Albania: Banka Kombetare Tregtare
The past year has been particularly difficult for Albania, with the economic slowdown being exacerbated by uncertainty caused by parliamentary elections and a subsequent change in government.
Other winners
Despite these pressures, which saw the Albanian banking system’s non-performing loans hit a record 25%, Banka Kombetare Tregtare (BKT), unlike its competitors, delivered an increase in profits. This performance, as well as its success in issuing its first subordinated debt, earned BKT the title of Bank of the Year in Albania.
“Unlike most of our peers, we continued to lend and we have managed to keep our non-performing loan ratio to almost one-third of the system average. Our historically high profitability has been affected only marginally, with the result that this year has been a year of growth and profitability for BKT,” says chief executive, Seyhan Pencabligil.
The bank’s strong performance was reflected in its 2012 annual results, which showed profits of $30.9m, with equity rising by one-third to $184m, equivalent to a 33% return on equity. This is more than double the return on equity in 2011, with the 24% average return over the two years in line with the bank’s long-term average of 27%. Total assets grew by 25% in real terms to $2.3bn.
The bank, which is now the country’s leading retail lender, has achieved its success by becoming a market leader in areas including credit and debit cards.
This continued strong performance, combined with the issue of €15m subordinated debt backed by the Green for Growth Fund – the European Investment Bank’s specialised fund to advance energy efficiency – boosted BKT’s capital adequacy to 14%, well above the central bank’s 12% regulatory requirement. “The bank channelled the increased lending capacity to renewable energy and energy-efficiency projects in which we expect sustainable growth and higher profitability,” says Mr Pencabligil.
Armenia: Ameriabank
Ameriabank has become the outstanding financial institution in Armenia as it reaps the rewards of a strategy that has seen it transformed from a corporate to a universal bank. Profits increased by 48.9% to 6.04bn dram ($14.9m) in 2012, with the bank building a reputation for innovative products and market leadership, as well maintaining a low level of non-performing loans.
As a result, the bank is a major player in retail as well as corporate markets, a position it is sustaining by putting even greater emphasis on improving the quality of its services and investing in IT.
The banks says it “sees many lucrative opportunities in the market, but our strategy will mainly target the development of retail banking and small and medium-sized enterprise [SME] lending, transactional banking with [an emphasis] on card product development, and an innovation-based approach for new products”.
This approach will include help for SMEs through products such as Armeriabank’s special energy efficiency financing plan, as well as introducing other innovative products including flexible deposit accounts, equity loans and co-branded cards with one of the largest retail supermarket chains in the country.
Also, Ameriabank’s investment banking department has acted as an underwriter and market maker for the placement of the bonds of one of the largest retailers in Armenia, SAS Group. The placement was done in foreign currency for the first time in Armenia.
This approach reflects the bank’s determination to lead the market not only in financial results but also in terms of reliability and brand reputation. This means it has adopted a client-oriented approach, along with well-balanced financial, legal, human resource and social policies, well-regarded business ethics and high level of professionalism.
This strategy has left the bank well placed to strengthen its position as one of Armenia’s financial institutions by reinforcing its role as a universal bank, equally accessible to both retail and corporate clients.
Azerbaijan: International Bank of Azerbaijan
A successful recapitalisation and the development of a series of Islamic finance initiatives have enabled the International Bank of Azerbaijan (IBA) to stand out from its competitors in the country. Net profits have grown by 170.5% to AzN52.9m ($67.45m), with the return on equity rising from 7.5% in 2011 to 15.4% in 2012.
Moreover, the bank’s share capital was up by 52.74% to AzN330.83m, with the total equity reaching AzN416.24m by the end of 2012. With capital growing faster than the assets, there was both better capital adequacy and room to increase lending. This gave IBA a crucial competitive advantage and significantly improved its financial stability. This enabled the bank to greatly increase its active operations.
The bank’s assets reached AzN6.17bn in 2012, 27.46% up on the previous year. The amount of loans to customers rose by 31.11% to AzN5.25bn, while corporate and individual customers’ term deposits reached AzN1.9bn, 49.32% higher than the previous year.
This dramatic improvement has been made possible by the bank implementing strategic initiatives in all business areas, including the introduction of a modern customer relationship management system.
One of the most significant developments was the expansion of Islamic banking services through the bank’s Islamic window. All the products were certified by legal and financial consultancy company Dar al Shariah, assisted by Dubai Islamic Bank.
The bank also upgraded its corporate banking department, modernising and restructuring its sales and credit procedures and improving the quality of service. Retail banking services were also modernised while new products were introduced to improve the quality of investment banking.
In all areas, IBA’s emphasis has been on improving the quality of services to customers – a special standard was created to monitor quality on a daily basis. The appropriate standards are modified instantly to meet the new demands.
Belarus: Priorbank
Efficiency, profitability and a strong customer loan portfolio have earned Priorbank the award for Bank of the Year in Belarus.
“Due to our strong performance and the active development of alternative channels of customer service in 2012 – internet banking and electronic banking – Priorbank remains the most effective bank in Belarus. The past year has been another successful period in our development,” says Sergey Kostyuchenko, Priorbank’s chief executive.
The bank, which is a subsidiary of Raiffeisen Bank International and a member of the RZB Group, delivered a substantial 618% increase in net profits in 2012 to Rbs535.7bn ($57.4m), making it one of the most profitable private banks in Belarus. Its non-performing loan ratio remains low at 1%, while its Tier 1 capital ratio has risen to 19.5% in the past year.
“The high level of profitability has raised capital adequacy rates according to the national and international financial reporting standards,” says Mr Kostyuchenko.
In the past year, Priorbank has focused on developing current account packages for private individuals, where its offers have included new types of debit cards for international use and credit cards for those who have retired. It was also the first lender in Belarus to introduce phone banking. As a result of these initiatives, the number of premium customers at Priorbank has risen by 75%.
On the corporate side, the bank successfully organised – in co-operation with the International Finance Corporation – the financing of the €85m Alutex project, which included the construction of a new factory and production facilities.
“In summary, the bank has been able to increase the already high quality of its loan portfolio in all of its business lines. The continued optimisation of the ‘Lean’ business processes has significantly improved efficiency and productivity indicators,” says Mr Kostyuchenko.
Bosnia-Herzegovina: Intesa SanPaolo
Despite the impact of the global financial crisis on Bosnia-Herzegovina, Intesa SanPaolo was able to deliver a continuous improvement in financial performance through the sustainable growth of its core businesses – and it did so without using short-term speculative investment strategies or jeopardising long-term results by taking excessive risks.
This combination of prudent management, including effective cost control, and strong results in 2012 (net profits rose by 51.14% to €8m) made Intesa SanPaolo the Bank of the Year in Bosnia-Herzegovina.
One of the keys to its strong performance has been the strict control over operating costs as well as the optimisation of the branch network and the careful selection of borrowers with the aim of minimising the cost of risk. The bank also re-priced its lending and borrowing policies, grew transactional income, ensured that capital investments focused on business support and liquidity and enhanced its credit risk management.
Costs were also kept under strict control by the rationalisation of branch and electronic channel networks, with all decisions taken after rigorous analysis of their profitability. Rather than any significant reduction in branches, the approach has been to relocate them in areas with maximum growth potential, with the same principles used for decisions on strengthening ATM and point-of-sale networks and for the development of mobile and e-banking.
The bank has also been able to control the cost of risk and minimise the growth of non-performing loans by improving its credit risk monitoring through the use of stronger management processes and IT.
“One of our main successes has been raising awareness on the understanding of all business risks that, at times of sluggish economic movements, impact results faster than they would in times of economic growth,” says Almir Krkalic, chief executive of Intesa SanPaolo in Bosnia-Herzegovina.
Bulgaria: DSK Bank
The past year has been a difficult one for the Bulgarian financial sector as it has had to operate in a market affected by a deteriorating local and international economy and an unstable domestic political environment.
Many of Bulgaria’s banks struggled as they tried to cope in conditions where incomes were falling, consumption remained at best flat, and there was uncertainty about economic recovery and the market’s limited potential.
DSK Bank was the outstanding performer in the country, delivering among the best financial results by changing its priorities towards preserving stability through maintaining adequate capital and liquidity positions and coverage of non-performing loans through constant management quality improvement and prevention measures.
DSK produced higher profitability and efficiency than the average for the Bulgarian banking sector. Net profit for 2012 rose by 125% to Lv191.9m ($132.07m), while net income from banking activity rose by 5.1% to Lv676.7m due to the growth of the operating income. The bank kept its stable interest spread (the most stable among its peers) and managed to compensate to a great extent for the negative impact on profitability of Bulgaria’s still stagnant lending business.
“DSK Bank reported the best operating efficiency – a 35.3% cost-to-income ratio, amid the top 10 banks in the country. The return on equity was 13.8% and the return on assets was 2.2%. We also achieved a total capital adequacy ratio considerably above the regulatory requirements,” says Violina Marinova, DSK’s chief executive.
This leaves the bank well placed to continue succeeding in a market where there are only modest prospects of economic improvement. Ms Marinova says it will do this through further modernisation, including the introduction of new products and service such as e-banking to meet the requirements of customers.
Croatia: Raiffeisen
Although the Croatian economy has moved out of recession it is still stagnant, meaning its banks, rather than looking to become more profitable through increased sales, have sought to do so by increasing the quality of customer service, minimising the problems of non-performing loans and cutting costs.
Using such criteria, Raiffeisen Croatia is a clear winner of the award of Bank of the Year in Croatia. It was the only major bank in the country to increase profits – which rose by 12.79% to Hrk432m ($76.34m) in 2012 – while its non-performing loan ratio, at 10.26%, was relatively low compared to other financial institutions in Croatia.
This latter performance is particularly impressive as the Croatian government has implemented new regulations regarding pre-bankruptcy settlements that have helped to detect insolvent companies. “Restructuring or termination of their operation in a market with limited growth potentially accelerated the recognition of bank losses. In the household lending segment, the risk imbedded in the loans indexed to the Swiss franc was transformed into a rising non-performing loans ratio,” says Zdenko Adrovic, chairman of the board at Raiffeisen Croatia.
The shift in emphasis to service provision has been carried out by insisting on the highest standards and putting in place policies that ensure these are maintained, while also developing new products and services. “Income growth is planned to come from innovative products and delivery channels adjusted to rapidly developing technology, catering for a growing number of customers,” says Mr Adrovic.
Raiffeisen Croatia has also successfully identified some areas for new business, making it the only major bank in the country still able to develop through organic growth. It is boosting lending to government, large public companies and also the small and medium-sized business sector, where it is working with the government to increase financing opportunities.
Raiffeisen Croatia has also sought to improve its position continuing to implement ‘Lean’ – a globally recognised corporate culture of business process improvement, which has enabled the bank to maintain service excellence while making significant reductions in costs.
Czech Republic: CSOB
A prolonged recession and a low interest rate environment have made life difficult for all those operating in the Czech financial sector. But there is no doubt that CSOB was able to cope with the challenges more effectively than its competitors by making a series of effective initiatives, including offering new life insurance products.
Consequently it was able to achieve the best results among the Czech Republic’s banks with profits of Kcs15.28bn ($758.5m), which was a 36% rise on the previous year.
“We believe that challenges posed by a recession and low interest rates requires banks to adjust their approach to clients by putting an emphasis on the efficient knowledge of client preferences and needs, and the rapid provision of services,” says Pavel Kavánek, CSOB’s chairman and chief executive.
In 2012, CSOB implemented the strategy of its parent company, Belgium-based KBC Bank. “I see many in-house achievements, including a new approach to retail clients... We are changing the way we manage our branch network and making product development faster and more agile,” says Mr Kavánek.
Among those initiatives was the launch of a new life insurance product, Bez Obav, which offers fully separated risk coverage and unit-linked investment. This makes it possible to have a risk coverage premium paid automatically from the yield on an investment.
CSOB has continued to innovate in what has been a difficult environment. Investment into systems and new products has continued in a market where the trend has been to put cost cutting first. The bank has just launched a new client portal that allows the seamless addition of online services with less preparation time.
Estonia: Nordea
The award for Bank of the Year in Estonia has been won by Nordea Bank Estonia, which has outperformed the market to the extent that it delivered its best ever results while implementing a wide range of technological initiatives.
Nordea achieved a 59% increase in profits to €35m in difficult economic conditions in Estonia, which saw a decline in market volumes, interest rates and margins. The low interest rates, modest loan demand and uncertainty about the strength of economic recovery have been key challenges for all banks in the country.
Over the past year, as it has done throughout the financial crisis, Nordea has kept to its core strategy while also managing proactively. This has delivered consistently good results with the bank increasing both the number of customers. Income is now substantially larger than it was before the crisis.
At the heart of this success, says Andreas Laane, head of banking at Nordea Bank Estonia, is the fact that the lender is the only one in the country that has been able to deliver increased customer loyalty. “All of the other banks have the opposite trend [according to 2013 EPSI research]. Our Gold customers’ relationship with the bank is among the best in Europe [based on 2012 Trim research]. While holding the third place in the market, we are constantly close to second position among corporate customers,” he says.
Mr Laane also insists that Nordea will continue to “offer our customers the best service experience through every customer contact point, be it a branch office, the mobile bank or the call centre”.
The bank has been particularly keen to meet demands for more sophisticated technology, which has led to the introduction of Light Logins – which enable customers to check account information and make transactions between accounts – as well as adding new features to its mobile banking offering.
Georgia: Bank of Georgia
Bank of Georgia wins the award for best bank in the country, having delivered record profits for a financial services company in Georgia. A strong business performance, the reduced cost of funds and improved efficiency across the business were reflected in the strength of the bank’s earning power. In 2012, it reported a return on average equity of 19.1% and earnings per share growth of 17.6%.
This performance was driven by the bank’s unmatched client reach through the largest distribution network in Georgia. This has expanded even further over the past 12 months through its ‘Express’ banking strategy, which has boosted the growth of the retail banking business.
Retail banking client deposits are now increasing at an annual average of 26%, despite several rounds of deposit rate cuts, which saw contractual US dollar 12-month deposit rates falling to a record low in Georgia of 5%. Key to this strategy has been the strengthening and further expansion of Bank of Georgia’s Express banking strategy, which has brought with it the rollout of cost-efficient and small ‘Express’ branches. This makes it possible for the bank to continue to serve a growing client base without having to build costly flagship branches.
This has helped Bank of Georgia to further the shift to transactional banking through a wide range of electronic channels, leaving its major branches to focus on selling more value-added products and services. By the end of June 2013, there were 870 Express pay terminals, more than 308,000 new contactless Express cards (transport payment cards) and 62 Express branches.
Bank of Georgia has also diversified its areas of growth, with non-interest income amounting to 43% of revenue in 2012 compared with 34% four years ago. Insurance and healthcare contributed 11% to the consolidated revenue and 8.7% to the consolidated profit, while its affordable housing business completed a pilot project, contributing La15.5m ($9.25m) to the mortgage loan book.
“We plan to focus on the growing Georgian market to continue delivering solid profitability and efficiency metrics and diversify revenue sources by concentrating on the growth of non-interest income-generating businesses. We are also preparing to launch a regional money market fund that will invest in local and foreign currency-denominated short-and medium-term debt instruments issued in Georgia and neighbouring countries,” says Irakli Gilauri, the chief executive of Bank of Georgia.
Hungary: K&H Bank
The past 12 months have been challenging for banks in Hungary, with the difficulties of deleveraging and the problems caused by economic hardship compounded by an unprecedented regulatory backlash, which has brought an extremely high levy on financial institutions and tough price regulations.
Despite these difficulties, K&H Bank was able to deliver a major improvement in results – net profits were Ft20.5bn ($92.5m) in 2012 – the lowest non-performing loan ratio in the country (12%) and launch a series of financial initiatives. Taken together, these made it a clear choice as Bank of the Year in Hungary.
Hendrik Scheerlinck, K&H Bank’s chief executive, attributes this continued profitability to “prudent underwriting standards”, while proactive assistance to delinquent borrowers kept our credit costs at manageable level. K&H increased its relative share in new loans, and was very successful in attracting new customers and increased volumes of deposits in all segments.”
Additionally, K&H is a clear leader in Hungary’s capital and yield-protected investment fund market (with a 50.74% share) and second best in the overall mutual funds market (19.5%).
These impressive results are evident in K&H Bank’s corporate business, too. Its corporate relationship managers have built a reputation for being among the most experienced and well-trained corporate bankers in Hungary, while corporate risk indicators are consistently in the top three among the country’s larger banks.
Among the other initiatives of the past 12 months was the integration of the leasing subsidiaries into K&H Bank, which resulted in both one-off immediate and long-term financial gains. The bank also introduced its Constant Proportion Portfolio Insurance (CPPI) funds – a flexible, open-ended fund tracking market risk.
Kosovo: Raiffeisen
The winner of the award for the Bank of the Year in Kosovo is Raiffeisen Bank Kosovo, which has improved many of its key performance indicators and extended its range of products and services in areas such as factoring and trade finance.
It has achieved this success while balancing the requirements of its parent bank, Raiffeisen Bank International, in areas such as capital, liquidity and costs with the local objectives of asset growth and increased profitability.
“The main successes were the improvement of some of our key performance indicators compared with 2012,” says Raiffeisen Bank Kosovo chief executive Robert Wright. “For example, our non-performing loans ratio and cost-income ratio were both reduced, our net interest margin increased and our profitability increased. We also implemented a very successful talent management programme within the bank.”
Raiffeisen is the best capitalised bank in Kosovo and has a client base that includes the country’s biggest corporations. As a universal bank, it offers a full range of services to large companies, small and medium-sized enterprises and private individuals, including-state-of-the-art electronic banking and first-class customer services.
In particular, Raiffeisen Bank Kosovo has responded to demands from its customers for products and services that make it easier to trade in a constantly changing market and business environment. These include initiatives such as Factoring for Corporate Customers and Working Capital Credit Line (WCCL) for small enterprises.
While factoring provides an alternative model for financing, WCCL is a structured financing product offered to small enterprises, allowing great flexibility in fund usage ultimately resulting in a lower cost of financing. The trade finance products business makes Raiffeisen Bank Kosovo the market leader in this area.
Latvia: Swedbank
In a highly competitive Latvian market in which there was little between the results of many of the leading banks, Swedbank stood out for its successful acquisition strategy, highlighted by the purchase of the commercial arm of the state-owned Latvijas Hipoteku un Zemes Banka.
The purchase, which included the retail and corporate banking business as well as the leasing company Hipolizings, meant that more than 70,000 customer accounts have been moved from Hipoteku Banka to Swedbank. Customer deposits or liabilities to customers worth Lt147.7m ($283.9m) and 7000 commercial loans worth Lt86.5m have also been transferred.
Swedbank has also developed solutions in the digital environment. There is a loyalty programme for private customers, unique in Latvia, called ‘Smart Points’. This enables customers who keep their accounts in surplus and pay bills with their Swedbank MasterCard to earn points that can be exchanged for innovative benefits, including mobile apps.
There is also a digital platform for businesses – Swedbank Business Network – that enables entrepreneurs to establish business contacts, expand opportunities to sell more products and services, obtain the most up-to-date information about business environments and use business management tools.
In the past year, Swedbank has also maintained its drive to ensure cost efficiency, which has been one of its key objectives in the past five years. These include initiatives to improve internal efficiency and adapt the bank’s cost levels to changing market conditions. As a result, Swedbank’s cost-income ratio improved to 42% in 2012. Further measures to reduce costs include the improvement of internal processes, reviewing and simplifying the bank’s product range and changing customers’ behaviour from lower value activities towards self-service channels.
To reduce unnecessary tied-up capital, the bank has continued to achieve the best risk and capital-adjusted lending margins, with the emphasis on sustainable growth and profitability rather than gaining a higher market share.
Lithuania: Siauliu bankas
The competitive landscape in Lithuania was transformed this year when Siauliu bankas took over the assets and deposits of the bankrupt Ukio bankas, the first time in the country’s history that the problems of an insolvent financial institution had been resolved in such a way.
This action, which catapulted Siauliu bankas to fourth place in the domestic market as measured by Tier 1 capital and enabled it to compete more effectively with larger financial institutions, has earned the lender the award of the leading bank in Lithuania.
One of the most impressive aspects of the highly complex takeover was the speed and efficiency in which it was carried out. It took only a month to merge the two banks.
“The main challenge faced by the bank was to resume the provision of banking services to the former clients of Ukio bankas and to integrate the taken over part of Ukio bankas into Siauliu bankas. This required considerable effort and focus on the matter – and we succeeded,” says Audrius iug‑da, chief executive officer of Siauliu bankas.
Despite the challenges of implementing this merger so quickly, the benefits to Siauliu bankas are considerable.” Mr iug‑da adds that after taking over the assets and liabilities of Ukio bankas, Siauliu bankas has become much bigger and more significant bank.
The network of Siauliu bankas increased to 76 outlets which operate in 36 towns and cities, while the number of customers has now grown to more than 350,000. The new bank is now fifth largest in Lithuania in terms of assets as well as fourth largest in terms of deposits.
“We're creating a strong, intelligent, understandable Lithuanian bank – we know the abilities of our country, its traditions, mentality and business features. We can get deep into things for which the big Lithuanian banks have neither the time nor the wish,” says Mr iug‑da.
Macedonia: NLB Tutunska Banka
NLB Tutunska Banka has won the award for the Bank of the Year in Macedonia, in no small part because it has produced the best results among the country’s financial institutions and has launched a series of new and innovative products.
In the past year, the bank has delivered a 10.1% return on equity and a net profit of €4.7m despite testing economic conditions. This profitability derives from a stable client base and sound and transparent practices.
The high quality of NLB Tutunska’s credit portfolio is shown by the way the bank has consistently reduced its non-performing loan (NPL) ratio – at 7.6%, its NPLs are lower than the average performance of its main competitors in Macedonia, which stands at 10.1%. The bank attributes this success to strong risk management policies and prudent practices that have enabled it to successfully manage its long-term liquidity, profitability and capital adequacy levels.
The bank has also taken a series of initiatives to improve services to its customers through a branch network that has now expanded to 50 outlets, and a sophisticated point-of-sale service. NLB Tutunska is the first bank in Macedonia to issue MasterCard and Visa payment cards that implement the latest chip technology.
NLB Tutunska’s strategy for the next year will focus upon maintaining stabile business relations with the better performing corporate clients, while increasing financial support for small and medium-sized enterprises, micro businesses and individuals.
“We will also grow the retail operations within the bank’s overall operations, through intensified cross-selling activities between the corporate and retail segments, as well as retail to retail. The bank will use a multichannel sales strategy in order to provide a comprehensive service and easy access to its products,” says Gjorgji Janchevski, president of NLB Tutunska’s management board and the bank’s chief executive.
Moldova: Victoriabank
Despite financial instability and economic stagnation in several strategic areas of the Moldovan economy, Victoriabank has outperformed its competitors and earned the title of the bank of the year in the country by delivering a 37.26% rise in net profits in 2012 to 220.69m lei ($17.06m).
Over the past year, Victoriabank has provided support to enable customers to expand their businesses, and has increased its share of this market by providing quality products in a competitive market.
“The main measures of success are customer loyalty and trust in the safety of the bank. We keep maintaining the development trend of the bank in terms of increasing the number of clients, expanding the branch network and supplementing the portfolio of goods and services with new and competitive offers, designed to meet current customer demands through an ongoing technological development, ” says Natalia Politov-Cangas, president of Victoriabank.
In its 2012 figures, the bank’s loan portfolio rose by 9.66% and these loans were made at the most attractive rates in the market. It maintained the loyalty of Moldova’s agricultural sector by helping to attract funds from multilateral organisations, increased lending to entrepreneurs on attractive terms and offered competitive rates of return on deposits through accounts targeted at specific groups.
Victoriabank has the largest branch network in Moldova, with more than 100 branches and service points, as well as the most ATMs in the country. However, it has also made a major investment in communicating directly with its customers. It has modernised its call centres, introduced SMS banking, and launched an internet banking channel that enables customers to generate card payments from their phone or computer.
Victoriabank has also developed a feedback service, which allows direct communication with customers that subsequently helps the bank to improve services.
Montenegro: Erste Bank
The economic environment in Montenegro in 2012 was demanding with modest growth rates, insufficient liquidity and high internal debt. New regulations have been introduced including limits for both lending and borrowing interest rates. On the public sector side, numerous saving measures were introduced and tax rates continuously increased.
Despite the challenging environment, Erste Bank continued to grow its total assets, loans and deposits, strengthening its market position in all segments and keeping the quality of assets well above criteria prescribed by the national regulator – achievements that have won it the award for bank of the year in the country.
In 2012, Erste Bank was responsible for 13.2% of total loans in Montenegro, up one percentage point on the previous year, an expansion mainly accounted for by a 13.4% rise in lending to small and medium sized enterprises and by a 8.3% rise in retail lending. The share of total deposits was up 1.5 percentage points to 10.6%.
This increased activity helped net profits to rise by almost 20% to €4.77m, the highest among all of Montenegro’s banks.
Erste Bank had significantly better indicators of asset quality and lower credit risk than the industry average in the country. The cost of credit risk amounted to 1.8% and was considerably lower than it was at the end of 2011, when it amounted to 2.6%. Non-performing loan coverage by reserves was high, amounting to 77.14% at the end of 2012.
In 2012 and 2013, Erste Bank has invested in a new information system. This system will look to boost the bank’s product range and improve its service quality.
Poland: Alior Bank
The success of Alior Bank’s 2.1bn zlotys ($680.3m) initial public offering (IPO) – the largest by a privately owned company on the Warsaw Stock Exchange – provided a vindication of the bank’s strategy to create a universal financial institution that combines the principles of traditional banking with innovative products. And it also wins the bank the title of Bank of the Year in Poland.
Alior has focused on offering more attractive services to customers at lower prices than its competitors, or even for free. And it has done this while developing ground-breaking technological solutions.
“As well as our successful IPO, we gained more than 500,000 customers in 2012 alone,” says Wojciech Sobieraj, Alior’s chief executive. “We introduced to the market innovative solutions including an online credit process, an online currency exchange integrated with banking services and the Alior Bank Express concept.”
Mr Sobieraj wants “the bank to remain a role model in the Polish banking sector”. He says: “The main priorities will be distribution and multichannel strategies, including mobile banking. The bank will strive to maintain its lead by adopting a tailored client approach to meeting the changes in the market environment.”
Nowhere is this readiness to lead the market more evident than in the revolutionary changes it has introduced. Alior Sync is Poland’s first virtual bank, enabling the comfort and quality of service of the traditional bank branch in a fully virtual branch with a complete variety of contact options, including video conversations and video chats.
Alior’s online credit process enables online shoppers to make a purchase without logging off from an online store, while business customers can now use the online currency platform eFX Trader. Alior has also opened the first Alior Bank Express – small, modern Alior Bank branches, located in high-traffic areas.
Romania: Raiffeisen
The award for the Bank of the Year in Romania goes to Raiffeisen, which has again demonstrated the strength of its business model by continuing to deliver improved results in a market where the economic conditions have been volatile for many years.
It was the country’s most profitable bank for the second year running, recording a profit after tax of €88m, reflecting the fact that it has been run prudently and with a careful risk management strategy for a number of years. This enabled Raiffeisen to avoid the problems faced by institutions that lent excessively over the past decade.
Equally important has been the bank’s ability to adjust its policies rapidly as market conditions have changed. It identified the need to improve the ratios measuring operational efficiency, and important progress was made in 2012 with the implementation of the decision to approach this issue systematically. This enabled the bank to decrease its operational costs by approximately 7% and improve its cost-income ratio accordingly.
“In 2012, Raiffeisen Bank once again managed to adjust to unfavourable market conditions and a challenging economic environment marked by high volatility and uncertainty. We have maintained our position as the most profitable bank [in Romania] by balancing cost control with reviewing the customer value proposition and new business acquisition,” says Steven Cornelis van Groningen, Raiffeisen’s president and chief executive in Romania.
“When the market conditions worsened, we have been proactive, offering customers solutions to restructure their loans while conservatively provisioning the non-performing loans. All of these measures gave us time to adjust our customer value proposition on each client segment, to review and simplify processes without destroying value.”
Raiffeisen has also focused on being more able to respond to customers’ increasing needs for efficient personal finance management by continuously developing integrated products and services.
Russia: Tinkoff Credit Systems
This year’s winner in Russia not only leads its domestic market in terms of return on equity and technological innovation – it is one of the stand-out banks in the world on both counts. Just six years from going live in 2007, Tinkoff Credit Systems (TCS) generated return on equity of 58.7% in 2012, even with an increase in Tier 1 capital of more than 150% to finance its spectacular growth rates.
Adding 1 million credit card customers a year in 2011 and 2012, the bank is now one of Russia’s top three card issuers. That growth has not been achieved at the expense of asset quality, with a market-leading non-performing loan ratio of just 4.7% in 2012. And since it remains a branchless bank, the focus on technology and alternative delivery channels is relentless.
“TCS has evolved continuously, from a wholesale-funded direct mail credit card company, to an online deposit-taker, to a general online business including the credit cards, and that also opened up new opportunities,” says Oliver Hughes, chief executive of TCS.
Those new opportunities have included providing the payment solutions behind e-wallets for two of Russia’s highest profile internet names, search engine Yandex and e-mail provider Mail.ru. Another vast opportunity is the group’s move into online insurance in 2013, since retail insurance has a market penetration of just 1% in Russia.
Given this potential, it is no surprise that the bank’s initial public offering (IPO) in October 2013 was upsized twice from $750m to $1.25bn. Founding entrepreneur Oleg Tinkov retains a majority stake and a desire to continue building TCS over the long term, while early-stage private equity investors also stayed on board.
“We were pleasantly surprised by the strength of demand, with orders from the usual focused emerging markets and financial institutions funds, and from US tech funds who see us as not only a regulated bank, but also an online customer acquisition engine and service provider,” says Mr Hughes.
Serbia: Raiffeisen
A lack of creditworthy demand, particularly from the corporate sector, and an increasing number of non-performing loans (NPLs) has presented a major challenge to the financial sector in Serbia. But Raiffeisen Banka has still been able to deliver excellent results – including a 17% rise in net profits – and wins the bank of the year award in the country.
“Our strategy to promote quality has received verification in the market as we have had NPL ratios continuously below the market average. We are the bank of choice for the majority of large corporations and multinationals in Serbia. This is the best evidence that we are perceived as a dependable and professional partner,” says Zoran Petrovic, Raiffeisen Banka’s chief executive in Serbia.
Despite the complex situation in Serbian corporate markets and limited new investments, Raiffeisen’s corporate segment continues to perform significantly above target. It has delivered sustainable profitability while increasing its market share from 6.48% in 2011 to 6.7% in 2012, all the while keeping the NPL level below the market average.
The efficient use of alternative financing sources (state subsided loan schemes and supranational loans), as well as the bank’s strong foothold in the multinational segment (in terms of liabilities and fee products) continue to be the key driver of this sector.
Raiffeisen’s retail division also continues to perform well, with the bank holding the leading position among the country’s financial institutions for disbursing cash loans – it has a 15% share of this business. One product – in which personal loans are disbursed within two hours – is unique to Serbia.
For the third year in a row, the bank has retained its leading position in Serbia when it comes to consumer loans approved directly at the point of sale, with a market share of more than 40% by new disbursements. Also, with its share of credit card market growing to 11%, the bank has retained its leading position in this sector.
Slovakia: Slovenská sporitel’na
The award for the Bank of the Year in Slovakia has been won by Slovenská sporitel’na, which has outperformed its competitors and introduced an impressive online portal called Easybanking.
With capital adequacy at almost 23% and Tier 1 capital ratio at almost 19% (as of June 2013), Slovenská sporitel’na is well above any regulatory limits. And it has moved quickly to counter the adverse impact of the new bank levy introduced in Slovakia in 2012 and a more paternalistic government approach – the latter including the forbidding of a loan maintenance fee and the setting of regulated prices for current accounts for the poorest account holders. Slovenská sporitel’na has responded by focusing on operational efficiency and utilising internal reserves.
As a result, the cost-to-income ratio is in the low 40s, which is lower than that of competitors, and its non-performing loan rate has also been significantly reduced. The bank’s extensive database provides it with detailed information about clients even before they take a loan. Consequently, better risk assessment provides growth potential in loans without excessive
risk-taking.
Slovenská sporitel’na is also expanding its range of products by introducing new banking smartphone apps. They constitute a simple, quick and transparent alternative to traditional internet banking.
However, they do not need to be downloaded or installed to be used as they are all available at www.easybanking.sk. The bank has also expanded its internet and mobile banking services.
Other initiatives include the successful implementation of the European standard in payments – making the bank one of the first in Slovakia to adopt this system. Clients can now submit and receive euro payments within member countries of Single Euro Payments Area under the same conditions as domestic payments.
Slovenia: SKB Banka
Difficult and turbulent market conditions and a changing regulatory environment have made Slovenia a tough market in which to operate. However, through a combination of secure, stable banking and innovation, SKB Banka has managed to be the only major bank in the country to remain in profit and so wins the award as bank of the year in the country.
Despite the difficult operating conditions, the bank has continued to offer quality services to its customers and has found ways to take advantages of new opportunities that are still available despite the turbulent economic circumstances.
“SKB has focused even more deeply on risk management and the optimisation of overhead expenses and at the same time has had the ambition to offer to its clients, companies and individuals better quality products and services in order to maintain the growth of its business operations,” says François Turcot, SKB’s chief executive.
SKB has improved and strengthened its position in the Slovenian loan and deposit market by increasing its market share, as well as growing its client base. It has kept the highest interest margin among banks operating in the Slovenian market as well as the highest fees and commission margin, leading to a lower decrease of net banking income compared with the average in the Slovenian banking system.
Operating in the Slovenian market meant that SKB could not avoid being hit by the economic crisis, particularly given the deteriorating financial situation faced by many of its corporate clients, even though it had used a first-class quality credit approvals process and conservative risk policy in the pre-crisis years.
However, SKB has an impressive credit portfolio, with its corporate credit portfolio being one of the best in Slovenia. The bank’s default marking and provisioning policy has been strict, so SKB is in a very good position to get back to strong profitability once the country’s economy stabilises.
Ukraine: Privatbank
Privatbank has won the award for the Bank of the Year in Ukraine after 12 months in which it has delivered excellent financial results, with a net profit of Hrv1.44bn ($175.87m), while introducing impressive technological innovations. It is also well positioned to further improve its services to customers.
“Today, the main challenges for the Ukrainian market are to improve service quality, which requires the introduction of clear and fair terms, the absence of hidden fees, fast and effective feedback on any customer’s request to the bank and convenient tools for remote servicing,” says Alexander Dubilet, the chairman of the Privatbank’s board.
“We realise that our customers have the right to expect top-quality service from banks at a fair price. We want to be able to react quickly to any requests and complaints from our customers. This development is a strategic one for us,” he adds.
Its unique technology development has been one of the key reasons behind Privatbank becoming the leading bank in Ukraine while successfully enlarging its market share in other countries. More than 40% of retail transactions and nearly 80% of payments by corporate customers are performed via the internet or through ‘smart’ banking.
The bank is also one of the largest developers of smartphone apps in Ukraine. Its Privat24-Smart financial software app for Android has been particularly successful in the country and the surrounding region.
PrivatBank was the first bank worldwide to adapt its services for Google Glass, which can be accessed by a QR code, GPS, voice commands, app-to-app connection and augmented reality.
Other initiatives include the launch of the 24-hour service for legal entities, and a ‘pay by instalment’ programme that offers instalment payments at 0% interest without any hidden fees when goods are paid for by credit card.
