It was just a good offer, says Jiří Hrouda in an interview

February 12, 2024

CEO of CREDITAS Group, Jiří Hrouda, in a long-form interview for Hospodářské noviny. He discussed the activities and plans of Banka CREDITAS, Max banka, CREDITAS Real Estate and UCED Group. As the most successful acquisition in the history of CREDITAS, he described the one-year ownership of the British InterGen steam power plants. After their sale, the group plans to invest billions in the energy sector in the Central European region.

You personally are on the InterGen board, you have flown to the UK a lot and have been involved in the business there. How do you evaluate the one-year project?
For us, it was a window into the future of the energy sector. In Britain they are five, ten years ahead of us and continental Europe. It was also a good school for our energy projects in the Czech Republic. And it has also probably been the most successful acquisition in the history of the CREDITAS Group.

How much did you earn on it?
Considering that we are talking about an annual return, this is a really impressive result. We bought a potentially lucrative asset at its peak for a good price. In fact, we immediately benefited from the extraordinary results for 2022 and 2023. We have recovered a large portion of the purchase price in dividends alone in the hundreds of millions of pounds. We will not comment on the price of the transaction itself.

Only the steam power plants are subject to the sale. Are you keeping your upcoming battery storage projects?
We are keeping the battery storage for now, although we do have interested buyers. It’s a complex business that is influenced by a number of factors. It is actually a combination of the development and energy sectors. You deal with land, its connection to the electrical grid, zoning. In any case, we continue to work on the projects. They are in various stages of development. These are the largest projects of their kind in Britain, with the largest having a capacity of 400 megawatts.

Have you ever been tempted to stay in the UK and establish a strong long-term position there?
Sure we have. At the beginning, there were different scenarios on the table. But honestly, InterGen in the UK is a great platform, unique and long established for someone who wants to invest large sums of money in the market there. In billions of euros, for example. It was a very successful investment for us, but now we want to focus on Central Europe.

Do you mean on the energy sector here?
Yes, it is gradually becoming the dominant part of the CREDITAS group. And the successful exit from the UK will help us in our upcoming major investments in local projects. This includes, among others, the construction of a brand new 220 megawatt steam power plant in northern Bohemia. Here, the total investment will be around €400 million. This fits right in with our long-term strategy.

What is it then?
Our goal is to build a 1,000 megawatt aggregation unit. Today we have something like 200 megawatts. We want to integrate the power sources, our distribution network and other parts so that the unit is able to operate according to the current demand. That is, to incorporate renewables, to respond to weather and demand. The share of renewable energy sources is growing and this topic is gaining in importance. And thanks to our energy company UCED, we are ideally placed to take advantage of this trend.

So you will build or buy more power plants?
We already have a gas-fired power plant in Prostějov, where we have invested in a new turbine and doubled its output to 108 megawatts. We are looking at building more sources. However, the greatest strength is to integrate it all together and manage it as a single entity. So the goal is to have up to 1,000 megawatts by 2030, which amounts to an investment of over CZK 20 billion.

Isn’t that a too big a bet on gas?
These plants are being built as ”hydrogen ready”, so all that matters is the amount of hydrogen available in the gas pipeline. In terms of the energy mix, there is not much of a solution yet. Either we’re going to have a huge amount of batteries or we’re going to rely on these fast sources. So far, no one has come up with an alternative. Moreover, these investments have a pretty quick return, so I’m not worried about any major reversal. Look at the coal that has been written off and what profits it still brings to the miners.

 2022 was a record year for CREDITAS in terms of results. The group achieved a net profit of CZK 5 billion. Any idea if last year was similarly good?
Preliminary figures show that we should be at a similar level of profit of around CZK 5 billion in 2023. The group again performed well in all sectors, that is in both banks, the energy sector and the real estate division.

 Has the profit structure changed in any way? What area has been the most profitable?
The distribution of profits is similar. In 2022, Banka CREDITAS had a net profit of 1.6 billion, for last year we expect to be roughly similar. The banking sector continued to perform well, no surprise there. The second driver was the energy sector. All of the transactions we made at the end of 2022 and at the beginning of 2023 showed up in the results with promising numbers. Similarly, real estate has developed, where we are talking about some hundreds of millions of profit.

 Max banka, formerly Expobank CZ, quickly returned to profit after your takeover. What led to this?
Banking is a volume game. When we acquired Max banka, it was a really small bank with a balance sheet of around CZK 20 billion. It's hard to be profitable at that volume because every bank has relatively high fixed costs that dissolve into either a small balance sheet or a large one. So the basic idea was to make the bank bigger, to take on new clients, to accept deposits. And we were successful. Today we have a balance sheet of around 60 billion and the number of clients has grown from 12,000 to 60,000. High interest rates in the economy significantly helped banks last year. We need to continue to grow in order to maintain our profits.

 You offer one of the highest interest rates for savings accounts. Is this sustainable with the prospect of falling rates this year?
It will always be a fundamental pillar of our banking strategy. We always strive to be in the top 3 best-performing deposit accounts on the market. And that won’t change even if rates go down in the economy. We are currently trying to offer this group of clients a new range of alternatives to savings accounts, namely investments. A great deal of our attention and funding is now going into this area.

 What will the rate cuts and last year’s abolition of the interest rate on mandatory reserves at the CNB do to the banking business?
I see it as a cost associated with the business of banking. And it’s not just about the abolished interest rate at the CNB. It may also be the discussed additional taxation of some banks, the resolution fund and additional capital requirements. We are certainly not happy about it, but we have to be able to adapt to it. Again, the bigger you are as a bank, the better you are at doing business in an industry where there are a number of fixed costs and regulations.

You declared that Max banka will eventually merge with Banka CREDITAS. What will happen to the Max banka brand then, will it survive?
Yes, the merger will definitely happen one day. The merger is in the works. But we are still banking on the Max brand. We already have accounts called Max, we also have some funds and other products in the pipeline, so we would keep that as a secondary brand. We like it, it’s more youthful, chic, suitable for online activities. And now we are coming up with a new investment application Max Invest, where we enter the field of publicly traded investment products, specifically ETFs, which we offer to clients in the most simple and clear form. Our clients thus already have a complete range of investment instruments from Creditas Group.

In addition to Max Banka, you also announced the takeover of Ney credit union. Do you have any other goals to expand the banking group?
I would definitely like to buy something, but there are not many promising targets in the Czech Republic anymore. There are not many banks left to buy. We certainly have our eyes open, but nothing is in the works at the moment.

 What’s the status of the Ney takeover anyway, the process is still not finalised?
Its not, its a fairly complex process subject to regulatory approval.

 And what about the acquisition of a bank abroad, doesn’t that appeal to you? After all, you worked for years at Citibank in London.
Yes, we are looking at the possibility of expanding abroad. The aim is to have some source of deposits in euros. It would be a lucrative addition to our portfolio. We looked at Slovakia, Germany and Austria. Germany is the most promising so far, but we are really in the early stages.

 Another important segment of the group is real estate. Unlike the banks and the energy sector, they have not had the best of times. How did it make itself felt?
Indeed, the situation of relatively high interest rates, which have helped banks so much, has had the opposite effect on real estate. These are mainly expensive mortgages, which many households simply cannot afford, so demand for property purchases is falling. And thus prices are stagnating. The period hasn't been particularly favourable, and sales haven't really gone as well as we expected. On the other hand, you also have rental apartments, which are very lucrative in this situation. We now have over 200 apartments under management, and the occupancy rate is enormous. Our group is diversified, which has the effect that if one part of us is doing extra well, it doesn’t matter so much if another part is not. It just confirms to us that our diversification  stands on solid ground.


A shortened version of the interview was published in Hospodářské noviny.