Land Ho! From offshore to onshore

Volksbank Chairman Maurice Mizzi and Managing Director Thomas Havlik speak to David Lindsay about Volksbank’s ambitious plans to come onshore, after operating as an offshore bank for seven years

After seven years of operating as an offshore bank, Volksbank Malta is about begin operating as an onshore bank, pending final approval from the Malta Financial Services Authority.

Part and parcel to Volksbank’s onshore move are the new services it will be making available to both local and foreign clients. These will include financing Maltese corporate companies - an initiative that has attracted a good deal of interest from future Maltese customers - servicing ITC’s and offshore companies, as well as offering permanent residents home loans and a range of collective investment schemes.

But what is it that Chairman Maurice Mizzi and Managing Director Thomas Havlik feel will distinguish Volksbank’s products and operations from the competition?

Maurice Mizzi explains, "First of all, I am very pleased for Malta that a bank of this size, one of the most reputable in central Europe, is coming to Malta.

"I think it is important for Malta to have one of the largest banks of the region come onshore in Malta as it will give us better connections with the region as a whole and with Austria in particular, which will help Malta and its standing in Europe.

"It’s quite an exciting time for us. So far we have been limited to dealing with foreign customers and have not been allowed to deal with Maltese corporate or individual clients.

"With Volksbank officially coming onshore in the near future we will continue to be fast, efficient and deliver a highly personalised service for home loans, collective investment schemes and corporate finance. This is where we think we can score on the local market.

"In this case small is beautiful. I am very excited about the fact that although we are a small bank in Malta, we are backed by a bank the size of Österreichische Volksbanken AG.

"Once we have received the final go-ahead from the MFSA we will be able to deal with Maltese individuals’ banking needs, such as home and personal loans. We also plan to be active in corporate business. We will, of course, have to be careful with our advances but we will be in a position to give them."

Interesting for the prospective home buyer, Volksbank’s bureaucracy-free policy means the bank can have home loans approved within 24 hours and the fast turnaround on international payments saves businessmen and corporate clients time and money.

Volksbank Malta currently employs an international workforce of 25 banking personnel and last year the bank registered substantial growth, with a profit of EUR7.6 million - a 27 per cent increase on the previous financial year.

With increasing profits and a widely expanding portfolio of services in the pipeline, what are Volksbank’s future staffing and premises requirements? Mizzi explains, "At the moment we are employing 25 people but I can envisage that, as the workload increases we will be taking on more personnel. For the time being we will operate from these premises but if the workload outstrips the capacity of this building, we will have to move.

"However, we will be starting off small and slow. Things cannot be done in a hurry in banking - it’s quality and following the proper methodology that count.

"As we are entering a completely new ball game, our first task will be to consolidate the work here. We expect to increase our client base in terms of numbers, whereas we had say 500 large net worth clients as an offshore bank now we might expect a higher number of clients but with lower net worth and advances per capita.

"So obviously we will have to make sure that everything is in place and that the customers will be getting the right service for their needs.

"The next step will be to go forward into the North African markets and establish either a base there or at least carry out frequent visits.

"We have not decided on our course of action in this sphere as yet, since there is a lot of business to be dealt with here first. But it should be emphasised that there is a lot of business to be had in the North African region - especially in Libya, a market that is just beginning to flower."

When was the opportunity to come onshore first identified, I ask.

Mizzi explains, "It was when I took over as chairman that we determined the need to and the opportunities from increasing our business by going into the Maltese market. We have done just that over a very short space of time, Mr Havlik has worked very hard on the project and we are nearly there."

Thomas Havlik recalls Volksbank’s initial decision to set up an offshore bank in Malta back in 1995, "Mainly we wanted to set up the bank to support our existing Austrian customers doing business in the Mediterranean region and to support them when they export to the North African region.

"Secondly, we also wanted to set up an investment bank. At the time we benefited from the legal environment in Malta and we are still benefiting from it as the additional expenses that cover the risk [of syndicated loans] are higher in Austria than they are in Malta, which is the reason why we are still concentrating on the international syndicated loan market today.

"However, at the same time we also developed products for the local market for foreigners, which will now be avaliable to Maltese residents.

"We are looking for new business rather than taking business away from the competition and the Maltese customer will certainly stand to benefit from the added competition we will be bringing to the sector."

Despite the range of new services being introduced at Volksbank, trade finance will still figure largely into its operations. Mizzi comments, "We will also be issuing letters of credit and other funds very quickly, which is very important in that businesses would save one or two days on transactions. In trade finance we will be able to see to a client’s needs very quickly and with a very personalised service.

"We will also be offering collective investment schemes. We will have bond-based funds, balanced funds, equities and funds of funds. These will number 30 products in all."

But he emphasises the distinction between his and Havlik’s role at the bank. "My role as chairman of the bank is to ensure that the shareholders’ investments are safeguarded and that the policy of the board of directors is upheld by the management.

"Meanwhile, the nitty-gritty day-to-day running is being done by Mr Havlik and his team. They will be assessing companies asking for advances, which I will not be going into as I feel I need to stand back from that operational sphere because of my position."

True to its founding concept in Malta, Volksbank intends to continue applying a focus on trade activities with North Africa. Havlik explains, "There is already a build-up of very good contacts between Libya and our head office and, in tandem with our step to come onshore in Malta, we want to concentrate much more on the North African market. This market holds a great deal of potential but you really have to be quick off the mark as international interest in the region is growing quickly. But obviously we have to take things one step at a time and our first step is to come onshore."

Havlik speaks about Volksbank’s, and his, history in Malta.

"Volksbank Malta was set up in 1995 and at the time I was already involved in the formation of the bank. However, the offshore licence granted to us at the time limited us to carry out business only with non-residents of Malta.

"In 1996 we had already moved to our current premises, starting at first with just the first floor, but as the business grew we also took on the second and third floors.

"From the beginning the business concentrated mainly on syndicated loans, which were done partially with the head office and with international syndicate leaders such as French and German banks.

"Following an absence from Malta, during which I was working in Slovakia, I was offered the post of managing director here. We had already started to sell products to finance foreigners who were interested in buying property in Malta. That started in 2000 and we have developed very well in the field due to the fact that we approve loans within 24 hours.

"Our practice was, and still is, to always deal with our customers on a face to face basis. Going to the customer, as opposed to the customer coming to us, gives us the opportunity to get to know our customers better than banks that only carry out business from their premises.

"Although we are quite small, we are in a position to give a much more flexible service to our clients."

Volksbank Malta is wholly owned by Österreichische Volksbanken AG, Vienna and the granting of an onshore banking licence represents an important evolution in the group’s strategy to expand its pan European network. The Group’s extensive knowledge base and expertise is also behind the local enterprise’s operations.

Mizzi explains, "Unlike a bank that has its base in Malta, we have the mother company supporting us. As such, we have all the expertise of a first class Austrian bank, which will obviously be avaliable to us when we need it.

"Training sessions are held in Malta and we also train people abroad and this is where we will be ahead of most of the competition– with the backing of a very good central European bank."

Mizzi had concluding words of praise for the Malta Financial Services Authority, "The co-operation we have had from the MFSA – from Professor Bannister, Paul Vella and their teams - has been incredible. They’ve been fast, accurate and we have benefited greatly from the assistance provided by these gentlemen and their teams. You don’t find such quality help everywhere – they’ve really gone out of their way to help us meet our goal."