MONETA Money Bank, headquartered in Prague, Czech Republic, has undergone several name and ownership changes since its beginnings in 1990 as Agrobanka. In 1997, General Electric purchased part of the bank and rebranded it GE Capital Bank, later renaming it GE Money Bank. Nearly two decades later, GE exited the Czech Republic’s financial sector, and following its initial public offering, MONETA Money Bank was born, a fully Czech-owned bank. During the next four years, MONETA grew, becoming one of the largest companies on the Prague Stock Exchange (PSE) and the fourth largest financial institution in the country, with nearly 1.5 million customers. The bank operates two main lines, commercial and retail, through a network of 160 branches and hundreds of ATMs across the country. MONETA’s product range is diverse, encompassing everything from consumer loans to investments to insurance, along with loans to small businesses. The bank is committed to expanding its services through digital innovation, describing itself as the true digital champion of the Czech banking market. Its digital prowess is matched only by its determination to protect the environment in which it operates. Guided by its core values—entrepreneurship, respect, cooperation and engagement, accountability, credibility and integrity—MONETA has become an example to other financial institutions of supporting customers through all available avenues and economic conditions. In recognition of its achievements, MONETA has received many prestigious awards and placed highly in competitions.
International Banker recently welcomed Tomas Spurný, Chief Executive Officer of MONETA Money Bank, to provide an update on the bank’s success in weathering the pandemic and what he predicts the future will hold for MONETA and its customers.
Mr. Spurný, thank you for your time today….
MONETA recorded an operating profit of CZK 9.4 billion in the nine months to the end of September 2020, along with a 19.4-percent year-on-year increase in operating income. To what main factors do you attribute such a robust performance, especially in the face of the challenging conditions brought on by the coronavirus pandemic?
Last year saw MONETA complete the acquisition of insurance company Wüstenrot. What is the main reason that you made this acquisition in the first place? Is bancassurance a business area the bank may pursue in the future as a result of this acquisition?
The Wüstenrot acquisition was strategic for us from several perspectives. The first one was the acquisition of the building-savings segment, a CEE region-specific banking product known, for example, to come from Germany. Historically, there have been only six banking licenses for the building-savings business, and Wüstenrot stavební spořitelna (Building Society) was one of those banks. We already have strong bankassurance model, providing number of hight quality protection products. Our product range is sourced from locally and internationally strong partners revenues generated from this area not only constitute one third of our fees, we also grow around 30 percent annually.
MONETA has provided a moratorium on many billion CZKs’ worth of loan repayments. Although the bank’s asset quality remains solid as outlined in the third-quarter results, how concerned are you about a substantial decline in quality transpiring once the moratorium expires? Do you expect to see a major uptick in the bank’s nonperforming-loan ratio at any point, for instance?
We need to see it in the following way: since last spring, when the Czech government legislated a six-month moratorium due to the economic impacts of the COVID-19 pandemic, we deferred payments almost CZK 35 billion. After the moratorium expired in November 2020, we offered our clients voluntary extensions for additional 3 months. We currently see gradually declining interest in further moratoria. The largest share—over 80 percent—of the currently deferred repayments consist of unsecured consumer loans; this is where we anticipate the biggest number of those who are likely to have problems returning to standard repayment schedules in the future. Our estimates forecast that it may be up to 20 percent from relatively small amount of CZK 1.9 billion of loans.
What do you consider to be the single biggest challenge the bank has faced since the onset of the coronavirus pandemic? And how has the bank attempted to overcome this challenge?
There were three major challenges. The first one was the above-mentioned acquisition. We completed the closing on April 1 during the hardest lockdown of the first pandemic wave. The following eight months were spent integrating both acquired banks, one of the most demanding aspects of acquisition in general. We managed to finish the integration four months earlier than anticipated. The second major achievement for us was the migration of our payment-card core system to a new platform: after 18 months of hard work with just the basic team, including 130 people from all over the world and another 150 contributing on an ad hoc basis, we managed to migrate all payment cards in April—again during a hard lockdown—from Australia to Frankfurt, Germany, and successfully launch the new system. It covers hundreds of transactions, such as logging into a current account, mobile-payment activation, change of limits or calculating interest from a credit card. Moreover, the operating costs are about 30 percent lower than those of the former system: the investment should return within five to six years. It was a step into the future that MONETA will benefit from for many years to come. The third challenge was the technological process of the repayment moratorium: to be able to invent, design and launch a robust system, which needs only three clicks on the bank’s website to determine whether you want to defer a consumer loan, mortgage, business loan or leasing and immediately defer the repayment—all this within just one week was seemingly superhuman, and yet we managed. And I am incredibly proud of my people for this. And during all of this, we successfully operated our brand, ATM and digital channels. And introduced number of innovations.
As stated in the bank’s third-quarter report, the continued and highly unpredictable situation of the coronavirus pandemic and its impact on the Czech economy have forced MONETA to suspend dividend payments and retain its 2019 net profit. Is this suspension still in place, and roughly when do you anticipate it might be lifted and dividend payments resumed?
This decision is not up to us but our regulator, the Czech National Bank. As soon as CNB permits Czech banks to resume their dividend policies, we are prepared to pay our shareholders their share of 80 percent of the bank’s annual net profit.
Many banks around the world have undertaken a formal digital-transformation strategy in recent years, including MONETA. What do you consider to be the most significant way MONETA’s digital strategy is more advanced than that of its peers within the Czech banking sector?
How has the bank restructured workforce logistics during COVID-19? Do you have a significantly higher number of employees working from home, for example? And what measures has the bank taken to ensure the impact on business continuity is minimised as much as possible?
There were definitely many measures that had to be taken to protect our employees and had to be taken fast. We’ve installed protective plexiglass at our branches and asked all non-essential employees to work from home. We started fully compensating employees’ PCR (polymerase chain reaction) tests, and the testing has been carried out one day each week at pre-booked locations. We bought laptops and the necessary equipment. In addition, the call-centre operators received additional operating systems, and we asked them to work from home. Clients cannot tell if they have reached their banker or operator in the office or at home. Under standard operations, our employees are entitled to four days of home office a month. During COVID times, some colleagues have been to the office for just two weeks since last March. We found out that these extraordinary conditions have no impact on the bank’s operations: we continue to operate and achieve very good results. I think that within this context, the pandemic has turned the steering wheel of global business in a major way.
How do you see the Czech banking sector changing over the next few years? Do you anticipate a more competitive landscape for MONETA during this time?
The pandemic has clearly impacted our economy, including the banking sector, not just in the Czech Republic but globally. The moment of surprise and shock was reflected in MONETA’s share price, as well as the share prices of other banks. At the beginning of May, we were, therefore, forced to revise the mid-term guidance reflecting decreased interest rates and expected economic slowdown, which unfortunately happened and had a negative impact on the lending activity of our clients as well as our overall financial results. The most essential change of 2020 on the banking market was, therefore, the decrease of banks’ profitability from CZK 91 billion to estimated CZK 50 billion due to anticipated pandemic-related losses and the subsequent impact on their economic stability and interest rates. I expect it will mean, up to a certain level, consolidation of the banking sector, since many smaller institutions will face significant challenges. The market will become consolidated and digitalized since the pandemic has accelerated digitalization globally.
That sounds as if it is achievable for such an enterprising bank. Thank you again, Mr. Spurný, for speaking with us today.