Champion of the retail banking revolution
MIDDLE CLASS AND proud of it. That’s the unapologetic claim of Andreas Treichl, chief executive of Austria’s Erste Bank and the man who has overseen a transformation in the bank’s fortunes over the past decade. At first glance, it’s perhaps an unlikely and even arguably an unwished-for boast for a bank headquartered in Vienna, a city that more than any other in the so-called Old Europe has attempted to throw off its fusty imperial past and sought to position itself it as the gateway to the hip, happening world of the soi-disant New Europe.
Closer inspection, however, reveals that on a practical level Erste’s ambition to be the bank of choice for the emergent middle class of central and eastern Europe is one lined with a gilt-edged future. The bank has pursued it with undoubted passion. Although its roots go back to 1819, making it Austria’s oldest financial institution, there’s nothing old-fashioned about the bank.
Its headquarters are on the site of a house where Wolfgang Amadeus Mozart wrote Die Abführung aus dem Serail in 1781, but the bank arguably has more in common with the late lamented Austrian popster Falco, whose annoyingly infectious hit Rock Me Amadeus showed that Vienna could against all odds have a popular – not to mention profitable – and modern take on its past. "Er war so populär, because er hatte flair," may seem an unlikely epithet to apply to any banker, but as an ex-biker turned fervent ice hockey fan Treichl is a prime example of the Old-Meets-New school of Austrian management that has yielded the country’s corporate community such rich dividends from the transition in central and eastern Europe, which has involved Communist party cards being swapped for credit cards with all the zeal of the thoroughly converted.
Born and educated in Vienna, Treichl began his business career at Citibank in New York, before taking in Morgan Stanley, Brown Brothers Harriman and Chase Manhattan. He worked in the US, Belgium and Greece in the late 1970s and early 1980s before returning to Austria to take the helm at first Chase Manhattan and then Crédit Lyonnais in Vienna in the late 1980s.
Given such a cosmopolitan résumé that spans spells in credit analysis, asset management and corporate banking, it’s perhaps no surprise that Treichl has seized the once-in-a-lifetime business opportunity offered by the opening to capitalism of central and eastern Europe to propel Erste Bank into uncharted territory. Treichl is clearly equally proud of the fact that the Austrian element of the bank’s traditional savings bank franchise is paying its way as much as the new segments of its business in central and eastern Europe. Austria makes a healthy 16% return on assets, compared with 6% when he took over the bank in July 1997.
And although Treichl concedes that Austria might no longer bulk quite so large in the bank’s imagination as it once did, Erste’s successful track record in its home market still lies at the heart of its success over the past decade or so, having provided the blueprint for its expansion into the burgeoning markets of central and eastern Europe. "We are the bank for the middle class in the region," says Treichl.
Different picture
In its former incarnation as an Austria-only savings institution, Erste was hardly going to set the banking world alight. With a mature, not to say oversaturated sector to play in, Erste had just 230 branches, 5,000 employees, 600,000 customers and a market capitalization of just €2 billion. A decade after Austrian rivals RZB and Bank Austria Creditanstalt had made their first pioneering forays into the newly capitalist markets of central and eastern Europe, the region contributed less than 5% of revenues. Fast forward to the last quarter of 2007 and the picture is very different. Erste is present in eight core markets, has more than 2,700 branches, 50,000 employees, some 16 million customers and a market capitalization approaching €16 billion. What’s more, central and eastern Europe contributes 75% of revenues, a proportion that is likely to rise even higher in the coming years.
One of the key factors behind that success has been the bank’s willingness to put its money where its mouth is when it comes to seizing opportunities in central and eastern Europe – Erste having invested in excess of €7.3 billon in its acquisitions in the region to date. To put that in context, that’s more than nine times more than the net payout that rival Raiffeisen International, with its mid-market corporate banking focus, has made in the region to date, having first started its expansion in central and eastern Europe way back in 1987.
Given the difference in business models between the two banks, Treichl is confident that Erste has spent wisely to give it leading positions in many of the markets where it now operates. Indeed, given its focus on the retail segment, where a critical mass of at least 20% is a prerequisite for success, Treichl maintains that the bank has made smart investments throughout its decade-long expansionist phase. The one acquisition that really stole the headlines was the €3.75 billion the bank splashed out on Romania’s Banca Commercia Romana in 2005 – the largest ever foreign acquisition by an Austrian company and the largest ever (excluding Russia) bank privatization in central and eastern Europe to date. Headline-grabbing as that figure is – and Erste has since spent a further €500 million on acquiring the employees’ stake in BCR and a further €200 million-plus on restructuring charges to date – Treichl is confident that the bank’s investment will pay off handsomely. "Wait and see what others will pay in the future," he says in defence of claims that the bank overpaid for BCR. "We pay a price based on expected economic development and also our ability to transform banks, " he says, adding that Erste has been proving its doubters wrong ever since it took over former state savings bank Ceska Sporitelna in the Czech Republic in 1999. "It took three years for the market to believe in the CS acquisition," says Treichl, adding that since then trust in the bank’s abilities to integrate and improve the efficiency of the banks it has acquired has risen immeasurably.