CEC makes costly comeback

After the fall of dictatorship in 1989, CEC had everything going for it and a big chance of becoming the largest local bank or at least a leading player in the system.
First of all, it was the oldest Romanian bank, having been around since 1864. That automatically builds up confidence among clients and sheds a light of credibility and stability onto an institution.
Then, CEC was the only bank active throughout the communist regime. Its fall found CEC as the sole ruler of a vast, unmapped land starving for loans and cards and all that capitalism had to offer.
Thirdly, CEC's outreach was far wider than any other competitor could dream of putting together. Its 1,400-branch network even now continues to be by far the largest in the country, almost double the size of second placed BRD. Branches gave the bank visibility and business opportunities in even the most remote parts of the country where no other banks have gone.
Then again, CEC has had its share of bad luck as well. Most of it was linked to its on-again-off-again privatization strides. The state decided to put the bank up for sale back in 2005, gathered up eight European players, but had halted the privatization process by the end of the same year. In 2006, the process was resumed, but only one of the would-be buyers submitted a binding offer for the bank. The price National Bank of Greece was willing to pay for CEC, EUR 560 million, did not match the administration's expectations, and the privatization was called off once again.
The uncertainty and continuous tumult around it affected CEC's activity and financial performance. The change in management that followed the cancellation of its sale further deepened the insecurity. CEC's long-terms plans changed from one day to the other: from becoming a financial group comprising a housing bank and a leasing company to sticking to its core business and trying to become a leading commercial player.
The wandering in search of a direction took the bank from fourth position in central bank rankings at the beginning of 2006 to the 8th and then to the tenth at the end of last year.
In the meantime, CEC's most prized asset, its branches, was working more against it than for it. Their dusty appearance drew attention to CEC's lack of modern IT systems and alternative sales channels like internet banking, and to its basic products that did not even include credit cards until mid-2006.

The comeback: sexier image, better products, steeper growth
Under the new management, with Radu Gratian Ghetea at the helm, CEC's financial indicators picked up again last year. Even more importantly, the administration last week decided to give the lender a much-needed EUR 50 million make-over, a new name and a new scope: to become a strong universal bank and an important competitor on all business segments: retail, small and medium enterprises, corporate banking and agriculture funding.
CEC Bank went from the obvious piggy-bank symbol to an oak-leaf-on-a-shield logo meant to symbolize “continuity and tradition, authenticity and power, but also safety and protection,” according to the bank. It also got a commercial presenting it as a boxer who recovers after being knocked down and wins the match. The inspirational slogan was: “This is not the end. It is just the beginning.”
CEC's much-needed rebranding is and will be multifold. It involves a EUR 45 million unit make-over in about 600 of its branches and the launch of new products – some new to CEC and some new to the market: an internet banking service, a new credit card and three products giving companies and local authorities easier access to European funds among other things.
It will cost EUR 5.5 million to promote CEC's new persona this year and it will take two more years to modernize all of its units, most of them located in the countryside.
CEC's new found identity and its good run so far this year have prompted the administration to give up the thought of bringing in a strategic investor.
“When the management is efficient, the prospect of privatization does not translate into finding a strategic investor, but rather into listing the bank,” said finance minister Varujan Vosganian. He said CEC's gross profits had doubled last year and its assets increased 52 percent, slightly outgrowing the market. At the end of the first quarter of this year, the bank had amassed RON 42 million in gross profits, almost half of what it made for the whole of 2007.
This year, the bank wants to increase its loan portfolio by 48 percent and its deposit portfolio by 41 percent. Both percentages are slightly above the estimated average growth of the market.

CEC's predecessors in rebranding land
Aside from CEC, two other major banks have gone through rebirth pains in recent years. The difference is that their rebranding followed a merger and an acquisition respectively, while CEC's followed precisely their absence.
One of the two lenders in question is Banca Comerciala Romana (BCR), which was bought by Erste Bank, once a contender for the ownership of CEC.
BCR and CEC shared more than just Erste's interest. They also shared the image of outdated dusty banks lacking good taste in branch decoration and employing staff with poor people skills.
In February last year, Erste Bank decided to take matters into its own hands and put EUR 200 million into an Integration and Development Program (IDP) meant to complete the bank's assimilation of Erste Bank's principles and the consolidation of its leading position on the market.
BCR kept its old name, but got a new logo and Erste's defining colors, red and blue. Its number of units also grew extensively and their look changed for the most part. Former CEO Nicolae Danila was also replaced: first by interim head Manfred Wimmer and then by Dominic Bruynseels, starting July 1.
The rebranding was initially scheduled to be completed in 2009, but was declared over last month.
The other notable rebranding on the local market was that of UniCredit-Tiriac Bank. It came after HVB-Tiriac Bank and UniCredit Romania merged in 2006 and was expected to cost about EUR 10 million, according to initial estimates from Dan Pascariu, chairman of UniCredit-Tiriac Bank.
Both BCR and UniCredit-Tiriac have focused their rebranding efforts on extending their branch network, which has proven to be a costly and energy-consuming endeavor. CEC Bank does not have to worry about opening hundreds of new branches to catch up with competition. If anything, it might have to ponder the idea of closing some of them, especially in small remote villages. The cost of keeping and modernizing them might be bigger than the profits they actually turn in.

By Ana-Maria David

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