Wüstenrot and essentially Equa Bank. This year there could be as many as five. Logically, as a result, the competition will decline. The fewer players there are on the market, the less pressure there will be on price and other parameters. Furthermore, Sberbank has now disappeared from the market overnight.
What will this mean for the business of smaller players like CREDITAS?
Banka CREDITAS is currently not for sale. We see the ongoing consolidation of the banking market as an opportunity for us. In virtually every merger, some of the clients of the original entity, i.e. the smaller and usually more flexible and modern ones, do not want to do business with a large bank and seek an alternative. Our strength lies in the zero fee services associated with the current account and the modern application for its management – not only the one in our bank, but also the account that clients have with other banks. So it's easy to check us out and see what our digital app can do.
Are you going to come up with a special offer for the clients of the banks that are being taken over?
Doing a massive campaign for such a narrowly targeted group doesn’t really make sense for us, but we will probably do some smaller targeted activities, especially online. Additionally, we have been promoting our strengths through advertising and messaging over a long period of time, through which we could attract those clients who are “on the fence” with regard to choosing our bank as an alternative. By these strengths, I mean not only pricing parameters such as savings rates or mortgage rates, but also the technological advancement of our applications.
There is speculation on the market about the sale of some banks such as Expobank (the interview took place shortly before Expobank announced the sale agreement last Thursday – ed.), Hello Bank or mBank. Are you considering buying a competitor if the opportunity arises, or do you want to continue growing naturally?
We are receiving takeover bids, but we are not planning any acquisitions this year. Last year we bought EkoRent, a leasing and credit company that provides loans and lease financing for the private healthcare segment, and we have to devote a lot of our capacity to integrating it into our company.
How many clients does CREDITAS currently have, and how do you manage to attract new ones?
We currently have nearly 150,000 clients. Last year, the number of clients increased by 20,000. Since January, the growth in clients has been accelerating, with around 20,000 people opening a new account with us.
What proportion of this is made up of active clients – i.e. those who have not only a deposit account with your bank, but also use it for payment transactions and regularly send money to their current account?
I cannot tell you the exact number. You are right, though. For most of our clients, we started as a second bank, and for most of them it has remained that way so far. However, we are now considered not only a full-fledged bank for payment services and current account maintenance, but we are also developing the other services I mentioned. Notwithstanding this, I am convinced that the banking market is changing a lot, thanks to digitalisation, and the time when a bank’s app will be more important to clients than its brand is not far off. Therefore, we will continue to improve the functionality of our internet and mobile banking applications, and I believe that the share of our primary customers will also increase as a result.
Smaller banks have recently fallen behind the big banks with some technological innovations. What innovations has CREDITAS planned for this year?
We want to introduce a bank identity and further expand the number of banks whose accounts can be controlled from our web and mobile app. We also want to add the option to invest online. We’ve already taken the first step – we’ve launched an investment questionnaire in our digital apps so that anyone who wants to invest doesn’t have to go into a branch to do so. And once we launch consumer loans, arranging them should be possible directly through the app as well. While these are not services that competitors have, we recognise that it is very important for clients to be able to arrange them as easily and conveniently as possible. We intend to prioritise their improvement this year as well as the year after.
So when will you launch bank identity?
The plan is to launch it around the middle of the year.
Why is it that CREDITAS has fallen behind some of its competitors with this service? In other innovations – in the past they included instant payments, multibanking, Apple Pay and Google Pay mobile apps – it was among the first banks on the market. Your former Richee app was also among the most advanced on the market...
I have to admit that I consider banking identity to be the most important innovation for clients in the last three years – but the reason we were not among the first to market was simply pragmatic. For quite a long time we didn’t know what was going to happen with the company that the banks had established for this. If you remember, there were originally two associations of banks that wanted to provide the service. We decided to wait for the situation to clear up. The drafting phase, therefore, took a little longer than we would have liked. Partly because we ran into capacity constraints of the external firm we are working with on this. As a result, we missed the deadline we originally set, which was around December last year.
Do you also plan to allow customers to block the DCC service when paying by card or withdrawing from an ATM abroad? In practice, it tends to be disadvantageous for them. Or perhaps, more detailed security settings regarding the cards, as some competitors have already come up with?
No, because our clients do not currently request such a service. Of course, as part of our instructions for customers, we try to explain that when making a payment or withdrawal abroad, it is usually more convenient to use the rate that the client has received from us rather than that offered by a merchant or ATM as a DCC service. This means that we do not recommend them to choose the option that is shown to them during the transaction directly in crowns, but to choose the one that is in the foreign currency.
Are you planning to join the European SEPA ICT instant payment system and thus enable clients to send instant payments not only in crowns but also in euros?
We are already actively pursuing this topic. We expect to provide instant euro payments within the SEPA area through the National Bank of Slovakia, and we are already working on this. If we are successful and everything will go according to our plan, we could launch instant payments in euros later this year.
Fio banka, which has a branch in Slovakia though, is planning a similar solution. Does this mean that CREDITAS is also preparing to open a branch in Slovakia?
Expanding our business into the Central European market is something we would really like to pursue. First we would like to expand to Slovakia, then to Poland. This project is not in this year’s financial plan, but we would like to prepare it during this year and open a CREDITAS branch in Slovakia next year.
Most of the new banks entering the market in the last decade relied on online service with a minimum of branches. CREDITAS has relied heavily on physical branch offices in addition to developing electronic services. What is your next strategy regarding branches, since the trend in recent years has been more to reduce them?
Last year, we opened three new branches and closed one, so we currently have a total of 37. Regarding our branch strategy, I would say we are on the more conservative side. This means that we are not planning to expand our branch network at the moment.
While our figures this year show that more than 60 per cent of new clients opened an account with CREDITAS via online or mobile banking, we also see that branches are important for a large number of clients – even those who are digitally inclined; typically, when it comes to finding out information related to mortgages or investments. The feeling of being able to come to a branch for advice is very important to them. On the other hand, we don’t plan to grow our branch network substantially either.
A number of banks have replaced human cashiers with deposit-taking ATMs to save money, or have eliminated or reduced currency exchange. What do you plan next regarding these services in your branches?
We provide cashier services at all our branches, and we do not plan any changes in this respect for the time being. We have fewer branches overall compared to our large competitors who limit these services, so there is no reason for this.
As for the exchange offices, we have completely abolished them as of 31 January. There has been little interest in the exchange service, and the costs associated with it are high for the bank. We continue to provide the service only for clients who have a current account in crowns with us and want to buy foreign currency from it, but this does not count as currency exchange.
Five years ago, when CREDITAS entered the banking market, you talked about your goal being to build a niche bank – that is, a bank that wants to differentiate itself from the mainstream and fill in the gaps that are present there. Is this still true?
We are trying to. However, I must admit it’s getting harder. Of course, banks are trying to differentiate themselves, but bank regulation is getting greater and greater, so the space is very narrow. Typically, when you offer mortgages, the only way you can differentiate yourself now is virtually in the negotiation process itself, i.e. your speed. In other parameters, mortgages are so restricted that the banks’ offers are basically the same.
Do you wish to remain mainly a retail bank, as it has been until now?
We are still predominantly a retail bank, although we have always lent to Czech entrepreneurs and companies as well. That remains unchanged. What we are expanding is the focus of corporate lending. Until now we have concentrated on lending to relatively large companies, whereas now we are also reaching out to small and medium-sized companies. EkoRent’s focus on medical practitioners also plays a role in this.
Where do you see Banka CREDITAS in five years in terms of number of clients, number of assets and market position?
In the past five years, our number of clients as well as total balance sum has increased more than seven times. I think the growth will be more gradual now, but I imagine we could double today’s numbers – over 100 billion in total balance sum and a quarter of a million clients. It’s also worth adding that up to now we have focused mainly on growth and development, but now we will also go down the path of greater efficiency because we already have a core client base to work with.
A lot of things may change over the course of five years, which would of course change our behaviour as well, but if the situation is similar to what we experience now, we wish to be a bank where retail customers have all the most frequently used services free of charge and where they can control their finances conveniently and clearly, including products they want to have elsewhere. We want to strengthen our position of a bank that manages clients’ money effectively. And last but not least, a bank that can lend, especially to companies, very flexibly and on an individual basis.