Interview with Jiří Hrouda: Our goal is not to be the biggest, we want to be the best

October 9, 2023

The CREDITAS Group is doing well. Last year you achieved a record net profit of over five billion Czech crowns. Which of the CREDITAS Group’s areas of activity is economically key for the Group?
One of the main factors in our success is the spread of investments across several sectors. The well-known “don’t put all your eggs in the same basket” is also true in business. The CREDITAS Group is built on three pillars: financial services, energy and real estate. All of these sectors are key to us and complement each other well. This allows us to take advantage of market opportunities more effectively while being resilient to potential downturns in individual segments. In some years banks do better, in others real estate does better. That is our strength. So it cannot be said that one area is less important than another in the long run. Thanks to this, we closed 2022 with a net profit exceeding five billion crowns. Last year, the energy sector was particularly successful, earning about 2.5 billion Czech crowns, as was Banka CREDITAS, which earned a profit of over 1.6 billion crowns. The remainder of the profit is in the real estate sector and other smaller investments outside our three main segments.

Most of the talk is about financial services. Last year, Banka CREDITAS took over Expobank CZ and renamed it Max banka. Now there is talk of their merger. Why, then, the intermediate step?
From the beginning, we have been counting on Max banka becoming a part of Banka CREDITAS one day. But mergers are always a process taking several years. And the intermediate step of rebranding Expobank to Max banka has its logic. First, we wanted to get away from the original brand as quickly as possible, and then it was part of the deal with the seller. Because Expobank also operates in markets other than the Czech Republic. The quick rebranding has paid off. One year after our entry, Max Banka is in the black and its profit for the first half of this year reached almost 160 million crowns. Under the wings of the CREDITAS Group, Max banka’s balance sheet has more than tripled to 50 billion crowns and we have significantly increased the number of clients, which will soon reach 50,000.

What ambitions will Banka CREDITAS have after the expected merger? Getting into the top 10 or maybe top 5 in the Czech Republic?
Banka CREDITAS is now one of the ten largest banks in the Czech Republic, measured by the balance sheet total. Of course, we have the ambition to grow further, but our goal is not to be the biggest at any cost. We want to be the best at what we have been doing for a long time, and that is seeing our clients’  savings grow. Whether this is in the form of deposit products or through investments. We are constantly expanding our product range and preparing investment applications. We don’t just want to copy what the big banks do. We want to go our own way.

How do banks actually fight for clients in the Czech Republic? Is so-called stealing clients common?
In the Czech Republic, the competitive environment is the same as everywhere else. There are over 40 banks on the market, and they are fighting for their retail or corporate clients. Sometimes it’s a struggle in the style of: we offer a tenth of a percent more on a savings account and hope that the client will come to us. That’s not our case. Our policy has always been to offer some of the best deposit products on the market. We try ensuring that our clients do not have to chase a tenth higher interest rate on a savings account or time deposit. With us, they can be sure that their finances will appreciate steadily above standard and without unnecessary conditions.

How are the CREDITAS funds, the oldest one is the one called Real Estate I, connected to your interests and development in the real estate sector?
These two parts of the Group are not directly linked. Our development division, CREDITAS Real Estate, is a medium-sized developer focusing mainly on projects in Prague and Brno. We have about 20 projects in the pipeline, and we are going to build about 5,000 flats over the next ten years. Compared to other developers, we also have a rental housing division. However, we do not buy ready-made projects from the market, but we build and prepare projects for rental housing from the beginning. This is a huge advantage. If you know at the beginning of the project that the apartments are for rent, you can adjust the design and construction accordingly. In addition, because we build the apartments ourselves, we are able to achieve better economics for the rental project.

What about the real estate fund?
CREDITAS Real Estate Fund, on the other hand, focuses on the acquisition of logistics and industrial sites. It currently owns several such sites in various locations in the Czech Republic. The fund manages these properties, ensuring they earn value, so the clients’ funds also appreciate. By the way, real estate management is something we are constantly developing and trying to unify across the Group. The fund actively seeks new opportunities in the market. Its operation therefore does not consist in the acquisition of finished real estates from the Group. Moreover, it is doing very well. The appreciation for last year was nearly 12 percent, making it the best real estate retail fund on the market.

How does owning or operating the Grandhotel Pupp in Karlovy Vary fit into this?
We consider Grandhotel Pupp to be our exceptional asset. That’s why I’m glad it’s part of our Group. It is our oldest asset, as Pupp was founded in 1701, and one of the most famous because of the international film festival. And all the movie stars stay there. In the few years that we have owned the hotel, we have managed to renovate much of it and significantly raise its reputation in the eyes of guests. We have an excellent occupancy rate of around 80 percent and very solid performance.

Do you intend to become more involved in the hotel industry?
I don’t think we want to expand in this segment in any significant way in the future, but I can imagine strengthening our presence in Karlovy Vary. We see other opportunities there. We want the Pupp name to be associated with the best, and we do everything we can to ensure that hotel guests leave with a unique experience.

The CREDITAS Group is increasingly being mentioned in connection with the energy sector. How did you manage to become the fourth largest energy distributor in the Czech Republic?
It’s a long story. We started basically on a green field with Českomoravská energetika, and with it we made the first acquisitions of local distribution systems. These are defined areas where a licensed entity may provide energy distribution services. Through one partnership, we reached other local distribution systems and continued to grow. The growth has been both organic – by building distribution in new territories – and through acquisitions. Our energy team is very strong and has a clear vision. We have therefore gradually focused also on other areas of the energy sector, such as cogeneration units. And when we were strong enough, we started looking at energy sources. Now we have several power plants and, in addition to energy distribution, we are also engaged in the production of electricity and heat and the related interconnection of sources into so-called aggregation units. But that’s not the end of our journey. We are thinking about building new sources. We are also looking at some opportunities abroad. I am convinced that you will hear more about the CREDITAS Group in the future in the context of the energy sector.

Your Group also includes the British company InterGen, one of the largest independent power producers in the British Isles. What other acquisitions are you considering, perhaps also in the Czech Republic?
By 2030, we plan to build a 1,000 megawatt aggregation unit in the Czech Republic, which is equivalent to about half the output of the Temelín nuclear power plant. The cost of its construction is expected to exceed 20 billion Czech crowns. In 2022, we bought the biomass heating plant in Kutná Hora – one of the largest in the Czech Republic. Last year, we completed the acquisition of the gas-fired power plant in Prostějov, the capacity of which will be doubled in the coming years. We plan to build several steam power plants. The first one should be in Chomutov. If all goes well, we could have it up and running in 2027, and our ambition is to gradually switch to hydrogen in the future.

How do you select the startup projects you invest in?
Startups are not exactly our domain. Sometimes I say they’re not in the DNA of our Group. However, we have a few startup investments in our portfolio, including our startup Lifeliqe, which deals with education and retraining in virtual reality. It has already found its place in the US and Chinese markets. But from the Group’s perspective, this is a marginal part of our portfolio. But who knows? For example, I never thought we would buy a second bank. And look, we now have two banks in the portfolio, and both are seeing solid growth this year. So maybe in the future we will be so interested in a startup that we will decide to invest in it more significantly. We are now focusing on financial services, energy and real estate and intend to further strengthen in these areas. We want to continue to grow in them and allow the people who invest with the Group to grow with us.

The text was published in the weekly EURO.