Sberbank Europe CEO Mark Arnold talks to the STA about the bank’s plans for organic growth, misperception of the situation in Slovenia.
Ljubljana, 12 April (STA) – Slovenia needs to do a better job presenting the facts about its economy and banks on the international stage, because these show that Slovenia is nowhere near the countries it is being likened to, including Cyprus and Spain, Sberbank Europe CEO Mark Arnold has told the STA.
“I think that the gap between the old government and the new government and the Cyprus crisis has caused chaos [in Slovenia] because the real facts about what is going on here have not been stated publicly,” Arnold told an interview with the STA.
“From the facts that I see, 54% debt to GDP, the magnitude of the banking crisis is nowhere near that of Cyprus, nowhere near that of Spain. The government have got to work on presenting the facts to the international community.”
He assessed that a coordinated campaign is needed to get through to international investors who are reading the headlines on international media outlets “but not observing the facts”.
Moreover, Arnold believes that quick measures are needed to deal with the ailing banks in the country, foremost the state-owned banks. “The building of the bad bank structure to support government banks will have to happen now. It is just timing now.”
After clearing what he views as this first hurdle, the country must then go about changing laws in order to enable banks to dispose of assets.
He views the process of clearing bank balance sheets as the first step in a process that will eventually lead to consolidation of the banking market as part of which the fittest will survive.
While assessing the banking sector in the country as very competitive, he said there are “too many banks”, which is why consolidation is bound to happen in the medium term.
Moreover, Arnold told the STA that the current situation presents an opportunity to Sberbank, a newcomer to the Slovenian market, arriving in February 2012 through the acquisition of Austria’s Volksbank.
“We’ve been very conservative in the past, which probably worked out well for us in that we are profitable while other banks are not. I think we are in a good position to grow from here.”
Having already increased its market share from 2% held by Volksbank a year ago to 2.9% now, Arnold says that the goal ultimately is to get to around 10%, although he admits that this will be a tall order.
“I think 5-6% would be where we will be in 2 years,” he said, adding that as the no. 1 bank in Russia and no. 2 in Europe in terms of capital, Sberbank was eyeing to be no less than in the top 3 in Slovenia.
But he stressed that while opportunities abound, the bank was also focusing on “sensible growth”. “We need to take the right risk controls. Before we grow too much, we put the infrastructure to make sure we do it sensibly. I think we see many banks in this market and elsewhere who haven’t done that.”
Given the troubles of some of its rivals, Arnold expects that the bank will be able to achieve significant organic growth, which is the priority for the bank in the short term.
“The desire is initially to leverage what we have, to rebrand as we are doing today. I think for the next year and half to two years the aim is to grow organically, after that point we may look to inorganic growth.”
He stressed that this was also the strategy of the parent bank, which was currently focusing on and integrating and leveraging the acquisitions of recent years that have expanded its position in Europe.
In this light, he also shot down speculation that Sberbank was thinking of buying Austria’s Hypo Alpe Adria, saying that Sberbank’s name has come up because it is a new player looking for growth.
He explained that the bank wants to focus on specific segments of operation in Slovenia. This was echoed by head of the Slovenian branch of Sberbank Gašpar Ogris-Martič, who said that retail banking would be a core segment that also represents the biggest challenge for the bank.
In business banking, the bank is expanding its focus from small and medium-sized corporations which was in place under Volksbank to large corporate clients. “Now we have the power and the capital base of the group,” Ogris-Martič said.
Moreover, he announced that the bank was also looking to act as a “bridge between the business and trade flows between Slovenia and Russia and other Commonwealth of Independent States countries”.
Emphasising this point, Arnold pointed to the rising trade between Slovenia and Russia. “I think we’re the perfect partner for people to export or import to CIS and vice versa.”