It is more than 10 years since the collapse of Lehman Brothers, but Andreas Treichl still hasn’t forgiven himself for what he sees as the biggest mistake he made in the run-up to the financial crisis.
“I had always been vehemently opposed to currency-mismatched lending to individuals,” says the veteran chief executive of Erste Group. “Everyone in Austria thought it was normal, the bankers all had FX mortgages themselves, but I hated it.
“Yet I ended up owning a bank in Hungary that had the highest market share in FX lending in the country. I don’t know why I didn’t stop it. I was too chicken.”
Treichl takes some comfort from the fact that he didn’t make the same mistake twice.
“When we went into Romania, I said we won’t issue a single Swiss franc loan,” he says. “As a result, we lost a third of our market share in 12 months – but I stood firm.
“If I had done that three years earlier in Hungary we would have avoided a lot of problems.”
If he made mistakes, however, Treichl has also got a lot right in his 22 years at the helm of Erste. Four months after his appointment in 1997, he took the 200-year-old Austrian savings bank public. Over the following decade, he transformed it into one of the leading banking groups in emerging Europe.
“Then just when I started to think that I am one of most brilliant individuals on the planet,” he says, “the financial crisis came and I had to realize that I had seriously messed up on quite a lot of things.”
As well as getting stung in Hungary when the forint collapsed, Erste also suffered heavy losses in Romania, where BCR – the bank Treichl paid a record-breaking €3.5 billion for in a 2005 privatization process – turned out to be riddled with bad debts and worse management.
Does he wish he hadn’t bought BCR?
“I regret every day how much we paid for it, but I don’t regret buying it,” he says. “Despite all the problems, I would be very unhappy if we didn’t have it because we are strong enough to support it, it’s now making money and Romania is a good market that will shape up one day.”
I managed to grow Erste and get it out of a mess- Andreas Treichl
Treichl also notes that the five times book value Erste paid for BCR looks less egregious when compared with the Austrian group’s own share price at the time.
“We paid with our shares and we were valued at 3.5 times book,” he says. “That would be the equivalent of buying a bank for 1.8 times book today – no one would say that’s completely crazy.
“Erste was highly overvalued, and with highly overvalued shares we bought something that was even more overvalued.”
It is also only fair to note that Erste was not the only bank overpaying for central and eastern European assets at the time. Two years after the BCR deal, in an equally ill-fated purchase, UniCredit paid six times book for ATF Bank in Kazakhstan.
That was one mistake that Erste avoided. At a time when western European rivals such as Raiffeisen, UniCredit and Société Générale were pushing east into Russia and the CIS, Treichl kept his focus closer to home.
“We believed that, in countries that were on the path to EU accession, corruption would end more quickly, thanks to both the rapid development of the educated middle class – which is the strongest weapon against corruption – and the need to adhere to EU rules,” he says.
Perhaps with Romania in mind, he adds ruefully: “We were only partially correct in that assumption.”
However, if Erste had a tough time in the wake of the financial crisis, it has made a remarkable recovery. Not only is the group now well-capitalized and impressively profitable, it has also emerged as one of CEE’s leading digital innovators.
Treichl is proud of his part in the turnaround.
“The day when I knew we had survived the clean-up and emerged stronger than ever was the most rewarding in my whole banking career,” he says. “I managed not only to grow the bank but also to get it out of a big mess.”
In December, he will hand over the reins of the revitalized Erste Group to his successor, Bernhard Spalt, and move to head up the Erste Foundation, the charitable organization that is the bank’s biggest shareholder.
This will give him an opportunity to work on an issue close to his heart – financial inclusion.
“The state of financial education in CEE is horrifyingly low,” he says. “If we don’t address this, it will seriously hamper the development of the region in the long run.
“I’m not a doctor, but I would like to be a financial doctor. I want to help people understand the importance of an educated and organized financial life.”