Takis Arapoglou, a long-time Citi banker, took up Greece’s biggest banking job at the request of Costas Karamanlis, the prime minister. Traditionally the chairman of National Bank of Greece (NBG) is appointed by the government.
Mr Arapoglou’s task is to streamline domestic banking operations while expanding the group’s franchise in south-east Europe. Running Ionian Bank, a small state-controlled lender, in the early 1990s gave him a useful grasp of Greek banking culture. “We have to maintain high revenue growth, integrate the enlarged group and keep on with restructuring in Greece,” says Mr Arapoglou. “It’s a challenge.”
NBG’s acquisition last year of Finansbank, the eighth largest Turkish bank, is already paying off, he says. As the first major Greek investment in Turkey the deal marks a historic shift.
NBG has left Finansbank’s management in place and the bank continues to trade under its own name. Last year, with results consolidated for just three months, Finansbank contributed €78m to group profits of €990m.
“Finansbank is the most profitable Turkish bank in terms of return on equity and it is showing very strong organic growth. It’s aiming to capture a share of the retail lending above 10% and to double profits over the next three years,” says Mr Arapoglou.
To finance the acquisition, NBG raised €3.3bn in fresh capital. It bought out minority shareholders holding 44% in line with Turkish takeover regulations. Huseyn Oseygin, the bank’s founder and chairman, retained a 10% stake. This year NBG sold 5% in Finansbank to the International Finance Corporation. “Its good to have supranational institutions as shareholders. In emerging markets they’re a support,” Mr Arapoglou says.
Finansbank will fund its own growth out of profits projected to grow from €156m last year to €200m by 2009. Over the same period, the network is set to expand from 300 to 550 branches, with new branches projected to become profitable within 12 months. The loan book stands at two-third corporate to one-third retail.
There are plenty of synergies, says Mr Arapoglou. Finansbank will benefit from NBG’s expertise in mortgage lending, still a fledgling market in Turkey, and consumer finance products. It will be able to access funding at lower rates as part of a big EU-based group and move into new activities. “Finansbank will be able to take on project financing, for example. Infrastructure is going to be a huge opportunity in Turkey.”
Finansbank’s high-quality IT offers the possibility of setting up an integrated technology platform for NBG’s regional network, covering Albania, Bulgaria, Macedonia, Romania and Serbia, as well as Greece. A London-based group trade finance centre will provide services for international customers, including Turkish companies. And opportunities for the NBG group to expand in the Caucasus at a later date could arise through Finansbank’s connections with the region.
At home, NBG benefits from its “captive customer” base, Mr Arapoglou says. “Almost every Greek family has an account at NBG so we have much the biggest deposit base. We’re one of the strongest Greek groups – our market capitalisation is equal to 10% of Greece’s GDP.”
But the group was deeply politicised until recently, making restructuring more difficult. Union opposition to change remains strong. “We’re making progress but there’s still some way to go,” says Mr Arapoglou.
Cross-selling drive
NBG branches must be encouraged to beef up cross-selling, he adds. The current average is 1.8 products per customer compared with four for banks in western Europe (a target the group aims to achieve within the next three years): “It’s about changing the culture.”
The group is outperforming its current business plan, he says. The loan mix has improved with retail loans making up more than 60% of total lending. The cost-to-income ratio fell last year by 14 percentage points to 51%. A voluntary redundancy plan is expected to make space for young managers to move up.
“We’re in a very favourable period. The economic climate is supportive, with Greece growing at more than 3.5% and even higher rates in south-east Europe and Turkey. Trade with Turkey is booming and the bilateral business environment looks very promising,” says Mr Arapoglou.
