Today we welcome Mr. Pedro González Grau, CEO of the family-owned Andorran banking powerhouse MoraBanc. In the three or so years since his arrival, Mr. González has led a substantial transformation of MoraBanc’s business model, which is now proving crucial in boosting the bank’s current and future profitability prospects, as well as its sustainability.
Mr. González, thank you for joining us.
I suspect that it must be a fairly unique occurrence in today’s world of banking for an institution of MoraBanc’s stature to still be family-owned. Do you think this provides any advantages over your Andorran banking peers, especially when it comes to forging solid client relationships?
In recent years, we have transformed and adapted our bank to be competitive and stand out in the new international banking market. We have modernized MoraBanc with innovative projects but do not want to lose the traditional values that come from being a family bank. These values, which blend innovation with sound judgement, inspire trust and are highly valued by our clients. More than 60 years of history as a family bank have given us a unique know-how that can’t be found in other banks. It allows us to undertake long-term projects and differentiated investments for the benefits of our clients and shareholders (Formula E, Admiralty Arch, Casa Vicens…) without obsessing with quarterly earnings growth.
Yes, I imagine that must provide some relief. And those earnings you mention have certainly been impressive in recent times. Among the most spectacular figures from the bank’s 2016 results, for instance, is the 32.4 percent capital adequacy ratio, according to INAF (and 19.04 percent CET1 ratio, according to Basel III), which if I’m not mistaken is the strongest in Andorra. To what do you attribute such strong levels of solvency?
MoraBanc Headquarters in Andorra la Vella, Andorra
Solvency is of paramount importance for a bank with private-banking activities. MoraBanc is a 100-percent family-owned bank, and this is clearly reflected in the way we do banking. Traditionally, we have been a conservative bank with a long-term vision based on values like solidity, trust and solvency, which is why we’ve been the most solvent bank in Andorra for many years now. At the expense of a higher return on equity, strengthening our solvency ratio has been one of the objectives of our strategic plan in recent years—both to provide our clients and stakeholders with peace of mind and to have the investment capacity to respond to market opportunities within the framework of our strategic plan and our drive to grow.
As I understand, the bank is well ahead of that strategic three-year plan, which I believe was originally scheduled to finish in 2018. How have you managed to get ahead of schedule?
We designed the strategic plan to transform MoraBanc with a three-year roadmap, and we were very strict with ourselves when it came to setting goals. We were also aware that many of our domestic peers would have to undergo similar changes, and therefore the faster we could adapt, the more we would differentiate ourselves. Thus, the effort to try to implement a three-year plan in two. While the effort and stress have been far greater, the sooner we could adapt the faster we could focus on future growth. Today we can say that the effort of the bank’s entire team, with every member doing his or her part, has made it possible for us to get ahead of schedule, and in 2017 the bank plans to break the dynamics of falling profits by reversing the trend and growing its profit again. The depth and speed in adapting are now also integrated into our DNA, making us a more flexible and efficient bank.
So, when do you expect this current three-year plan to actually be completed then? And what are the bank’s major targets over the next three or so years?
Our three-year plan will be largely completed by the end of this current 2017, a year ahead of schedule. This has involved a huge effort from all our teams, and it is something we are all very proud of. Our capital base is also stronger and our balance sheet more liquid. As a result, we can now fully focus on the clients and future challenges for them and us, namely:
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Sustaining the competitiveness we’ve acquired with the new digital tool over the coming years, thanks to a continuous and sustained investment.
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Increasing our strong presence in Andorra, gaining market share in domestic banking by serving all targets: individuals and companies with loans, wealth management and solutions for new expats in the country.
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Consolidating our business in Miami and Zurich through both organic and inorganic opportunities. Acquisitions in other markets may also be analysed, provided they have enough scale upfront.
That “digital tool” you highlighted there—I presume one of the bank’s most notable accomplishments in recent times has been the launch of the new online platform MoraBanc Digital. What are some of the best features of this platform, and are you satisfied with its performance since the launch?
MoraBanc Digital is our flagship project. It represents a significant part of our spirit of transformation because it is an innovative initiative that makes the bank more accessible to clients and users through several channels, making their lives easier. We can be their bank wherever and whenever. Results so far exceed our best expectations. Client sign-ups have increased 39 percent, web users 33 percent, visits 84 percent and money transfers 33 percent in just the first nine months of operation. Figures can only tell so much, but what they do demonstrate is that the people who use the MoraBanc Digital service have embraced it and find it useful. Client satisfaction is our top priority, which is why we continue to work to innovate and advance in what is a crucial project for us.
You also mentioned focusing on your business in the United States and Switzerland, where you have an active overseas presence, especially for wealth management. What benefits does the bank reap from having a presence in these countries? Are there plans to expand the bank’s geographical footprint into other countries in the future?
As an independent family-owned bank, MoraBanc had the opportunity in 2014 to acquire the first house built by the great architect Antonio Gaudí, a private house in Barcelona that MoraBanc has transformed into a museum opened to the public in November 2017. For MoraBanc, it’s a unique investment in Culture, based on sustainable patronage.
We’re an Andorra-based bank, but we have long wanted to expand to other countries. We believe our value proposition of bespoke client management and professional investment process with both in-house and third-party competitive products can be exported, particularly to marketplaces and clients with similar cultural backgrounds. Right now we have regulated wealth-management entities in Zurich and Miami, and both are growing successfully: 43 percent in 2016. Our priority today, having rationalised our international footprint, is to consolidate such international outposts both organically and inorganically. Having said that, the foreign market is an opportunity that we want to take advantage of, and we’re always on the lookout for new opportunities that may make sense.
And what about back home in Andorra—do you consider the domestic economy to now be fully recovered from the five years of recession that ended in 2013? And if so, do you consider MoraBanc to be ideally positioned to capitalize on higher growth rates during the coming years?
Andorra is growing. The recession is over. The number of tourists continues to grow every season, and this is one of the major driving forces behind this small country. Beyond tourism, the commitment to transparency and competitive fiscal positioning means that increasingly more companies and individuals move here. This is also an interesting line of business that we’re working on with a highly specialized international team. During these years of change, our focus has also been very intense in our domestic market, explaining all the transformation and launching new initiatives and products to try to help in bringing growth back into the system. All of the above, I believe, should help our competitive positioning, as results are starting to show. We are therefore well-positioned and capitalised to take advantage of these opportunities, and others that may arise in Andorra or abroad.
If I’m not mistaken, Andorra also signed up to the OECD’s (Organisation for Economic Co-operation and Development’s) Automatic Exchange of Information (AEOI) agreement in 2015. Can you briefly explain how this event has significantly changed MoraBanc’s prospects?
This agreement is an expression of Andorra’s commitment to transparency. We were early believers and are convinced that this is the right path, and therefore designed three years ago an end-to-end transformation plan at all levels of the bank. It has also required very extensive and intense client contact throughout this process. At the leadership level, we have incorporated new independent directors to the board and have redefined the senior-management structure and teams along efficiency criteria. At the business level, we have a new commercial offer in Andorra to grow our domestic market share, and our activities in Miami and Zurich closed in 2016 with significant growth, all of which is tied to a strong investment in the digital aspect of banking. This whole process has also updated our internal culture, making the bank much more agile and efficient. The strategic plan is well ahead of schedule, and MoraBanc will once again increase profits in 2017, the best indicator that our adaptation to the new scenario works and that we have managed to sustain an attractive and unique value proposition.
How do you expect the Andorran banking sector to change over the next few years?
We just dealt with massive changes as a financial sector. Here at MoraBanc, we’ve done our homework, and we’ve adapted. The key, now and in the future, is to find the differential values that we can offer as a sector and as a bank. I think client confidence shows that we continue to be an attractive option for a number of reasons. We are a great choice for diversification of assets, have a know-how and a way of doing banking based on highly competent professionals developed over 60 years of experience, and present an attractive proposition for individuals and corporations in terms of quality of life, stability, location, fiscal and regulatory environment. Delivering on these values is important, as is taking advantage of what Andorra has to offer companies, businesses and expats.
Well, it would seem that MoraBanc’s long legacy of banking excellence is reaping substantial rewards today, and long may it continue. Mr. González, many thanks for your time today.