OTP banks on corporate customers and focuses on expansion

The Romanian banking market is still feeling the negative effects of the current crisis, but despite this, lenders continue to post positive results and are also making promising noises for the end of 2009. One of the medium-sized banks active on the market is OTP Bank Romania, which recently celebrated five years of local activity. It seems that the lender achieved at least one of its most important goals: making a profit. It posted an after-tax profit of HUF 133 million in 2008, its first profitable year. Moreover, in the first six months of 2009, the lender posted an after-tax profit of HUF 586 million. Talking to Business Review, Mirica addressed the evolution of corporate loans both for his own organization and for the whole of the Romanian banking scene. He also outlined the lender's corporate strategy on the local market. According to him, for its first five years in Romania OTP focused on consolidating corporate banking activity and amassing a high number of new corporate clients. “It was a development time and we intend to continue this strategy in the future. We also plan to strengthen our position on the corporate banking segment,” said the executive director. To this end, the lender has devised a significant and strategic corporate client concept. Another element of its strategy was to extend its corporate banking offer, in response to the specific needs of customers. It is quite clear to all that the crisis has had a deleterious impact on companies' turnovers, reducing them significantly. In order to meet its customers' needs, OTP has decided to be closer to them, offering support services during the turmoil. The aim of this approach was to minimize the damage for its customers. “We have a flexible approach that let us conduct customized analyses for every single company. Together with our customers we have set up a specific framework to support them during the crisis,” added Mirica. Despite this, much like the whole market, OTP's corporate loans' volume shrank in the first part of the year, due to customers' reluctance to borrow. But there is also good news: some corporate customers are becoming more interested in taking out a loan, because of their increased need for short-term financing. “The volume of corporate loan contracts shrank by 5 percent in the first semester on the end of 2008. Since September the volume of loans has stopped falling and we expect it to increase in October,” said Mirica. He expects OTP's corporate lending activity to rise by 10 percent maximum in the future on 2009's estimated end of year balance. Moreover, “we will take a specific approach rather than a general one,” said Mirica. The lender will focus in the months to come mainly on companies that have managed the crisis professionally, optimized some business lines and adjusted investment plans according to the current situation. As for adapting its range of products for companies to suit the current context, OTP has changed both their distinctiveness and prices. “The pricing policy for loans, cash management and the exchange rate is structured as a package and closely linked with customers' future estimations of their activity,” said Mirica.Turning to the innovation on the Romanian corporate banking market, Mirica says that it depends both on the local market and on each bank's approach. “A product must address a specific and tangible need. As customers are becoming more sophisticated, banks will meet their requirements. It's clear that there is plenty of space to innovate on the corporate banking segment,” adds the banker. Regarding the most important short- and medium-term strategic principles of the bank, Laszlo Diosi, general manager at OTP Bank Romania, says that they are stability, liquidity and profitability, in that order. “We want to become a significant member of the top ten market players in Romanian banking and finance, in the next five years,” says Diosi. He adds that the lender has decided to reach this objective either the organic way or through acquisitions. But he specifies that a possible acquisition “could happen when we find a suitable and realistic target”.
Corporate clients feel the pressureIn the last five years the Romanian corporate segment has developed as quickly as the local economy did. The banking system has become mature, consolidated and sophisticated. A significant downturn has taken place since the economic crash, and companies have needed to adjust their strategies, in response to their slumped turnovers. But, as Mirica says, private companies reacted promptly to the crisis, restructuring both their activity and business lines, cutting costs, focusing on their most profitable business divisions and paying more attention to business decisions. In fact, the worst affected companies were the small and medium ones, while large organizations felt the crisis less acutely than small players. But once companies became reluctant to borrow money it was too hard to predict a recovery for lending in Romania. “The first green shoots in lending depend a lot on awareness of the short- and medium-term evolution. Companies are being more cautious and thinking twice before signing a loan contract or revolving credit,” says Mirica. He expects lending to bounce back in the second half of 2010, but not as the same levels as those posted from 2005 and 2008.
anda.dragan@business-review.ro