Since 1998, major steps were undertaken by the government to prepare the ailing banking sector for privatisation. Transfers of bad loans worth over Sk100bn were operated from the 3 largest banks to 2 state hospital banks (Konsolidacná banka, Slovenská Konsolidacná). How would you qualify the way the restructuring of the banking sector has been handled so far by the government?
I think that what was done by the government was a success story. The government quickly recognised that revising the bank accounts before privatization was necessary. Then, the proper privatisation of Slovenská Sporitelna was done in less than 6-month time, which is really a record time and it was done in a very professional way through an open tender fulfilling the western conditions. In the end, the government has completed the privatisation of all the 3 state-owned banks rather successfully, with the IRB, now sold to the Hungarian OTP, being the most complicated case as it had been more than two years under banking supervision. The last to be sold is the Banka Slovenská (The Bank of Slovakia), which despite having profited, is rather small and based in the middle of Slovakia which makes it a little difficult to sell. Overall, the government managed to fulfil all the targets they had set themselves within the bank privatisation, ending up with some 80-90% of banking sector in foreign hands. Moreover, it was done at an unexpected speed and at a very professional level.
The two newly created state institutions are now responsible for debt collection. Knowing that half of the clients in the portfolios are bankrupt, how would you evaluate the debt collection process?
Since it is not the best portfolio to have, selling part of it can already be considered a great success. At the moment there is a merger going on between Konsolidacná Agentúra and Konsolidacná banka [Consolidation Agency and Consolidation Bank], which is a sensible action leading towards having them both in one hand. This process is also the reason they are not at the moment selling so many bad-debts. I think that next year they will concentrate on further selling of the portfolio.
Following the major restructuring process of the banking sector, the State sold a majority stake of Slovenská Sporitel'na to Erste Bank, Austria's 2nd largest banking group. What was the strategic interest for Erste Bank to take over Slovenská Sporitel'na?
In Austria, Erste Bank is a saving bank, which a slightly different situation than here, in Slovakia. The difference lies within the whole tradition of the banking sector. In Austria the banking sector includes banking associations as well as saving banks. Erste Bank is really focused on saving. And that is the common history for Ceská Sporitelna, Erste Bank and that of Slovenská Sporitelna. Our strategy is that we are here for everybody, taking all the deposit passbooks. Erste Bank is building up a big retail-group, which something that has not previously existed in central and eastern Europe. It is partly because most international banks, such as ING or City Bank are concentrating more on the corporate banking business and building up their international groups more or less on corporate banking. Erste Bank wants to be the leading retail banking group in central and eastern Europe, which it already is having Slovenská Sporitelna in the group. This is not to mean that we are not taking care of Corporates, however the strategic target market is the retail business and the small and medium-sized enterprises. Though we are not targeting at those big ones, they are nonetheless welcome. I believe that compared with ING and CITY our position, based on a long-term experience within retail banking, which has been the main business of our group, is rather advantageous. It is also very important for us, to include in the group both Slovenská and Ceská Sporitelna as the main institutions of their kind in the central and eastern Europe.
You share half of the market with VUB. How does your bank differentiate from VUB.?
Nobody knows at the moment what will be the strategic target of VUB as they had just got a new owner. So, we do not know exactly which way the Italian will exactly go. But I assume that they will more concentrate on corporate-client business than on retail. The tradition of VUB is that it has always acted as a corporate bank financing all the industries and all the corporates in Slovakia. And as far as they will continue this tendency, having different directions taken, we will not step on each other.
It seems that most of the banking sector is now re-focusing its attention from the corporations to the public. To your opinion, is the interest of the public in the collective investing growing and do you believe that in the short term there will be no substantial rise in corporate credit?
The fact that there are two possibilities of financing an enterprise (to give them a loan or to make a bondage) is nothing really new on the market. What might be new and shifting is the interest of the public in investments funds (e.g. we offer money-market fund and state-bond fund). But investment funds are always including a certain level of risk as it is not a passbook. And you also have to give a detailed explanation of what can and cannot be expected. For example, that there are no interest rates and that making higher profit may be accompanied with taking a higher risk. But it definitely represents a further possibility for Slovak population to invest their money in something different.
The EBRD owns 20% of Slovenská Sporitel'na. What is your level of co-operation with EBRD?
They have a member in our supervisor board and we have a professional corporationship. They are only building up their portfolio without having invested larger sums of money in Slovakia within the last five or six years. So I think they are simply looking for interesting possibilities to invest in Slovakia. And we are glad to represent such a possibility for EBRD who are, as professionals, not willing to invest in a company unless they see a strong potential. | The NBS started to use from 1998 the interest rates as the main instrument of its monetary policy. How would you describe the impact of that monetary policy on the inter-banking system?
In the last two years we have seen that the NBS is not exerting any great influence on the market and they really want to have a free inter-bank market which is very necessary from the perspective of entering the E.U. They are setting up their monitor goals like inflation rate and they are concentrating on the stable currency. They managed to decrease the huge interest rates from three years ago, which was especially important for the whole corporate sector which can now gain more investments and it also helped enabling people taking loans and paying them back.
Although not all banks are to be sold, would you see in the next five years a possibility of any acquisition by Slovenská Sporitelna of other banks on the national market?
Having a large market share, I do not see any necessity for buying a bank in Slovakia. Our network with more or less 500 branches makes us the biggest bank on the market. We have a mother-company who is helping as a lot with the know-how, we are getting experiences from the whole transformation process of Ceská Sporitelna, and we are co-operating with the Hungarian daughter-company of Erste bank. And also, buying a bank you have to make a merger, which is, of course, not always just fun. And being right in the middle of the transformation process of the bank to make a parallel transformation process and a merger would definitely be a great challenge, however a rather over-demanding one at the moment.
Today, especially with the EU perspective, it is necessary to create suitable legislative and supervisory bodies. The passage of the law on protection of deposits was a significant step in that direction. In your opinion, to which extent is this law to the benefit of banks and bank clients?
The new law on bankruptcy, which was completed with a last amendment in November last year, I think, had a real impact on the whole economy. This was a major step in the right direction as it gives a better position to creditors in case of bankruptcy, and as the banks are able to protect their rights in case of bankruptcy too. There was a move in case a bank goes bankrupt. Now we will pay out 90% compared to the previous 100% which is quite an advantage considering the possibilities of a misuse of the protection of the funds. On the other hand, the banks had to accept that we have to pay a higher fee for the funds, what was strongly criticised by banks.
How would you describe Slovakia as a potential investment destination as compared to its neighbouring countries?
I think that Slovakia has a lot to offer from the perspective of investments. First of all, the government passed the new law for tax incentives for new investments depending on the region, depending on the rate of unemployment (eg.: the higher unemployment rate the more tax incentives) The Slovaks in principle are willing to build up their country and they know that although there are many aspects missing, (e.g. the capital, know-how) they are ready to strike the effort. Therefore, from the personal, human resources point of view there is a good base. Another aspect is the cost point of view, salaries as quite low at the moment, which is always a rather interesting fact for an investor. I would describe the principle atmosphere for investors as excellent. Indeed, not everything is perfect. In such a young state one cannot expect the same circumstances as you find in Germany or Austria. It really is a question of natural development. On the other hand, looking at the results from the banking sector, the ROE figures, what the banks with foreign ownership could achieved here over the last years the western banks. We are talking here about 18-20-25-30 % ROE.
You were appointed the chairman and General director of Slovenská Sporitelna after having already some experience in this region. Could you briefly describe what actually motivated your taking up such a responsibility ?
I have been in the banking business for 18 years. I started in Austria and I was doing in the Austrian bank more or less everything. I worked in the head office responsible for strategic development, I was working in various branches too. And when my former bank started to build up its own business in Slovakia, seven years ago, I was responsible for the merger of those two banks. I familiarised with the country and I liked the people a lot. And then I got the chance when I was asked whether I was prepared and willing to take over this position. It was a great challenge and, indeed, I gladly accepted. It is really demanding as we are building up something new, but we are a wonderful team, the local people are deeply engaged and I am really satisfied.
My last words to potential investors would be that, although Slovakia is a small country, not very much known around the world, it is worth coming here, it is a wonderful country with wonderful people. And having once experienced it and knowing a little more about how successfully the people can do business here, then I think the investor will be tempted to invest even in a smaller country, with the size of Slovakia.
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V.I.P. INTERVIEWS 
