I don't want to be bought up by Russians - Portfolio.hu Interview with Andreas Treichl (Erste Bank)

Erste Bank does not regret that it is not open towards Russia and Chairman-CEO Andreas Treichl is convinced that the strategy he pursues is the right one for his bank. In an interview with Portfolio.hu he said Central Europe would do best if it created its own "Scandinavia", but believes we are "dumb" to make it a reality. Treichl does not want his bank to be taken over by Russians and thinks a merger with Hungary's OTP would be a logical step, but impossible to take. He says it is a pity what happened with Erste in Bulgaria, but firmly believes he is building a bank that should last for at least 100 years.

Russia why not?

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Portfolio.hu: While in 2006 Erste Bank was engaged integrating BCR, several other banks in the region, e.g. Raiffeisen Int., OTP were turning their attention to Ukraine and Russia. Do you have any kind of regret that you missed out on the CIS boom?

Andreas Treichl: No, I am not really nervous about missing out on Russia and South-east Asia. I accept that it is a highly interesting market but our strength is that we are concentrating on a certain number of things. There is logic in how we are developing in the region.

If you look at our region, it makes a lot of sense, because there is a tremendous amount of traffic not only for large companies but also for small and medium-size enterprises. And private mobility is also high. This is a region of 120 million people and our goal is to have 20% market share here. If you are a bank on a market which is one and a half times bigger than Germany and control some 20% means a very strong base.

We see great opportunities to make of lot of money in Kazakhstan, Turkmenistan and Uzbekistan and, of course, in Russia. But we want to concentrate on our existing markets and not on those where we are not present yet. Once we feel that we have the chance to reach the position we want, and we also have the necessary management resources, then we will move to another market. This, however, does not necessarily have to be Russia; it can be something completely different.

Portfolio.hu: Which countries could be your next target?

Andreas Treichl: Our strategy is focused on Central and Eastern Europe for now. Our strategy was to create a bank for new EU members, and for those countries that have the chance to join the bloc. We hope that Serbia, Croatia and Ukraine will make it. Russia will never be an EU member, as it is a completely different market. If we see a need for a new strategy, we will have one, but it could be India, as well.

Portfolio.hu: Erste Bank is by and large an extremely strong player on every market. In light of this, what is the rationale behind going to Ukraine and Serbia?

Andreas Treichl: Serbia is a market that will become very important for the region - it will be key for the future development in Europe. There's much similarity between Croatia and Serbia and also between Serbia and Romania. It is not such as small country, 7 million people. It could become a part of our world. (Note: in countries, which are not EU-members, Erste Bank invests enough to capture the market opportunities, while at the same time limiting the risks.)

Portfolio.hu: OK, that's true, but you have bought a very small bank in Serbia...

Andreas Treichl:It is not too difficult for a bank to go up from 5% to 15% if you make acquisitions. There are a number of examples for this in Erste's history. In Hungary too we have bought a very small bank and later a bigger one. When we acquired a very big bank in the Czech Republic, we already had two branches there.

In Ukraine, a lot of banks still remain available. It is a big market and we have to get accustomed to that. If we have a three to four percent market share and 400 branches in Ukraine about five years from now the political climate may change and Ukraine will become a member of the EU.

Portfolio.hu: Does not the acquisition of BCR mean that you have simply stripped yourself from a number of other lucrative businesses?

Andreas Treichl: BCR is different story - Romania is in the European Union, and Romania is a key market for us. We found exactly the right bank that we wanted to buy. We don't want to buy any of the big Ukrainian banks that are around at this point. We don't like them so much. One other reason is that we are very experienced in buying banks, and turning big bad banks into big good banks. We had no experience in doing green-field. It is highly necessary for us to show that we can build things from scratch.

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1. Russia why not?
2. Promises to shareholders
3. Why is merging with OTP is impossible?
4. I don't want to be bought up by Russians