ASPIS BANK TO BECOME THE CORE ACTIVITY OF ASPIS GROUP, A MAJOR INTEGRATED FINANCIAL SERVICES GROUP
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Q: Mr. Karatzas, do you feel that your career in banking is "under the shadow" of the success of your older brother Mr. Thoedoros Karatzas Governor of National Bank of Greece?
A: Certainly I am not the right person to judge my brother's work, the Governor of the National Bank of Greece, since the bank's shareholders and the society in general have already acknowledged it. I must confess however, that his success lays heavily on my own work. Relatively speaking, I believe I will be up to the task I was entrusted. In any case, the ongoing comparison with my brother in terms of competence as well as social and professional recognition, is a great challenge for me. I would like to note that the problems of small banks are often related to their size, especially in an era of intense competition and expansion of credit institutions. However, I believe that the outcome of my own work within Aspis Bank will be acknowledged as equally successful by the shareholders and society.
Q: You have taken over Aspis Bank in a rather negative period according to its recent financial results. Where would you attribute these negative developments?
A: The financial results of our bank were lagging the results of others in the recent years, but this negative development was mainly circumstantial. In other words, it was due to nonrecurring events such as the surpassing of the credit limits set by the Bank of Greece which brought a "heavy fine", as well as the concentration of the bank in the mortgage sector, in which the competition among banks has recently intensified. Furthermore, the bank during the last few years is dynamically expanding its branch network thus generating increased general and personnel expenses and depreciation costs. We opened five new branches in 2000, three more since the beginning of 2001, and we aim to set-up another ten until the end of the year. This means that the bank will have almost doubled its branches within two years. As you realize, if we consider all the above, lower profitability was somewhat expected. That is not to say that we could not have done better. Regarding the change in the bank's management, it must not be perceived as a reproach of my predecessor - after all Mr. Efstathios Papaefstratiou is still with the bank and he supports my work. Basically, increased competition and the need for a more dynamic growth, made us adopt a different approach towards the issues of organisation, development and strategy; a change in the bank's leadership facilitates this approach.
Q: Do you expect that in 2001 the course of the bank will be reversed and it will become profitable?
A: I believe that according to the preliminary results and mainly due to the growth potential of certain sectors of commercial banking, fiscal year 2001 will be profitable despite the expansion of our network and the investments in infrastructure for the spreading of our activities. For this purpose we have submitted a request to the Bank of Greece to typically change the bank's status from mortgage to commercial. This will allow us to add new banking services and thus new sources of income, which are estimated to increase profitability. We are already developing the bank's business plan for the next few years, with emphasis on the development and expansion of our activities into the fields of Corporate Lending and Asset Management. After the completion of the relevant study and the appropriate recruitment, we will be ready to proceed with the dynamic development of these sectors.
Q: What is the model of development for the bank?
A: The bank's development will be based on three cornerstones, the utilization of the existing know how, the wide range of the new services to be offered, and the distribution networks of Aspis Group as complementary to the bank's branch network.
First of all, capitalizing on the mortgage credit we will expand retail banking, offering the full range of products and services that the Greek consumer asks for: mortgage and consumer credit, credit cards, investment products, mutual funds and bancassurance products which combine the benefits of savings and insurance. We will expand our branch network by adding small, flexible points of sale. Our aim is to reach 70-80 branches within the next three years. At the same time we are developing alternative distribution networks such as phone banking, upgraded ATMs, e-banking which will be available soon. Besides the ideal size of a banking network is no longer what it used to be. I believe that a network of 70-80 branches, which utilizes the new technology, is quite adequate.
Second in parallel with retail banking we will develop the Corporate Lending with special emphasis on small and middle-size businesses which are the most productive in our country and which, until today, have not been properly serviced by the Greek banks. We have already proceeded with the necessary infrastructure and are ready to begin dynamically during the second half of 2001.
The third cornerstone is the development of Investment Banking, which incorporates corporate finance, brokerage, asset management and private banking. Especially the last two will be developed faster in cooperation with the insurance companies of the Group.
Q: The financials of most banks indicate that their profitability declined in fiscal 2000. Do you think that after the accession to EMU we will enter into a phase of contraction?
A: To a great degree, the reduction of the banks' profitability is circumstantial and is due to the disproportionately large investment income of 1999, which makes the 2000 profits appear comparatively lower. The smoother course of the markets during 2001 will make financial figures more comparable and will allow for better evaluation of banks' profitability.
Regarding the possibility of contraction after the accession in the Economic and Monetary Union, I disagree. Compared to other countries there is substantial potential for further credit expansion of our banking system. High potential sectors, such as the mortgage and consumer loans, represent 25-30% of the Gross Domestic Product (GDP) in our country, while in other European Union countries are at the 50-60% level. Given that the foreign banks have withdrawn their operations from the Greek market, with one-two exceptions, it is obvious that the Greek banks strengthened by low interest rates and high reserves face significant growth prospects. One thing that will change is the degree of easiness to make profits: the banks' margin squeeze, requires innovative management models, that will pursue profits from sources other than lending, and more effective management of the operating costs. At this point assimilating new technology and taking advantage of its potential, will have a great impact.
Q: In this new competitive environment that will be formed in the Greek market, what is the future of a small bank like ASPIS Bank?
A: It is misleading to call ASPIS Bank a small bank because this ignores the existence of ASPIS Group, which is a large, full-scale integrated financial services Group with a dynamic and extensive sales network throughout Greece and vital synergies that have not yet provided the maximum returns. There is a very large client base that we have not yet fully utilized and to which we will aggressively cross-sell the bank's services and products. Apart from that, I have to highlight that all banks are desperately pursuing cooperation with insurance and asset management companies acknowledging that the traditional differentiations of their products and services are becoming obsolete. ASPIS Bank has the background and the know-how to become a leader in the upcoming developments and the notion that it is "small" is a rather short sighted one. Combined with the comparative advantages mentioned earlier, ASPIS Bank faces a bright future.
Q: The current structure in the Greek market after the mergers and acquisitions of the previous years is final or do you think that more such corporate activity will follow? And are you going to survive by yourselves?
A: Of course the answer cannot be categorical, given the numerous unforeseen developments, which are being influenced by factors that cannot be defined precisely. However, the expansion that took place over the last years without planning, aiming purely to increased market shares, have not yet produced the expected returns. As a consequence many banks are facing efficiency problems. Therefore, without excluding the possibility of new mergers and acquisitions, this time banks will go ahead cautiously and based on specific strategic and efficiency goals. Regarding ASPIS Bank, the intention of its main shareholder is to pursue a dynamic, autonomous growth, so that the Bank will become soon the heart of ASPIS Group. Capitalizing on the synergies with the other companies of the group, and particularly their distribution network, the bank has the potential to compete on equal terms with the leading banking institutions.
Q: Most banks have proceeded or are planning to proceed in the formulation of strategic alliances with foreign banks for acquiring know how etc. Have you ever considered this issue?
A: As I mentioned, ASPIS Bank aims to an autonomous development. However this does not rule out the formulation of strategic alliances with foreign banks or with financial institutions in specific business fields such as Asset Management.
We have already contacted established foreign institutions, in order to explore the potential of certain alliances.
Besides, ASPIS Brokerage S.A. recently entered into an alliance with UBS in the field of Global Investment Management. It is likely that other similar alliances will follow.