The best banks in the continent’s developing markets reported higher growth and stronger fundamentals in 2019.
Global Finance: What were the key factors in RBI’s performance in 2019?
Johann Strobl: Our focus over the past year has been very much on innovation and the resulting improvement in customer value. Our initiatives all basically aim at helping us make banking as easy as possible for our customers. One good example of how we can offer convenience through innovation is our digital know-your-customer process, e-KYC. We were the first Austrian bank to offer this to large companies, in 2019.
Obviously, such features also make life easier for us by improving our efficiency, reducing time and manpower needed for organizational and regulatory necessities and ultimately giving us more time to communicate with our customers—in other words, to acquire business and execute it fast and flawlessly.
GF: How does RBI deal with new market participants, such as fintechs?
Strobl: Proactively, thereby creating mutual benefit. I think it is fair to say that RBI is one of the leaders in fostering fintech ecosystems. In 2017, we launched Elevator Lab, the largest fintech partnership program in Central and Eastern Europe [CEE], in order to meet current and future trends in the banking industry and to satisfy the evolving digital needs of consumers in cooperation with fintechs. In 2018, we founded Elevator Ventures as a logical complement to Elevator Lab. As RBI’s corporate venture-capital entity, Elevator Ventures focuses on strategic direct investments in later-stage fintechs, co-investments with partner investors and investments in VC funds—all in close cooperation with Elevator Lab.
When the Iron Curtain fell, more than 30 years ago, we played a pioneering role in building a modern banking system and transforming planned economies into market economies. In 2019, we played the role of bridge builder again—for example, by bringing together Western European fintechs and CEE banks, and vice versa—but the market, and hence, our role is very different today. CEE has caught up enormously over the past three decades and has a well-educated, digitally sophisticated population. Our current role is therefore less about development than about helping our clients and partners overcome local regulatory, linguistic and cultural barriers.
GF: What are the main economic and financial challenges facing the CEE region right now?
Strobl: The Covid-19 spreading in Western Europe and CEE is contributing to one of the sharpest recessions seen in recent years. For Western Europe, we will see the strongest setbacks in decades. Some CEE countries might still do a bit better from this point of view, given hefty setbacks seen either in the global financial crisis or during the transition crisis. Nevertheless, on average the economic hit in the region will be massive, with average GDP contractions at -3% to -8% year-on-year.
For the local banking sectors, still, this recession will possibly be less painful, given more-disciplined growth profiles in recent years. Prior to the financial crisis, from 2004 to 2008, the major CEE banking sectors enjoyed growth rates of 20%-plus, year-on-year, mostly externally financed; in the last four years, average loan growth amounted to around 5% and was mostly locally sourced.
GF: How does RBI intend to respond to those challenges?
Strobl: Basically, by remaining close to our customers’ needs, sometimes of course with a shift in focus from expanding their business toward helping them master any difficulties as early as possible. We are in close contact with various local governments and agencies offering aid and coordinating support programs. Feedback from our customers shows us that our initiatives to support them in getting help from the state, combined with our product and industry expertise, are much appreciated. Obviously, such a crisis hits the banking industry with a delay; and we are well prepared for that, regarding both capital equipment and risk-control procedures. And our wide presence over the CEE region is helpful in that respect too, in terms of both business inflow and risk diversification.