“The budget will provide for a profit, but the amount will not be large. In fact the amount doesn’t count, what counts is the signal sent by setting a profit target,” says the head of Erste. Over the course of 2012 BCR deepened its losses from one quarter to the next, reaching a total of EUR172 million after nine months. Under the circumstances, restoring the bank’s profitability is the main objective of the mandate entrusted to the BCR management team.
One year after selecting the bank’s current management team, headed by Czech Tomas Spurny, Treichl says he is confident in the team’s ability to bring the bank back on its feet. “This is a good team and I am happy with the job they are doing. Things are slowly starting to move.”
Amid continuous rumors that Spurny might end his CEO mandate prematurely, Treichl says the head of BCR will remain in place and that he has confidence in him.
“Spurny is already starting to achieve results and feels he can accomplish his mission. He is already known as being good at restructuring and if he achieves this at the BCR, his market value will go sky-high and I think he is aware of that and feels motivated to stay. He is not doing it for the money he is earning now, but for the reputation and value that will come from the BCR project.”
Since he became CEO in April 2012, Spurny has had one single press appearance, in December, and at the time he would not give a specific duration of his mandate.
According to market information, the initially discussed mandate was just two years, but Erste officials say it is in fact longer and that the idea of Spurny going back relatively soon to Italian group Intesa (from where he was recruited by Erste) is “nonsense”. “As time goes by, people will see that Spurny is still at the BCR and these rumors will stop,” say Erste officials.
“I know I have said this over and over again, but I continue to believe that Romania has an extraordinary chance. (…) Romania badly needs foreign investment and in order for this to come stability is needed. If it uses its chance, Romania can very fast become a second Poland.”
Treichl is surprised at the talks on the Romanian market about selling non-performing loans at discounts of 90-95% and says in principle these loans have to be sold only when the bank no longer believes there is any chance of recouping the money.
As for the players in the Romanian banking system, the head of Erste says several banks will leave the country. “At the same time, once growth returns to the Romanian market, it will have the potential to attract very big players, specializing in retail, such as HSBC and Santander.
“Until then, those of us who are committed to stay on the market have to continue the construction of increasingly good banks, with increasingly good services. For Erste, bank digitalization is a priority.”
Treichl also says he wants a much more efficient use of the huge client databases of banks within the Erste group, which are too little used.
Erste will reduce by EUR260 million the value of its participation in the BCR, the largest bank on the Romanian market by assets. This is the second such move in a year and a half, after in the autumn of 2011 BCR’s goodwill was cut by EUR700 million.
The Austrian group paid EUR3.75 billion for 62% in BCR in 2005, which valued the bank at six times its equity, a price that seems overvalued under the current circumstances.
Erste registered in its books as goodwill the difference between the acquisition price and BCR’s equity. Basically the goodwill is the book value of the business potential as it results from the business plan. The goodwill was EUR1.1 billion at the end of 2011, according to Erste’s annual report. Now the EUR260 million will be deducted from this value.
(English version by Daniela Stoican)