As one of the most liquid banks in Europe, Hellenic Bank is in a unique position to grow and is embarking on a digital transformation to meet the demands of the future.
Bert Pijls is the dynamic Dutchman heading Hellenic Bank and has a strong commitment to see the bank develop into a strong contender in the Cypriot market. The US-trained CEO has a long international banking career, with around 18 years at Citigroup. Moving to Cyprus to head Hellenic Bank in January 2015 marked country number seven for Pijls and since then he has brought in new investors to support the future growth of the bank.
Could you give a brief overview of Hellenic Bank?
Hellenic Bank is doing well and 2016 marks our 40th anniversary. Historically, we’ve been a well-run and conservative bank, and as a result fared relatively better than others through the financial crisis. That in turn has led to solid depositor confidence and over the last two years our deposits have steadily grown to twice the size of our loans – establishing us as one of the most liquid banks in Europe. This means we have the opportunity to put this liquidity to work, both for the Cypriot economy and the bank. We are in a position where we have adequate capital to grow and so far have seen good results with business multiplying. All our efforts are being further boosted by the Cypriot economy’s return to growth.
Following the banking crisis of 2013 and with the merger of the island’s two biggest banks, Bank of Cyprus and Laiki Bank, we are now the second largest privately-owned bank in Cyprus. We have attracted new shareholders and revamped the board. Wargaming and US hedge fund Third Point each have around 26% of the bank , local investment house Demetra has 10% and more recently we were very proud to see EBRD acquiring around 5% ownership, the rest is made up of smaller domestic and international investors. The investment of EBRD into Hellenic was not only a vote of confidence in the bank but also into the Cypriot economy. It is hopefully the first in a number of strong partnerships in various areas, such as shipping, NPL management and trade finance.
We conduct a lot of international business and have representative offices in St Petersburg, Moscow, Kiev, and Johannesburg, and we are also reopening our rep office in Athens. Our ambition is not to fully enter those markets with large branch networks, but to support the business we conduct here in Cyprus. We decided to reopen our Athens rep office mainly because of the recent influx of Greek clients and business into Cyprus, and we want to better cater to their needs in Athens.
We are a full-service bank, and cater to the entire local market, including retail, SMEs and corporates, as well as offer a full suite of products covering insurance, investment and private banking. We are listed on the Cyprus Stock Exchange and have a very supportive shareholder base, and our aim is to grow and further strengthen our position in the market in the coming years.
What key priorities have you set for 2016?
Our priorities are threefold. First of all, we need to aggressively manage non-performing loans (NPLs). This aspect is the single biggest challenge for not only banks, but for the entire economy of Cyprus, and must be dealt with swiftly. In order to tackle the NPL risks, banks must take an active role along with the regulators, government, politicians as well as the clients. Everyone must come together to figure out the best way forward and remove all complacency and denial about the situation.
The second priority for us is to spur growth in all of our lines of business, but particularly in lending. The businesses and households that have survived the crisis are definitely viable, and I see no reason not to offer lending services to them. Clearly, we must take a different approach to the pre-crisis methods, but we want to grow and see the economy thrive again. We are already seeing much more activity in the market, which is stimulating growth in Cyprus.
The third key priority for Hellenic Bank is to undergo a digital transformation. We need to take a long term view on the market and realise that the sources of competition are changing. We can’t just view other local banks as our competition, but realise that even new Fintech start-ups can be contenders now as they have a very low cost burden, but can operate across Europe or even globally to serve their clients. We need to be ready to compete with this type of business too. Equally important is to realise the trend of people using their mobile devices for practically everything. Clients today expect to conduct banking online and on their mobile devices. In the next decade, mobile solutions will play a huge role in the retail, SME and corporate side, and we need to be ready.
How are you preparing for this digital transformation of Hellenic Bank?
We need to harness the talent and strengths of our employees, and complement it with more efficient technology. Going digital does not only mean what our customers see, but also implementing proper digital solutions in our internal processes to make operations smoother. In a bid to achieve this, we recently hired a new Chief Technology Officer (CTO), who previously held the position of CTO for Samsung Electronics, Europe. It is crucial to bring in the right expertise in mobile and digital solutions, because this is the future and we are determined to take our services to the next level.
What new trends and patterns do you see emerging in your sector?
The two biggest things already influencing banking are technology and regulation. These two factors will transform financial services and will have a big impact on what types of systems and skills we should have – traditional banking skills are not enough anymore. Regulation is becoming more burdensome and there is a huge cost to all this compliance and it will have to eventually be passed on to clients as well.
The new OECD Common Reporting Standards (CRS), currently being implemented, is a big shift on the way banks operate and use personal data and customers are still very unaware of its impact. We are also dealing with multiple regulators, such as the local central bank as well as the European Central Bank (ECB) and the Cyprus Securities and Exchange Commission (CySEC) in addition to various international regulators and monitors. It’s become a very tough landscape and we are now running the risk of over-shooting it and if the volume of regulation keeps increasing it may have an adverse effect on the industry and economies worldwide.
These two factors are driving the evolution of banking, and will also bring more innovation in various aspects such as security and biometric solutions.
How important is it for Cyprus to attract foreign direct investment (FDI) and what sectors of the economy offer the greatest opportunity and why?
I am encouraged by the progress Cyprus has made and think there is great momentum at this point. It is crucial for Cyprus to attract more FDI, as it would speed the recovery substantially. Real estate is an important sector and has already seen much investment. However, Cyprus is over reliant on it, which means it has a disproportionate effect on the economy. This is painfully evident in the current situation with the high level of NPLs in Cyprus, as around 90% of collateral that banks hold are real estate. So in actual fact, Cyprus’ NPL crisis is a real estate crisis. What is encouraging to see is that the decline in retail prices is slowing down and we’ve already seen residential prices go up. Also the tax incentives launched by the government have stimulated the sector. What we need is marginal real estate price inflation, as it would prompt people to buy now rather than waiting for prices to drop further – and I think we are reaching that point now. The conditions of the market have already brought big investments into Cyprus, with the purchase of flagship malls and hotels by foreign investors. Although 2015 was a record year for tourism, Cyprus is still underperforming when compared to similar destinations in the Mediterranean and there is much untapped potential and opportunities for investment.
Another important form of FDI are projects that create new jobs and skills. The country would benefit from having programmes in place to attract this type of investor. For example, if Cyprus would implement a similar ecosystem as neighbouring Israel, it could become an exciting start-up location. It has all the same fundamentals in place, but no comprehensive strategy and support system for this type of business. A possible reunification of the island would also substantially boost the economy and bring more business and vital foreign direct investment.
The 2013 banking crisis dealt a severe blow to Cyprus, how could the country’s image be further strengthened?
Cyprus is still the only European country to suffer a bail-in and was treated as a bit of an experiment. Although devastating for depositors, from a fiscal perspective the controversial move has had its benefits as the state was not burdened by the debt, which in turn has placed the country in a better position than many others in Europe at the moment.
A good reputation takes decades to build and can be lost in a moment. Cyprus has suffered a blow, but its image and reputation as a solid business and financial centre is improving continuously. Locally, I would like to see more of an international focus on business in terms of a joint effort to compete with the rest of the world. Cyprus has great potential to punch above its weight if it’s proactive in offering better quality and higher standards than other jurisdictions. Competition is fierce today and with everything going digital, physical location and proximity play less of a role – it’s what you can offer that counts. If Cyprus can create a viable strategy and maintain high standards of service, it will prosper. Another key element in raising its profile, Cyprus must communicate more and advertise itself internationally, as many global investors haven’t heard much since the 2013 crisis. Telling the world the situation has stabilised and the economy is growing is just as crucial in attracting business.
How do you see Cyprus developing in the next five years?
Cyprus has done a great job in re-establishing itself after the crisis. However, I do think the country is over-banked when compared with its European neighbours. This is a drawback because it means less efficiency and economies of scale. In the next five years, there will be some consolidation in the sector as the market is too fragmented now and we need healthy competition and growth. It is important that as a small economy you don’t over-inflate your financial sector, in addition to Cyprus, Ireland and Iceland have gone through this painful experience. I would personally be more in favour of looking at developing Cyprus as a great place to do business, with this of course you need a healthy banking sector, but to have an ambition to become a major financial centre like New York or London is simply unrealistic. In terms of financial services, I think Cyprus will play a big role in supporting and facilitating business through expanding international banking services. In the near future, Cyprus will also have to broaden its skill base in digital and data services, risk management and other niche areas that are becoming increasingly important for business due to regulation. Cyprus really is a great place to do business, and its legal and accounting services have helped create the business hub it is today – also its geographical location provides many business opportunities. I would urge foreign investors to take a serious look at what Cyprus has to offer.