Bank of the Year Awards 2013 – global and regional winners

Global and Americas: Citibank

It has been a long hard road for Citibank. The bank received more rescue assistance than any other US lender during the crisis indicating just how far the bank’s fortunes had tumbled.

Turning around a fallen giant – one of the world’s top 10 largest banks (as measured by Tier 1 capital inThe Banker’s Top 1000 ranking) – was never going to be a 12- to 18-month project. It was bound to be an arduous and drawn-out process. But finally, in the view ofThe Banker’s awards judges, Citi has made not only sufficient progress but carved out a credible and winning strategy for the future.

In making this award, the judges were not merely interested in seeing Citi back in the black, a development that occurred some time ago. Rather the clinching factor was the view that Citi now is now well advanced on a long-term growth trajectory.

The strategy has three key elements – globalisation, urbanisation and digitisation. With globalisation, Citi has a head start by having a historic presence in many countries that were once backwaters but are now powerhouses. With 80% of world gross domestic product (GDP) now generated in urban centres, the bank is focusing on 150 key cities (together producing 32% of global GDP) where it calculates many of the upcoming business opportunities will emerge. It has a presence in 80% of these cities, and has plans for the rest.

On top of this, Citi has emerged as a leader in the digital revolution delivering smart banking to consumers and state of the art platforms to wholesale customers.

Chief executive officer Michael Corbat says: “Execution of our strategy with discipline remains our top priority. We have a unique global network that can’t easily be replicated, especially in faster growing markets. We’ll be focusing on investing in key markets and continuing to optimise in others. We’ll also work hard to streamline and rationalise our processes, products and systems to create a simpler, smoother experience for our clients and customers. Like this year, I am sure 2014 will bring new challenges but we are up to it.”

In key countries such as China, Citi has notched up a number of firsts. In 2012, it became China’s first non-domestic credit card issuer and in 2013 the first foreign bank to launch a domestic mutual fund business. In May 2013, Citi was the first bank in China to launch a multi-currency notional pooling with renminbi capability.

At the start of this year, Citi rolled out its next-generation banking channel, beginning with Singapore, Malaysia and the Philippines. Citibank Express, a smart banking machine, allows customers to do almost all of their banking without visiting a branch, including applying for loans and cards. Citi continues to roll out its new common core banking platform, Rainbow, with the aim of answering client demand to do business anywhere in the world.

A big issue for the bank has been to reduce the size of Citi Holdings, which holds the non-core assets. In 2012, assets in this category came down by a further 31% so that they only accounted for 8% of the total balance sheet – down from 40% at the peak of the crisis. Since then there has been a further fall to 6% of the total.

Yet the economic environment faced by Citi remains challenging. Mr Corbat says: “We faced a challenging environment and growth has been uneven. In the second half of the year, we saw a slowdown in client activity based on uncertainty regarding Fed tapering, concerns about the US debt ceiling, and forecasts for slowing economic growth, particularly in the emerging markets. Despite this uneven environment, we performed relatively well.”

Western Europe: ING

Continued difficult economic conditions, particularly in the eurozone and the introduction of new regulations for the financial sector mean that it has been a tough year for western European banks both to improve their balance sheets and service the needs of their customers.

One bank that is not only well on the way to paying back the state support it needed to survive the financial crisis, but has emerged as a focused, simpler and stronger bank is ING, which wins the award for the Bank of the Year in Western Europe.

The group has continued to perform well in 2013, building on the success of 2012 when it delivered a €2.6bn net profit – this was a fall of only 5.2% from 2011, even though the bank faced €626m of derisking losses, there was a €175m Dutch bank tax and higher loan losses caused as the economy weakened.

The performance of the bank was also reflected in two national Bank of the Year awards from The Banker. ING won the award in Belgium where it increased its customer base, while providing a better level of service, developing mobile and smart phone banking and in the Netherlands where it has the most clearly defined strategy of the banks there to cope with the current banking environment.

“In the countries in which we operate, we have managed to strengthen the capital position of the bank, improve our capital and funding position reflected by a strong core Tier 1 ratio of 12.4% per third quarter 2013,” says Hans van der Noordaa, the bank’s chief executive, retail banking for the Benelux region.

Mr van der Noordaa says: “In spite of the challenging financial and regulatory environment we have continued to support our retail, corporate and institutional clients, enhance our products, services and supporting IT systems as we launched several initiatives and mobile apps across our European countries designed to make banking easier, more transparent and at low cost.”

ING has continued to improve the level of service while being able to pay back most of the support it received from the Dutch state during the financial crisis. Strong capital generation at the bank has enabled it to pay in November another tranche of core Tier 1 securities, reducing the principal amount of outstanding state aid to €1.5bn.

The bank now plans to combine retail and commercial banking in some countries, pursue innovative distribution in retail banking and use its strengths as a leading commercial bank in the region.

Central and eastern Europe: Raiffeisen Bank International

The past year has been very difficult for banks operating in central and eastern Europe (CEE) with almost all of them struggling with poor asset quality and forced to sell subsidiaries at a loss.

One clear exception is Raiffeisen Bank International (RBI), whose strategy of steady organic growth has ensured it remains profitable and keeps relatively healthy levels of non-performing loans, while many others struggle to break even. This performance has won it five national awards and made it the outstanding candidate for Bank of the Year in Central and Eastern Europe.

RBI, a genuinely CEE banking group with a presence in 17 markets (including 15 with banks), made a consolidated profit of €725m in 2012 making it Austria’s most profitable bank. Since 2008, it has had average annual profits of significantly more than €800m.

Some 11 of the 15 banks are ranked among the top five in their markets in terms of customer credits. And The Banker has given the national Bank of the Year award to RBI in Belarus (through Priorbank), Croatia, Kosovo, Romania and Serbia. The performance in Romania was particularly impressive as it remained in profit when many others face serious financial difficulties.

Its strategy has been to create and maintain a diversified business model; this made it less vulnerable to setbacks and enabled it to deliver solid profits in a region that still faces considerable economic difficulties.

Equally important has been RBI’s ability to adapt its business focus to take account of the changes in the market caused by developments such as the introduction of bank taxes, the withdrawal of competitors and more stringent regulations.

This has been achieved by successful coordination and co-operation between individual corporate units, a transparent decision-making process and a consistent focus on customers, where the aim is to build long-term relationships and offer a full line of services. The result has been high customer satisfaction, a balanced portfolio and good risk diversification.

Among the specific achievements in the region, was the successful implementation of the agreement to acquire a 70% stake in Poland’s Polbank EFG. This is now RBI’s largest subsidiary in terms of customer loan volumes, combining RBI’s excellent international standing with the high recognition of Polbank in the local market.

RBI has also successfully introduced the Raiffeisen brand in Slovakia, making it the first bank in the country to operate a franchise model. RBI sees this model as an effective way of increasing the speed of its expansion while minimising operating costs.

Asia-Pacific: ANZ

ANZ has built on its super-regional strategy and has made its mark as an Australian bank with a presence throughout the Asia-Pacific. The past year has seen ANZ expand further into the region. The bank has performed well in its key Asian markets and has also raised standards in developing markets, both operating under its own brand and also through collaboration with its banking partners in various Asian countries.

 The bank’s core markets of Australia and New Zealand have been challenging for all banks, with lower credit growth, higher funding costs and intensifying competition for customer deposits. With such conditions at home, ANZ is ahead of its Australian peers in recognising the potential in expanding into higher growth markets in Asia-Pacific.

ANZ has been focusing on its strategy to build a well-connected bank across the region so that it is well positioned to benefit from the capital, trade and wealth flows in Asia-Pacific. In the wake of the financial crisis, ANZ was one of the banks that benefited from the retreat of the more established US and European players. The bank now, however, is facing stiffer competition as those banks are now beginning to recover. Despite this increased competition, ANZ has been able to push ahead with its super-regional strategy.  

Gilles Planté, ANZ’s CEO for Asia-Pacific, says: “While Asia-Pacific continues to lead the world’s growth, competition is accelerating with European and American banks recovering their Asian appetite, and together with the regional banks chasing higher yields than many have available domestically. Our challenge is to continue improving our ability to deliver end-to-end for our key customers,” he says.

ANZ has made progress in the past year with a number of landmark achievements. It was the first Australian bank to open in Myanmar, which adds to the bank’s footprint in south-east Asia as a regional bank with a presence in multiple markets. Another achievement is that ANZ also launched goMoney mobile banking in the Pacific islands.

The bank plans to continue with its expansion in the region. Mr Planté outlines his plans for the year ahead. “We will continue to grow our Asia-Pacific franchise in institutional, commercial and retail banking by participating more strongly in customers’ trade, investment and payment flows – particularly between our home markets and Asia-Pacific, across Asia, and taking our European and American clients into Greater Mekong markets such as Cambodia, and into China,” he says.

Middle East: Qatar National Bank

This marks the second consecutive year that Qatar National Bank (QNB) has been crowned our Middle East Bank of the Year. 

QNB held onto the title of the largest bank by asset size across the region, the most profitable and the second best capitalised, growing its pre-tax profits by 11.91% during 2012 to $2.3bn, while its Tier 1 capital rose by 8.45% to $8.8bn.  

Meanwhile, the bank grew its assets by an impressive 21.5% to $100.8bn, driven mainly by its robust international expansion, including increasing its shareholding in existing stakes in several regional banks, as well as two sizeable acquisitions.

During 2012, QNB raised its stake in the United Arab Emirates’ Commercial Bank International from 24% to 40% and Iraq’s Mansour Bank from 23% to 51%. In January 2013, QNB announced its purchase of an additional 49.96% stake in Tunisian Qatari Bank, bringing its total ownership to 99.96%.

On the acquisition front, in April 2012 it acquired a 49% stake in Libya’s Bank of Commerce & Development, one of the leading private sector banks in the country.

However, most pivotally of all, QNB acquired a 97.12% stake in National Société Générale Bank (NSGB), Egypt’s second largest private sector bank, which employs about 4300 staff and operates throughout Egypt with a network of 160 branches and almost 350 ATMs.

Valued at $2.34bn, the transaction was concluded in March 2013 and constitutes one of the largest acquisitions ever in the financial sector in the Middle East. It will play a major role in helping QNB fulfil its goal of becoming the leading bank in the Middle East and north Africa region. 

As the leading financial institution in Qatar – with a market share exceeding 45% of banking sector assets – QNB plays an active role in supporting the growth of the domestic economy and has extensive experience in project financing, with $70bn set to be spent on infrastructure development over the next decade in preparation for the 2022 football World Cup. 

With Egypt expected to undertake major development and infrastructure projects in the coming years, NSGB will benefit from QNB’s financing expertise in its operations in the Egyptian market.

Regionally, QNB also retains a 51% stake in QNB-Syria, a 35% stake in Jordan’s Housing Bank for Trade and Finance (HBTF) and a 20% stake in Qatar’s Al Jazeera Finance Company.

“Despite the globally volatile environment, QNB has successfully maintained its robust financial performance,” says Ali Ahmed Al-Kuwari, acting group chief executive. “We maintained our dominant local market share, further generated return on equity income and continued our international expansion with a presence today in 26 countries spread across the Middle East and north Africa, Europe and Asia. We also further improved our front- and back-office capabilities to grow our customer base.”

QNB Group was established in 1964 as the country’s first Qatari-owned commercial bank.

Africa: Kenya Commercial Bank

Over the past decade, some of Kenya’s big banks have tried to turn themselves into regional powerhouses. Perhaps none has managed to do so as successfully as Kenya Commercial Bank (KCB). The country’s largest lender by assets, it first ventured abroad in 1997 by opening a subsidiary in Tanzania. Since 2006, it has been especially active, launching operations in South Sudan, Uganda, Rwanda and Burundi, completing its quest to be present throughout east Africa.

KCB’s decision to expand beyond Kenya’s borders is already benefiting its bottom line. In the first nine months of 2013, its foreign businesses made pre-tax profits of KSh1.6bn ($19m), contributing almost 11% to its overall earnings. KCB wants them to make up one-quarter of its revenues in the long term. Given the high rates of growth in countries such as South Sudan and Rwanda, most analysts think that target is feasible.

The bank is still small compared to Africa’s largest lenders. With $490m of Tier 1 capital at the end of 2012, it ranks as the 44th biggest lender on the continent by that measure, according to The Banker Database. But its status is rising, in no small part because of the fact it is becoming more international.

In spite of its recent investments abroad, KCB has remained highly profitable. Its profit before tax in 2012 was KSh17bn, a 14% increase from 2011 and a huge leap from KSh6bn as recently as 2008.

Its performance in 2013 has also been strong, with earnings before tax in the first nine months climbing 17% year on year to KSh15.2bn. Another highlight was the fact its cost-to-income ratio for the period was 52%, down from almost 70% in 2009.

Much of KCB’s recent success is a result of its ability to tap rural and poor Kenyans. Thanks to it and its rivals’ efforts, the country has one of the lowest unbanked ratios in sub-Saharan Africa. Among the products KCB has developed to target this market segment is KCB M-Benki, a mobile banking account that can be activated through M-Pesa, Kenya’s popular mobile money transfer service.

By using mobile banking and agency banking – whereby it sells its products through retail outlets such as petrol stations – KCB has found a way to make the banking of Kenya’s mass population profitable, given that it does away with the need to build expensive branches in remote areas.

As KCB continues to grow in the rest of east Africa, and perhaps beyond, it will not just be Kenyans that benefit from easier and cheaper access to banking services, but Africans elsewhere, too.

Financial Inclusion: Metropolitan Bank & Trust Company

Just as The Banker decided that this year’s Financial Inclusion award should go to Metropolitan Bank & Trust Company, its home country, the Philippines, was being hit by a typhoon which killed thousands of people and left large parts of the population coming to terms with loss of lives and livelihood.

Efforts, including financial ones, to bring individuals and businesses back on their feet are now all the more significant. The second largest bank in the Philippines, Metrobank has created a programme to support overseas workers setting up businesses back home. Remittances from migrant workers contribute significantly to the country’s economy and have increased its resilience during tough economic cycles. Yet banking products directed at these workers and their families are still limited.

In partnership with Alalay sa Kaunlaran (ASKI), one of the leading microfinance institutions in the country, Metrobank implemented a financial education programme in Singapore, which has a large remittance corridor with the Philippines that includes mostly women and domestic helpers. Launched in 2011, the programme then enrolled 57 participants, which submitted business plans for ventures that would be backed by their remittances proceeds or through a microfinance loan. In its second, larger phase, 400 overseas workers and 400 family members are being admitted to the initiatives. All will receive training on financial literacy and business skills and once their ventures are established and growing, they will also be given the chance to access other credit lines from Metrobank.

Once set up, family members will run the business while any financing received will be repaid by remittances. In the long term, such businesses will create local jobs, boosting the economy and the self-esteem of other migrant workers, as well as providing new, more profitable clients to Metrobank.

A total of 10m pesos ($230m) was made available to graduates of the financial education programme and as of November this year, 4m pesos-worth of applications had been processed for businesses in farming, micro-groceries and micro-restaurants and internet cafes. While ASKI monitors progress of the initiative, Metrobank’s remittances arm in Singapore has halved charges on money transfers for participants. The plan is now to extend the initiative to other Asian countries.

lifetime achievement award: Jacko Maree

Jacko Maree, who retired earlier this year as Standard Bank CEO after more than 13 years in the top spot, receives The Banker’s Lifetime Achievement Award. In a 32-year career with the bank, he took on the CEO role in 1999 and was at the helm during some of the most far-reaching changes both for South Africa and for Standard Bank.

Almost immediately after his appointment the bank faced a hostile bid by Nedcor and it fell to Mr Maree to raise a defence. This he did so successfully that the bid collapsed.

In the early days of South Africa’s democracy, Mr Maree focused on both making the bank globally competitive as well as on bringing services to the unbanked and providing the finance for a growing economy. In 2007 a significant milestone was laid down when the Industrial and Commercial Bank of China (ICBC) took a 20% stake in Standard as a key plank in its Africa strategy. The $5.5bn investment was the largest ever foreign direct investment in South Africa at the time.

Following this, in 2008 in the face of the international financial crisis, Mr Maree refocused Standard’s Africa strategy away from broadly emerging markets to concentrate on 18 African countries, including South Africa.

Shareholders have been delighted with the results. During Mr Maree’s stewardship, the share prices has risen from R21 ($2.08) to R110, dividends per share have increased seven times and the market capitalisation has increased from R30bn to R190bn. But as much as the financial results, Mr Maree earns plaudits for his management style and integrity.

Group chairman Fred Phaswana says: “He is a man who people respect very deeply and that respect is actually based on Jacko and what he has done for the bank over the years.”

Mr Maree obtained from Stellenbosch University a Bachelor of Commerce (cum laude) degree and as a Rhodes scholar at Oxford a first class Masters degree in politics, philosophy and economics. He began his career in 1980 in Standard Merchant Bank’s (SMB’s) corporate finance department. In 1991 he was promoted to managing director of SMB and then in 1995 became chief executive of the newly created Standard Corporate and Merchant Bank. Mr Maree no longer holds a management role at the bank but acts as a senior banker focusing on client relationships.