Equity 11 May 2015, 4:21pm

Sberbank Hungary CEO talks exit, takeover speculation, plans

Portfolio

Although it is not one of the large banks operating in Hungary, Russia’s Sberbank does want to remain a universal player on the local market, said Richard Szabó, Chief Executive of Sberbank Hungary, in an interview with Portfolio. The parent bank is apparently paying no heed to takeover speculation and the sanctions against Russia.

There were rumours that Sberbank could be the next bank to exit Hungary and that the Hungarian state and/or Coop Hitel were interested in buying the local unit of Russia’s largest bank. There was also speculation that the parent bank is unable to raise capital at the Hungarian arm because of the sanctions imposed on Russia over its conflict with Ukraine.Szabó played down these as rumours, saying he has no information to share in this respect.

“At management level our task is to operate the bank appropriately in the current regulatory and market environment. [...] in terms of our liquidity and capital everything is in order. Our diversified business model is doing fine," he said.

He has acknowledged that the sanctions against Russia reduced the country’s business activity in Hungary too, but Sberbank Hungary is not affected more by Russia’s economic developments than any other bank operating in Hungary.

“We are member of Sberbank Europe banking group and so our operation is supervised by European and Hungarian financial authorities."

He said he was not in a position to divulge information about the nationality of their clients, given it was confidential data, but noted that “Russian clientele is an important part of our business model, but not a critical pillar because it is rather diverse."

Asked about the burdens the settlement of unfair FX loan charges will place on Sberbank Hungary Szabó said they can manage it and the owner has given them “sufficient support" so that the bank could comply with the regulations and that the settlement would not cause problems at an operating level.

Szabó said that in the competition to replace loans (in the wake of the forex loan conversion) Sberbank will also have “attractive offers [...] competitive interest rates and terms", with the aim to gain new customers.

As regards the National Bank of Hungary’s (MNB) new Funding for Growth Scheme (FGS+), Szabó noted that one of its disadvantages is that it is available only for companies that plan new investments, while it may not be used to refinance existing investment loans. “At the same time, the SME sector is an important business segment for us therefore we want to be as active in the programme as possible."

Asked about the personal insolvency which may be implemented by the government, the CEO stressed “it is not a panacea. If it is indeed introduced in Hungary, a lot will depend on the final regulation, the type of model [the cabinet] will choose to apply."

Asked about cost-cutting plans in the pipeline, such as the closure of branches, Szabó reminded that Sberbank has indeed closed five branches early this year, but it still has 43 nationwide.

“Frankly, I was taken aback by the reaction of the media. Sberbank operates the same way any other profit-oriented organisation. We strive to achieve optimal operation, we are constantly monitoring the performance of our branches. If one of our branches performs below expectations then we first try to develop it and if we fail we close it down. We are constantly on the lookout for new and better locations and if we find one, we open a new branch. These activities serve the optimisation of the course of business."

Asked what could be the backbone of operations and the engines of growth for Sberbank Hungary in the future, Szabó responded that “retail services will continue to constitute an important basis for our business policy, but I think that in Hungary too - just like in other European countries - the engine of the economy is driven by the growth and development of small and medium-sized enterprises."

“This sector is the biggest employer and Sberbank wants to become the best choice for SMEs," he added.

“We are developing and offering universal banking and financial models for them and private segments alike. We hope that these solutions will be the drivers of further development and will be the foundation for growth both for SMEs and retail customers."

“We also find the market of large corporate important, e.g. we are also focusing on export and import financing. Taking advantage of Sberbank’s international synergies we wish to offer added value for corporate in these segments," Szabó concluded.