BR Cover Story | Mihaela Bitu, ING Bank Romania: Banking makes dreams come true

ING Bank Romania’s 30-year history in Romania is deeply intertwined with the evolution of the country’s banking system since 1990. The journey began with handwritten payment orders, suitcases full of cash, telex transmissions, and a shortage of hard currency. Today, it continues with advancements in internet banking, mobile banking, and Generative AI (GenAI). Mihaela Bitu, the CEO of ING Bank Romania, joined the company six months after its entry into Romania, and her career has been closely linked with the bank’s growth and the broader changes in the Romanian banking sector. Bitu has witnessed and actively contributed to the transformations brought by ING Bank Romania. On its 30^th anniversary, Business Review spoke to Mihaela Bitu to reflect on the past three decades and assess the current state of the banking system and the country as a whole.

By Aurel Dragan

What is it like to be the CEO of a top bank? How has your career evolved?

It is challenging, but also very interesting. It is a position that can bring immense satisfaction, especially if you are part of a beautiful and successful organization like ING. I started from scratch, got a job at a Romanian private bank straight after university, then I did an MBA and joined ING, back in the summer of 1995, only 7 months after the opening of the bank. I started as a management trainee and then advanced my career in the area of corporate and investment banking, dealing with both local and foreign corporates, as ING was a purely corporate bank until 2004, when we launched retail banking operations. Following two international mandates, I became the Head of Wholesale Banking and a Deputy CEO in 2010 and later, in 2019, started my CEO mandate.

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Strong financial and commercial start for the 30th anniversary year for ING Bank Romania

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What was corporate banking like in the ‘90s and what has changed since?

Companies’ financial functions have developed significantly over the years. CFOs and their teams are now much more sophisticated and professional, and similarly the range of products and services that banks offer has also expanded continuously. Expectations are much higher now. Thirty years ago, we introduced Western banking practices, as we were the first large international bank to start operations in Romania after 1990. Our banking approach was advanced for the time, particularly in terms of technology, which was far ahead of what local banks offered. In addition, we emphasized building relationships and partnerships with clients, based on the understanding of their needs and challenges, and providing them tailored solutions.

Clients trusted us because we were a reputable Dutch international bank. We benefitted from the access to multinational companies that were also coming to Romania, and gradually we expanded our client base to include more and more local companies. Initially, some people were skeptical, and there was even an amusing misconception that we were a bank for engineers, due to ING being similar to the Romanian abbreviation for “engineer.” But perception changed over time and our presence on the market and our brand became stronger and stronger.

How were the years between 1996 and 2000 or even later, when interest rates were driven by hyperinflation?

There were interest rates that exceeded 100%, making lending in the local currency practically impossible. Mortgage loans were completely absent and long-term lei lending was unavailable. Generally, credit was only issued in foreign currency to companies that had exports, with natural hedging, because there were no financial hedging instruments. Lending was typically short-term and very restricted; it was a time when people would preserve the value of their money by buying dollars and German marks. It was a nascent period for the banking system; to make a settlement at the National Bank, you had to bring a suitcase full of payment orders and cash. We didn’t have SWIFT and relied on telex communication for international trade transactions.

Then came the SWIFT system, marking an important milestone in the development of banking and the speed of international transactions, not to mention what happened when the internet emerged and practically unleashed online banking. Currency exchanges were limited at first, because there was not enough foreign currency on the market, so we had lists of companies and not all of their demand could be met. Those were special years, but bankers, the general public, and companies have all learned to adapt and gradually the market has developed.

I evolved by working in the corporate banking and lending areas, then also in M&A consultancy. I focused on  capital markets for a while, in M&A but also intermediating debt and equity issuance of large local corporates on the international financial markets, for instance Petrom’s first Eurobond issuance and syndicated loan. Our first  syndicated loan was provided to Renel, to finance the supply of fuel oil in ‘96-‘97, for the winter stock.

As I moved more into investment banking, I was given the opportunity to go to London for a one-year assignment with the Corporate Finance team that handled such transactions for Central and Eastern Europe. I was offered the chance to stay there, but decided to return because I really wanted to contribute to the development of banking in our country. I took over as the General Manager of ING Baring Securities, our brokerage firm, but at the same time I was also working on what I knew best: capital markets issues and mergers and acquisitions consulting. As operations grew, I could no longer do both jobs, so I chose to focus on the commercial banking segment.

Later I had the opportunity to go to Amsterdam, where I was head of general lending for Central and Eastern Europe, and the financial crisis caught me there. I was there from 2007 to 2010. We had left Romania in the middle of the boom, when all we wanted was to grow, and a year later Lehman Brothers collapsed and completely changed the operating paradigm. It was a painful episode for all the banks in Romania, but it was a necessary correction. Let’s not forget that we hadn’t seen a crisis before; we didn’t know how to approach a restructuring. That’s when I had my first experiences of dealing with a crisis and had a lot to learn, as did our clients.

How was the transition from analogue to digital for banking?

Since the 1990s, we have had an electronic payment system for companies called Multicash, which was an offline system because online services did not exist at the time. Then came the internet, leading to the advent of websites, followed by mobile phones and mobile applications. Our internet application, Home’Bank, was the first of its kind to be launched and later became synonymous with the category of internet banking. We initially started with the website and only later developed the mobile application; between 2008 and 2010, the application was not widely used, with the website being the primary platform. Now, on the contrary, we are investing heavily in mobile. We still have clients who prefer to use the website and tokens, even though it is much easier to access the application using biometric security, but they are a minority. Today, the share of mobile active customers within the total active customer base is 84% and the share of customers that use only mobile within the total digital customer base is 89%, which is impressive even when comparing to Western markets.

When we launched retail banking in 2004, we introduced an innovative concept for that time. From the beginning, , we had no branch operations. Instead, we had machines and people who could guide customers on how to use them and offer advisory services for complex products. There were ATMs and multifunctional machines called Multimats, where you could instruct payment orders and other types of daily banking operations. Then we introduced Home’Bank, but for some time people still preferred to come to the Multimat for transactions. However, recent years have brought a clear and accelerated move towards digital services and a clear preference among clients for easy access to banking services from the comfort of their homes. We have always brought new and innovative solutions to the market. It is more challenging nowadays, but even though the differences between products and services are smaller, there are still things that stand out, especially in terms of the experience we offer to our clients and the relevance of our value propositions.

Do you think cash will ever disappear?

Someday, I believe it will, but no one knows exactly when that will happen. The use of cash will certainly decrease significantly in the coming years, but let’s acknowledge that the use of cash is associated to a certain extent with the grey economy and tax evasion, therefore the evolution of cash usage is dependent on how forcefully the government will act regarding this phenomenon. We can safely assume that cash will not disappear entirely in the short to medium term. The share of the unbanked population is declining, especially with the generational shift, as young people are much more familiar with digital solutions. There is also the phenomenon of the migration from rural to urban areas, which I believe will accelerate, with cities becoming gravitational centers for the counties to which they belong. This will increase the share of the banked population and hence the usage of cards and banking transactions, to the detriment of cash. In 8-10 years, we should reach over 90% banked population, from the current level of 73%.

What is the best part of being CEO?

The fact that  you can really make an impact. Together with the team, of course¬—you can’t do anything on your own, but you can make a difference for customers, employees, and society as a whole. You of course need a very good team, which I believe we have here. We also get involved in big societal issues, such as education—particularly financial education, but not exclusively. We are working, among others, with Banometru and Teach for Romania, and this year we’re also sponsoring a large educational conference, Dare to Learn, which will hopefully trigger positive change in the educational system. Sustainability is another cause we strongly believe in and we are developing many initiatives and products in this direction, to support our transition to a greener economy. We like and want to do impactful things, and we should not forget that banking has a deeply human element: it helps people make their dreams come true, helps them buy homes, create options for the future by saving, maintaining their financial health. Banking makes things possible and contributes to prosperity and progress and that is very important.

What was the most difficult moment in your career?

After the crisis, the covid pandemic was very difficult. I had been CEO for only six months when the pandemic hit us and that involved profound changes in the way we interacted with each other and with customers. There was a very tense atmosphere, we had all become very anxious and fearful of the economic crisis that could have easily followed. Fortunately, at ING we were better prepared than others, so we could also work from home immediately. At the time, we no longer used landlines, everyone had a laptop, so it was easier to switch to remote work. The difficult part was creating content, organizing, functioning in the new paradigm. And it took us a few months to set up the new system, but people got enormously involved, they mobilized to solve the problems that came up. Everyone reacted well: the banks, the state, and the people. There were moratoriums, support programs, all of which had good results and the pandemic did not turn into an economic crisis, not even in the most affected sectors, such as hospitality. Technology played a very important role at that time; the situation would have been much different had the same pandemic hit us 20-30 years earlier.

How is ING Bank Romania doing today? What is its position among the top banks in Romania?

From a numbers’ perspective, we are fifth in banking assets. But the rankings are influenced by the ongoing market consolidation. We are proud of the fact that we are the only bank that has organically reached a market share of 9% in banking assets and 10% in loans and deposits. Beyond balance sheet numbers, we are equally, if not even more interested, in continuously developing our client portfolio (currently at 1.8 million active customers) and providing them the best customer experience. We constantly invest in innovation and customer experience. These two attributes have been the guiding thread over the years, and our clients recognize these elements, as evidenced by the fact that we obtain the best Net Promoter Scores (NPS) in the banking sector year after year, which is a great accomplishment for us, and the result of a lot of focus, investment, and effort. We believe that these DNA traits are also relevant for the future and we continue to focus on digitalization and customer experience. Without happy customers and employees, you cannot perform well in banking. We not only enjoy the best NPS, but we are also the employer of choice in the financial industry and a top 10 employer across industries. This gives us confidence for our future development and success.

What’s the share of non-performing loans?

Under 3%, same as the system average. But we are a prudent bank; for example, we’ve never given out loans in Swiss francs. We were also the first bank to give up mortgage loans in foreign currency when RON interest rates reached reasonable levels. We have always been a responsible bank. We could probably have had an even higher market share had we been more aggressive, but we prefer to do business responsibly. We are a bank that builds for the long term, and I am extremely happy when I meet clients whom we have had with us for decades and with whom we have grown together.

We are going through an intense election year. Does that affect you at all?

It affects us all, and it is a year of profound significance that will set the course for the next decade. But there will be more challenges in 2025, even 2026, because we have an elephant in the room—the budget deficit—and compensatory measures will probably be necessary after the elections. I hope to see better financial discipline at the government level as well. Further steps can be taken to improve tax collection, reducing the need for fiscal adjustments. For Romania, the elections will determine the mix of economic and fiscal policies that follow, while in Europe and the US, they will set a tone concerning globalization, potentially leading to more nationalism and protectionism. There are problems in many corners of the world, and the geopolitical landscape is very complex. The combination of election results and the geopolitical situation could lead to some unfavorable outcomes. But any situation always brings new opportunities, and I am an optimist in my own way.

What does Romania look like from the outside?

Romania looks very good, it is a story of successful convergence. We have positive economic foundations, but also a massive demographic problem. We have technology on one side, migration on the other. However, the economic fundamentals allow us to grow above potential, at 4-5% per year in the medium-long term, enabling us to achieve an economic position within the EU that reflects our population size. As a nation, we are ranked sixth in terms of population, but we are twelfth in economic power, and we need to close this gap in the years to come. And we are seeing progress; ten years ago, we were 15th, and since then we have outpaced economies we had never hoped to. Our GDP has grown substantially and will continue to do so.

Additionally, we have not had the political slippages seen in Hungary and even Poland. This has allowed us to stand out in a positive way in our region. We are constantly communicating with foreign investors and I don’t think we’ve ever been more attractive than we were last year. This position has now eroded a little due to the persistently high budget deficit, and everyone is waiting to see more decisive measures, which are unlikely to be taken in an election year, but are expected for the coming years. Furthermore, we have made significant progress in the fight against corruption over the past few years, which is also contributing to a positive perception of our country.

How do you see the future?

The future will certainly bring both challenges and opportunities, including from the technology side, which is advancing very quickly. It is clear that there will be profound changes in banking as well. I don’t know when we will see banking products created by AI, but we are developing GenAI software for providing relevant content for customers. It can bring a high degree of personalization of banking services. I don’t know how many years it will take for it to be used regularly in client interaction, but it won’t be long now. At the same time. let’s not forget that GenAI also brings up risks, which we must manage very carefully. But technology will also continue to make the difference between banks, and we remain focused on innovation. This includes aspects around cybersecurity, which are crucial in maintaining customer trust. The future sounds complex and challenging, but incredibly interesting as well!

This interview was featured as the main cover story of the Business Review Magazine’s June 2024 edition