As the specter of a global economic slowdown looms, many banks are bracing themselves for leaner times. David Moucheron, Chief Executive Officer of K&H Bank, one of the leading financial institutions in Hungary, is confident that the bank’s solid financial position and international expertise as well as the resilience of the local economy open new vistas for the bank’s growth in Hungary.
Talk of a financial recession and a weaker global economy continues to grow, and economic actors are keeping a close ear to the chatter. The global banking annual review published by McKinsey in October warned that a “prolonged economic slowdown with low or even negative interest rates could wreak havoc” in the financial industry worldwide. Hungary’s banking sector was severely hit by the 2008 crisis, when lenders and regulators were caught unaware by the force of the economic meltdown.
Having learnt their lesson, KBC Group’s Hungarian unit K&H Bank has bolstered its financial foundations and is confident that a potential economic slowdown would not find the bank ill-prepared. “We have stable liquidity and capital position, our portfolio quality is good, the NPL (non-performing loan) ratio is continuously improving and we apply strict underlying criteria to the new portfolio, so credit risk is in control. All in all, we do not expect that any potential slowdown in the Hungarian economy would have a perceptible impact on our operations. We are positive about the Hungarian economy’s resilience,” David Moucheron, Chief Executive Officer at K&H Bank Hungary tells Diplomacy&Trade.
Indeed, the bank’s results are encouraging; the lender reported HUF 37.7 billion in aftertax profit for the first 9 months of 2019, up 5% from the same period a year earlier. In addition, the strong international background of K&H is a further guarantee for stability. “Hungary is a core country for KBC. Based on our strong international background, the level of service and funding is ensured not only in good times (like now), but also in stormy weather when the economy is less accommodating,” Moucheron points out. The executive adds that K&H can provide cross border financial solutions to its clients in a convenient way thanks to its international network, while the level of service, the implementation of digital and other solutions can be much faster at the bank thanks to the expertise gained in other countries.
Boosting the market share
K&H, Hungary’s second largest bank in terms of total assets, is looking to strengthen its foothold in the domestic market through systematic developments and building on its international expertise. Moucheron is positive that new product implementations and easy customer access to financial services offered by the bank will help K&H to improve its market position in the retail segment. “A typical example is our unique E2E mobile solution for cash loan processes; on the back of this and similar developments we managed to acquire around 9% market share in cash loans in the third quarter of 2019 (versus 6.4% market share in 2018).
In corporate lending, we are confident that with our capabilities to provide convenient banking services leveraging on our international expertise and background as part of a combined package – rather than focusing on a single transaction – we can remain competitive and increase the number of our core clients,” the executive notes.
The bank is also open to acquisition opportunities in the Hungarian banking sector, which is one of the most fragmented in the region and therefore ripe for consolidation. At the end of 2018, a total, 40 locally licensed credit institutions and nine foreign branches conducted business in the country, and the central bank has long been of the opinion that the number of financial service providers is too high. “Eventually it is expected that banks will merge with each other. K&H is in a strong financial situation and one of the most efficient banks in the country. Its customer base is continuously increasing in an organic way. So, we are clearly in a position to acquire other banks. On the other hand, we are committed to increase our market presence in an organic way as well, and the results of the last couple of years provide a strong confirmation that this strategy is working,” Moucheron says.
Riding the wave of innovation
The decade since the global financial crisis has seen a wave of innovation in banking services and the appearance of fintech startups and global giants like Google and Apple in the financial services sector is a strong incentive for established banks to reinvent themselves. At K&H, improvements to innovation capabilities and capital commitments to innovation remain in the forefront. “We are clearly aiming at being the best innovative bank in the market,” the executive says.
In 2019, the bank accelerated its digital transformation, focusing on offering best-in-class user experience across channels, while simplifying its processes and organization. “We made cash loan application with a few touches available in the mobile app and it became an instant favorite of our clients. This confirms that we need to continue making product purchase available on the mobile, moving away from the previous transaction-only approach,” David Moucheron notes. The number of mobile bank app users at the bank tripled in the past three years and now already more than 50% of clients actively use the mobile banking app. Innovation transforms the branches as well.
In November, K&H Bank was one of the first banks in Hungary to make it possible for clients to deposit cash via ATMs to another client’s account. By now, fast and easy cash handling became available at all branches. Cash-in ATMs made it possible to turn 60 branches out of the 206 to automated teller branches focusing on advisory instead, thus helping clients to make smart financial decisions. The bank introduced digital biometric signature via tablets for a limited set of transactions at the beginning of 2018 and by now 50% of branch transactions can be signed digitally. The aim is to reach 100% with both figures. “Our goal is to comply with the consumer requirements of the 21st century by providing an everyday banking experience in the most convenient, fastest and simplest way,” David Moucheron highlights.