I do not agree with those who say Hungarian companies are too weak for a liberal market economy and competition, Commerzbank Hungary Chairman-CEO Klaus Windheuser told Portfolio in an interview. He also does not believe the flow of EU funds will suddenly dry up and that Commerzbank should follow in the footsteps of Germany’s Mittelstand. On the other hand, he very much believes in the current growth-oriented business model of Commerzbank.
Hungary's GDP growth is over 4% and investments have soared by more than 34% in Q1. Being a medium-sized bank, does Commerzbank in Hungary go with the movements of economy or pursues its activities relatively independently, more like a niche player?
Of course, we go with the flow appreciate even more growth, the more because we are a corporate bank, that is why we are more attached to investments end corporate development unlike universal big banks that also offer residential and consumer loans. Therefore, we welcome this dynamic GDP growth, which was partly fuelled by postponed investment projects, while we also see that a large number of planned investments which have not been felt as economic growth.
The latest data show that the demand for credit in Germany is on the upswing after six years, this also drives my optimism. Otherwise we do not consider the bank a niche player in the sense that we have a comprehensive range of services to offer anything a company may require financially.
Many major Hungarian banks suffered during the crisis, while the Hungarian subsidiary of Commerzbank came through these years better than them or its own parent bank. Do you have blacklisted sectors you discontinued providing credit to after drawing the conclusions of the difficult years?
No, we grant credit to all sectors regardless of whether they are Hungarian companies or multinationals. Prudent Credit Risk Management is a key in our operation which results in a sound customer base and credit book. The German Commerzbank has a footprint in 60 countries. With that our unique proposition in the Hungarian market is that we can serve our customers internationally e.g. with their cash management and Trade Finance needs.
In addition to satisfying our clients' financing requirements, our activities include the management of various financial risks, such as the hedging of interest rate, currency and of course country- and counterparty risks. We specifically serve companies with revenues over HUF 3.5 billion.
Some Hungarian companies continue to gather information on financing from abroad, and their financing is usually covered by a foreign bank or their own parent company. What challenge does this mean for local banks?
It is a real phenomenon. The financing demands of companies are mainly covered by their parent companies, secondly by foreign banks, and we, local credit institutions are only third in this line. This is certainly a great challenge. However, there are good arguments to bank locally and we have to convince our clients to do so. We know the market and we have proximity and are a reliable partner on the ground.
How is work shared at Commerzbank? Which tasks do the German parent bank and the Hungarian subsidiary do for a Hungarian corporate client that has a German owner?
As a commercial bank, Commerzbank is the only active German bank in Hungary, so we do have an advantage in terms of banking services for German companies. All major corporate clients have a so-called lead relationship manager at the Group who is in regular contact with the financial manager of the company group.
Additionally the corporates are serviced with specialists in Cash-Management, International Business, Corporate Finance and Heeding if appropriate. We mirror this Relationship model in every Commerzbank location so that the corporate experiences what it is used from Germany. Very advantageous is that the colleagues in the several entities exchange themselves to offer the whole group our best services. We regularly get clients feedback that our model in exceptional and benchmark in international banking.
Don't you feel that Hungarian banks already take too high risks in corporate lending for Hungarian companies?
Not yet but we are on the verge of it. There is a massive price competition, lending terms are increasingly lenient and the banks tend to have higher risk appetite. There are barely any Hungarian banks that did not set a significant growth target for this year in corporate banking. . Important is not to join the game of low margins which push profitability below your capital costs, higher risk and loose covenants. We want to grow but sustainable and prudent with a sound credit portfolio and a fair profitability.
The prudent increase of crediting would require the continuous growth of creditworthy corporate clientèle. How could you copy the success story of the German Mittelstand?
That ship has sailed, or more accurately, it is slowing down. Strong German medium enterprises, that is the Mittelstand emerged in the period after the war, when the continuous increase of the production of goods and productivity, the processing, automotive and machinery industry, as well as demographic and employment boom were in focus, and they produced the economic miracle. It’s really an economic structure many countries envy Germany for.
However, the economic is not like that anymore, we live in the age of another revolution where the keys for a successful economy are information, the utilisation of data and digital solutions. Hungary has to pick up the opportunities to benefit from it: the pack will be reshuffled and Hungary should take advantage to play a respective role in the 4.0 world.
How concerned are you about the dependency of Hungarian economy on EU funds? Do you worry that growth will halt if these funds come to an end?
I am not too worried. No sudden halt of funding should be expected. I believe in liberal market economy that relies on competition rather than support as it leads to development and prudent allocation of resources I do not agree with those who say that Hungarian companies are too weak for it. The more you face up to the challenge in the widest possible market, the more chances you have for survival and for success. To conclude - it has to be faced out step by step and controlled - this will lead to an even stronger economy.
Where can Commerzbank make a difference from its competitors?
An important aspect of our growth plans is that our corporate culture lays great emphasis on the human side like personal service, while fairness with our clients and accuracy are rooted in our German culture. We utilise digitalisation to step up on speed and quality - features with increasing value in today's world.
Our international footprint gives us a great advantage over many local banks as this is a key factor for cross-border economic relations. Our international network serves our clients in nearly 60 countries globally. Club deals - granted together with other banks - are a developing and more and more demanded product. We have lots of experience here coming from our home markets.
