The banks’ Balkan strategy
The focus is clear for all five of the largest Greek banking groups: Expand further and upgrade the network in the Balkans as well as the products and services on offer. Their strategy is to exploit the comparative advantages afforded by their geographical position and the promising growth trends of the economies of Balkan countries, which are moving fast toward free market status. Their specific goal is to increase their income by developing profitable activities in the Balkans, in other words, to create new profitable resources in Greece’s neighboring countries, which will generate considerable profits and sustain this profitability on a long-term basis. Kathimerini contacted the five largest Greek banking groups and presents their current position as well as their future plans for the Balkan markets. National Bank of Greece National Bank of Greece (NBG) is basing its Balkan strategy on two core goals. First, to secure its dominant position in the financial sectors of the neighboring countries. NBG could pursue this goal either through acquisitions or by developing its own assets, as it has already successfully pursued both alternatives. Second is the constant development of new products. NBG currently represents the most significant force in the Balkans, having invested more than 400 million euros in the area. NBG has established its presence in five countries (Bulgaria, Romania, Albania, Serbia and Montenegro, and the Former Yugoslav Republic of Macedonia), either through its subsidiaries or through its own network. Altogether NBG operates 207 branches in the Balkans. In FYROM, NBG controls 35 percent of the retail banking market, 15 percent in Bulgaria, 11 percent in Albania and 16 percent in Serbia-Montenegro. NBG was the first to issue credit cards in Bulgaria and FYROM and the value of its outstanding loans to companies based in the Balkans is higher than 1.2 billion euros. Bulgaria represents the largest market, with loans worth about 830 million euros. Alpha Bank Alpha Bank’s management considers the expansion of its network into the Balkans a must in order to increase its operational volume and its number of customers for it to compete effectively. But such expansion will take place gradually and only after careful evaluation of each local market, in order to avoid possible losses. The bank’s expansion strategy is to enhance its position mainly in areas where Greek companies are already active. Having established its initial presence in such areas, the bank will then proceed to attract local customers and gain market share. Alpha bank operates a network of its own branches in Albania, in Serbia-Montenegro and in Bulgaria, while it is also present in Romania and FYROM through its subsidiaries. All of Alpha Bank’s units in the Balkans are profitable, with the interest spread representing the main source of income. In December 2003, the value of the group’s total assets in the Balkans amounted to 911.16 million euros and profits before taxes increased 27 percent that year. Total deposits increased 27 percent compared to 2002 and the value of outstanding loans jumped by 46 percent. EFG Eurobank Ergasias Eurobank aims to increase the share of its Balkan activities in the group’s consolidated financial results, including a 20 percent share of total profits and 25 percent of turnover by 2008. Eurobank is currently active in Bulgaria, Romania and in Serbia-Montenegro, with a total investment of 158 million euros. In Bulgaria, it owns 92 percent of Postbank, with a network of 119 branches, controlling about 5.2 percent of the country’s banking market. Its share of the market as far as deposits are concerned is 5.4 percent and the bank also claims a 7.8 percent share of the national mortgage market. Its net profits rose 65 percent to 6 million euros in 2003. In Romania, Eurobank has established its presence through Banc Post, controlling 53 percent of its share capital. Banc Post has a network of 165 branches. Its net profits rose 57 percent to 6.2 million euros in 2003. Eurobank aims to secure third place in the market on assets as well as to become the leader in the country’s retail banking market. In Serbia-Montenegro, Eurobank operates through EFG Eurobank Beograd, owning 91 percent of its share capital. The bank has a network of four branches, planned to increase to 50 within a five-year period. Piraeus Bank The Balkan market is of immense strategic interest to Piraeus Bank. The bank is planning its expansion into the retail market and its further development as a financier of small and midsized companies. The bank is active in Albania, through its subsidiary Tirana Bank, which operates 18 branches. It plans to offer leasing services and products in the near future by establishing a leasing company, Tirana Leasing. In Romania, the bank maintains its presence through Piraeus Romania Bank, with 10 branches, soon to become 15. It has extended loans to 159 companies. Piraeus Bank has 12 branches in Bulgaria, operated through its Piraeus bank Bulgaria. The group offers additionally online and telephone banking services through Bulgaria Winbank. The group will expand its network with six new branches by the end of 2004. It will also start offering leasing services and products. Emporiki Bank Through its subsidiaries, Emporiki Bank is currently present in Albania, Bulgaria and Romania. Its management aims to increase the return rates of its own capital to more than 10 or 12 percent, otherwise it will adjust its plans for the area. Emporiki subsidiaries focus their strategy on attracting foreign and local business customers, supporting large and midsized Greek companies active in the area as well as on expanding their position in the retail banking market and developing other activities. Emporiki Bank has extended funding to companies, especially from the retail, manufacturing, construction, telecommunications, energy and transport sectors. A promising market For Greek banks, the neighboring Balkan market presents a most attractive opportunity, as it means the expansion of their field of operations from an almost mature, local market of about 11 million inhabitants, to a market of more than 50 million consumers, currently at its initial developing stages. Romania’s and Bulgaria’s chances of becoming members of the European Union by 2007 give those two countries a competitive advantage over their other Balkan neighbors. Another positive factor concerning the economy of the Balkans relates to their average rates of growth ranging from 4 to 5 percent and their inflation rates decreasing steadily. Yet, for Greek banks, the most important factor is the low level of development of Balkan countries’ banking systems in comparison to Greece and other eurozone member states. The average rate of total bank assets as a percentage the gross domestic product (GDP) is about 50 percent for the Balkans, compared to about 150 percent for Greece and 260 percent for the eurozone. The average rate of deposits as a percentage of GDP is only 34 percent for the Balkans, compared to to more than 90 percent for Greece and 97 percent for the eurozone. Lending to the private sector in the Balkans is no more than 23 percent of their collective GDP, compared to about 60 percent for Greece and 90 percent for the eurozone. These figures show the importance of expansion into the Balkan markets for Greek banks.