Interview | Wednesday, 01 April 2009

Not in the size but in the numbers

Finansbank Malta General Manager Cenk Kahraman may only be 33 years of age and not your stereotype finance mogul, but in less than four years he multiplied his bank’s assets twenty-fold. Interview by DAVID DARMANIN

Have you always been involved in the finance sector? Were you directly employed in your position at Finansbank, or did you grow within the bank?
I’m actually a mechanical engineer by profession. In my third year of engineering school, I took a work placement as an executive assistant at a dairy products firm – where I was always intrigued on how the projects they undertook were financed. This is how I decided to take up finance after my graduation – which is when I joined Finansbank as a management trainee. Some time after that I was promoted to marketing officer at one of the bank’s largest branches in Istanbul. An inter-departmental promotion followed, and I was moved to the treasury unit of the bank, working on the foreign exchange desk.
In June 2001, I was offered a job as a treasury manager at the Malta office of Finansbank, which I accepted. Because of economic conditions at the time, head office closed the Malta branch and I went to Bahrain – working also as Treasury Manager. Then in 2005, the bank decided to re-open its subsidiary in Malta. That is when I was offered the post as General Manager, which I accepted.

Was the decision to re-open in Malta any way related to EU membership?
Yes, Malta’s accession to the EU was one of the main reasons behind the decision to re-open in Malta. Finansbank at the time had a number of subsidiaries in European countries such as The Netherlands, Romania, Ireland and France. Malta was key to us as our target back then was to let the office here work as a European hub.
Since the time we re-opened, a lot of things changed. Our starting capital base in 2005 was of €10 million. Now it’s of €200 million, and we’re looking at a further increase this year.

You mainly deal in the global market. How were you affected by the credit crunch?
The credit crunch tested our strengths. When it reached its peak in October and November last year, some of our investors decided to deposit their funds in larger institutions. But after all the turbulence, they saw that we stood still and as of the beginning of this year, we broke records in both our balance sheets and profits. I would say we came out stronger than we entered, but this is also attributed to the group’s performance.

What group do you form part of? Who owns the bank?
In 2006, Finansbank Malta and Finansbank Turkey were acquired by the National Bank of Greece (NBG), whereas the other subsidiaries became known as CreditEurope. Our acquirers are not only the biggest bankers in Greece, but also the oldest. They have been around since 1841. Whenever there is a crisis, a lot of depositors invest in NBG – and this tends to increase their liquidity enormously. When our liquidity decreased during the credit crunch, we were helped by the group – although we did not ask for excessive amounts. Also, the credit crunch mostly affected those banks with US exposure in their portfolios. Neither Finansbank, nor NBG have considerable exposure to the US market. Suffice to say that in 2008, the group made a profit of €1.5 billion.

How are you dealing with the recession that followed the financial crisis?
Financial crises are most often followed by a recession. By the time the financial sector picks up, the industry starts witnessing a decline. We’re in that phase now. It is however envisaged that the turbulence will be over by the fourth quarter of 2009. The banks suffering most have started again on a clean slate, and with enormous focus to get back up on their feet.
Our strength at Finansbank Malta is that we’re small in size, especially when compared to our profits. This makes us very dynamic and flexible. We respond very swiftly when external market forces change. We only employ 15 people here, so our reflex time is very short. When this gels with group backing and policy, we are capable of keeping off risky areas.
In turbulent times, we emphasise more on funding. During easier times, funding becomes easy to access so we focus more on promoting our assets. The number one killer of every bank is not the incurring of losses, but lack of liquidity.

Where are you positioned in the local market?
At the moment nowhere because we don’t really market ourselves in Malta, although we do have a small portion of local investors in our portfolio. However, 2009 will see Finansbank enter the Maltese market with private banking. I think there is a gap to be filled in this respect. Once these new services are launched, we aim to extend them - through our Malta office - to Turkey, Greece, Eastern Europe and Cyprus.
Our main interest at the moment is the Turkish market – which had consecutive years of high GDP growth. Finansbank Turkey for example, possesses only 10 per cent of the group total assets but generates 30 per cent of the profit, which shows the high yields in Turkish market.

How positively would you be affected is Turkey had to join the EU?
Turkey’s accession would affect us very positively, but this is yet to be seen. Turkey has a long roadmap ahead, and this might take 10 years at best. More realistically, we’re looking at 15 years. We will use this time to standardise our operations at ease. But by that time, Finansbank in Malta is expected to be very different. It is very possible that by then Turkey will not be our main market, as other markets we are exploring now might be giving very interesting results by that time.

You do not tag your interest rates to the European Central Bank (ECB). Why?
We offer either fixed or floating interest rates. Interest rate types are dictated by the customer. With floating rates, we either base on Euribor or Libor – since it is easier to hedge our rates on these. Euribor and Libor reflect the actual market, whereas the European Central Bank and The Bank of England provide intervention rates – which may not necessarily reflect actual markets. Since our rates are issued daily, our depositors may reap the full benefits of the market.

What are your views on local banks’ decision not to follow ECB rate cuts?
Maltese banks decided not to follow the ECB rates because the market dictated otherwise. The ECB keeps lowering its base rates because it needs investors to spend in the real market rather than in banks, in order to stimulate the economy. But you cannot possibly go lower than 0 per cent, and if interest rates keep going down without enough effect then it means that something is fundamentally wrong. The market will find the answer by itself.

Do you not notice a trend of small banks wanting to grow at this time in Malta, notwithstanding the delicate times?
The main purpose of the smallest banks in Malta is not to enter the local market, but the international one. The local retail banking market is heavily saturated and there is no more room. However, there is space for certain banking areas to be introduced to the local market – and this is because certain banking products in Malta are not yet compatible to world standards. At Finansbank for example, we’re looking at the prospect of introducing a series of new products to the Maltese market by means of private banking.

Are you not interested in entering the retail market in Malta?
No I would not say we are keenly interested in retail banking in Malta. The group owns €100 billion in assets. It employs more than 30,000 and runs more than 1,500 branches around the world. It has a lot of expertise in retail banking, but we don’t see any room to grow in this respect here. It would take a very aggressive strategy. There’s already BOV, HSBC, Banif, Volksbank, APS and Lombard in that field. We cannot add another piece to the pie – if we want a piece we would have to take it off someone else. If you take market share in retail banking here it would mean that someone else will have to lose it. The Turkish market is of course very different. The penetration rate in retail banking there is of 37 to 40 per cent. Finansbank Turkey opens 50 branches a year in Turkey. Group focuses on such markets for retail banking.

How do you see Finansbank Malta in, say, ten years?
2009 and 2010 will be milestone years for the financial sector all over the world as regulations are expected to become tighter. Also, it is foreseen that certain areas within the sector will emerge, which we at Finansbank will certainly exploit. Internet banking will also change a lot. In ten years time, I would like to see Finansbank Malta in a position where we are focused on certain EU markets such as Romania or Switzerland. We are interested in becoming a hub for the group, and I believe we have the potential to attain this target. A retail bank may not act as fast and effectively as we can in the international arena.

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01 April 2009

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