Steven Van Groningen: Borrowing Appetite Is Low

• Raiffeisen Bank has not foreclosed on any bad load

Ana Săbiescu

Raiffeisen Bank Romania, one of the leading lenders on the local market, has not yet foreclosed on any customer unable to repay their loan and has not sold any receivable, said President Steven van Groningen in an exclusive interview to BURSA. He stressed that the bank was focusing on finding solutions together with the customers and manage the situation as best as possible during the current circumstances.

"There was a clear increase in the volume of bad loans in January compared to December, as the exchange rate deteriorated. Now we can say that the situation is stable. The volume of bad loans is no longer increasing from one month to the next and, indeed, this is a good time to find solutions together with the customers. I don"t mean to say that we, as a bank, have restructured loans. It is the customer who needs to restructure their obligations, both towards the bank and in their personal life," van Groningen said.

Approximately 2,000 Raiffeisen Bank customers have requested a loan re-schedule since the beginning of the year. Unsecured loans account for most of the overall value of bad loans across the entire Romanian banking system. However, such loans also come with higher interest rates. Despite the increase in the volume of bad loans since the beginning of the year and the consequent increase in provisions, Raiffeisen Bank does not need a capital increase, considering the results of financial analyses and stress tests, van Groningen explained.

"We do not need a capital increase, considering our analyses and even the stress test made by the National Bank of Romania. We are in a good position and we do not need additional capital," van Groningen told BURSA.

• Customer relationships, a priority for Raiffeisen Bank

Raiffeisen Bank is focusing on long-term relationships with the customers this year, after several years when the entire banking system focused simply on giving loans, van Groningen explained. "Surely we need to continue to give loans, but we also need to have a long-term relationship with the customers. If the customer does not need a loan today, we are not trying to give him a loan, but treat him as a valuable customer," he said.

• Lending recovery signs in April

Raiffeisen Bank has noted a slight lending recovery at the end of April and found it to be sustainable, the president said. "At some point, we transferred many people from lending operations to collection, but now we have started transferring them back. However, the appetite for borrowing is low and it is very hard to forecast what will happen," van Groningen said. The slight lending recovery was noted particularly for unsecured loans taken by individual customers, following a promotional campaign started by Raiffeisen Bank.

Steven van Groningen emphasized the importance of the loans / deposits ratio, as well as the bank"s objective to grow deposits faster than loans. "It is difficult to translate that in numbers, but it is important to have a trend in each direction. At such times, direction is more important than speed, I believe," he said.

The bank"s loan portfolio has progressed very well, according to the president, who stressed that Raiffeisen Bank was one of the few banks with a higher market share on deposits than on loans. However, he emphasized the need to have interest rates on a downward trend, especially for loans, in order to stimulate lending and investment. "We need the interest rate to be on a slow downward trend. It is hard to say where it will end up, but I believe that interest rates are too high now," he said.

• Cost management, a leading objective of Raiffeisen Bank

Despite many uncertainties in the financial system, Raiffeisen Bank has defined priorities for this year, including a distinct focus on cost optimization. "This is a good time to manage costs very well. This is very important because you do not have the time to pay the most attention to cost management when you are growing fast," van Groningen told BURSA. Raiffeisen Bank has therefore starting renegotiating contracts, improving resource management and implementing business optimization projects. "There are projects that we want to implement, projects that contribute to efficiency. For example, we have a major project related to archiving. We spend 8 million EUR per year on archiving. This is obviously a cost we can improve," the president said.

Additionally, the bank has planned to reach the end of the year with fewer employees than it had at the beginning of the year. Importantly, the job cut will be the result of normal events and not of layoffs. "It is a normal, natural process. Every month, we have approximately 50 people who leave the bank. Some of them retire, some of them go to work somewhere else and some of them go on maternity leave. We also have more than 400 employees on a fixed duration contract," van Groningen explained. The bank concluded last year with 6,800 employees.

Three months through the year, Raiffeisen International, the majority shareholder in Raiffeisen Bank Romania, reported a net profit of 17 million EUR from operations in Romania and Moldova, down by 55.2% from the 38 million EUR reported for the corresponding period of 2008. However, this sum accounted for approximately one third of the parent bank"s overall profit.