Banca Transilvania (BT) is the largest bank in Romania, with a market share of more than 16%. Founded in 1993 by a group of entrepreneurs, in recent years it has shaken up the geography of the Romanian banking sector with the acquisitions of Volksbank in 2015 and Bancpost in 2018. Today, it is the only Romanian brand in the 2019 Brand Finance Banking 500 ranking and has the highest customer satisfaction and brand recognition in the country. Here, Omer Tetik, who became the bank’s CEO in 2013, discusses the bank’s recent moves and his strategy for continued growth

You’ve been considered by many as the architect of the expansion of the bank. What have been some of your key milestones?

For me, the first milestone was accepting the challenge. I worked in another bank for almost 20 years, but I had watched with admiration what BT had been doing and had in my mind what else could have been done. Three days after joining the bank, I had the chance to meet over 200 managers of the bank and they gave me the best consultancy that an executive could ask for. BT has a unique business culture and a strong team. In 2015, we carried out the Volksbank Romania acquisition, which was the largest deal in the Romanian banking sector in over a decade. The experience was very important for us and boosted not only our confidence in ourselves, but also the confidence of our customers, shareholders and the authorities. Most were surprised that we delivered such a smooth and quick integration. Another milestone was when we launched our mobile wallet, which I believe was one of the first mobile wallets developed in-house by a commercial bank in Europe. It really showed our potential in terms of technology. When we started our digitalization, we wanted to remain as a physical bank with our retail network because we have a very strong network with good people and local competencies. But we knew we had to invest in the modernization and automation of the bank – so we chose the “phygitalisation” of our model. The acquisition of Bancpost last year was also a major milestone. With Bancpost, we closed the transaction in the first quarter of the year, and in the second quarter, we were already starting integration. In six months, we finalized the full integration. It helped us to maintain value and to create synergies from both costs and revenues. So, that was another boost of confidence as we proved to ourselves, our shareholders, and third parties that the Volksbank acquisition was so successful not because of luck, but because of our capabilities.

How do you think these acquisitions have helped you capture value and increase your competitive advantages?

Bancpost is a historical brand with a strong reputation and a very good retail portfolio. We wanted to grow more in Bucharest and in the segments in which Bancpost was strong. It was one of the pioneers in Romania in consumer financing and developing cards and payment systems, so we took a good portfolio of customers and loans through which we can utilize our excess liquidity in order to increase our interest gains and margins. Bancpost was working heavily with state institutions as a salary program provider so that was another area of value that we gained. The salary accounts lead to a different type of relationship with a bank. For those customers, the bank is not just a one-stop-shop; it’s the first place you think of when you want to do a banking transaction or get a loan. It helps with your credit scoring as well. Both Bancpost and Volksbank were among the 10 most important banks in the market; these were not small integrations.

What were some of the main challenges in the integration processes?

Integration has different facets. It’s about human resources and culture, and products and services. In terms of products, services and technology, both banks had some overlaps. I wouldn’t say it was very easy, but it was relatively simple to integrate the technologies. In terms of the culture, the buyer usually has the arrogant attitude of “we know everything” – but we were very open in our discussions. People were treated fairly, and we were very transparent about what we wanted to do and when we were going to do it. We established a so-called group of ambassadors that we sent from BT, consisting of almost 50 people from different departments, including our COO, who became the CEO of Bancpost. They were our messengers who communicated our culture and goals. BT has a unique culture; it’s fast-moving and dynamic. Bancpost had been quite inactive in the markets because of the problems in Greece in 2009-2012, but we successfully injected this dynamism that they had lost.

What about organic growth?

We are definitely targeting organic growth from now on. When we look now, there are very limited potential targets for us in terms of acquisitions. When we were smaller, with 7% or 8% market share, a bank with half-a-percent market share would have made sense for us. But now, even in the first quarter of this year, we grew our market share 0.1%. We are at a different place now, which is why our strategy for the next three years is built on organic growth. However, if new opportunities do arise, we are ready because we still have excess liquidity and excess capital.

One of BT’s main niche sectors is small and midsized enterprises (SMEs). Tell us more about your work in that sector. 

Our bank is very focused on SMEs. When the bank was established by a group of small-scale entrepreneurs, this was a sector which was not tapped into by the competition. Around 70% of the people in Romania are employed by SMEs and more than half of Romania’s GDP is produced by SMEs. So the niche is very valuable. We are not just a credit institution; we are a financial partner. We also have our BT club, which is an educational part of the bank that provides financial education to small businesses. Last year, one of every two new companies in Romania opened their first account with BT. It’s a strong position and we are there to help make all companies bankable. Everybody complains that SMEs and micro-companies in Romania are not bankable, but we are going the extra mile to change this. On our technological platform, we now have the BTStore and different apps, which offer services like recruiting services, services for invoicing or for legal advice for our customers either free of charge or at very low prices. These are third-party applications. We want to help solve as many of their pain points as possible, even if they’re not related to banking. Human banking is a concept that we use a lot, especially when it’s about micro-lending or SMEs. We go the extra mile to understand the customer’s needs and challenges, and that, combined with a strong and widespread network, gives us a competitive edge. That’s perhaps why the customers are willing to pay a premium for our services. Indeed, they are much more loyal to us. That’s why we have the highest net promoter score (NPS) in Romania. In a country where banks are not very appreciated, we have a great position.

How are you working with German companies and how do you see that relationship developing in the future?

Germany is one of Romania’s most active trading partners, and major German investors are present in the market. In the past, it was difficult to prove ourselves to the biggest names, but now we have started working with more German clients. We offer financing and payment services to the companies, their customers and employees. We are very happy about this development, and we are also learning a lot. In corporate banking, your learning curve usually depends on the requests of the customers, and German investors are quite sophisticated. Their expectations trigger us to invest in systems, services and product flows so that we can further stand out against the competition.

As an entrepreneurial bank, what would your advice be to German companies looking at Romania?

When we were investing in Victoriabank in Moldova, an important person told me that when you want to invest in a country, you should try to understand what is not written in the newspapers. I would tell German investors to definitely include Romania in their investment plans because it has a young population that is well educated and hardworking. I’d even say it’s an expat haven. It’s a very safe country, and Romanians love foreigners. There are lots of emotional and also logistical advantages. It’s not only inexpensive labor; overall, Romania offers a very good cost-benefit ratio. It is an opportunity to be tapped before it’s too late because we will definitely catch up to European Union level averages in the future. I would suggest that they visit the country to discuss their plans with different stakeholders, like banks, entrepreneurs or investors who are already here to help them better anticipate challenges and get an on-the-ground perspective about the benefits of investing and operating in Romania.

Last year the International Finance Corporation (IFC) invested €120 million in subordinated bonds issued by BT. What does that say about the bank?

The subordinated bond transaction was interesting in the sense that we already had excess capital, but all our capital is so-called Tier 1 capital. Because of the new regulations in Europe, we wanted to test ourselves to see if we could get into the subordinated debt market. Our traditional partners, the IFC and European Bank for Reconstruction and Development (EBRD), came into the transaction with good interest rates and good terms. In financial markets and capital markets, we like to always be the pioneer and open new doors. We have strong financial institutions as partners that can take on these kinds of challenges. Now, other banks are pursuing similar transactions. We also did it because we knew that the low-interest environment will not prevail forever, and wanted to take advantage of the situation. Overall, we are glad that we did it, but we are not planning on another transaction soon. It’s nice to have excess capitalization, and we should return more value to our shareholders.

Are you eyeing opportunities outside of Romania?

Romania has very low financial inclusion and banking system penetration rates. There is a lot to do here, so if we can even come closer to the EU average in terms of financial inclusion in 10-15 years, the bank will grow substantially just maintaining the same market share. We don’t have very strong ambitions to become a regional bank or an international group, but we are following what is happening in other countries. Going to Moldova was an easier choice as we speak the same language and the culture is quite similar. We are shareholders of Victoriabank together with our partner EBRD, and we see a lot of potential to repeat BT’s growth in Moldova. Therefore, we will invest more in Victoriabank and Moldova, and expect growth. I don’t think we would find a niche in mature markets like Germany as BT, but digitalization gives us a different opportunity, and we will start going abroad with our mobile banking apps. It will not be a physical expansion; it will be more or less a technological digital platform. At the moment, we do have our branch in Rome, but Romanians are quite widespread. So if you don’t have a big network, it’s very difficult to compete with the local banks that offer everything from ATMs and branches to mobile banking apps.

BT has been listed on the Bucharest Stock Exchange for many years. How have the shares been performing?

BT was the first bank listed on the stock exchange in 1998, and since then our market cap position has been ever growing. Now, we have a market cap of slightly over €2.5 billion. We are happy about that, but if you look at our profitability and the valuations of Western European banks, there is still upward price potential. The Romanian capital markets are at a development stage, and I think it’s a good point of entry. Indeed there is a liquidity issue – you cannot easily invest tens of millions of euros in any stock in Romania, but we already have hundreds of investment funds. Very reputable investment banks from the US, Western Europe and London are investors in BT. We often hold meetings with our international investors, and they ask interesting questions and provide good advice about where to be cautious. It is always good for someone to come and challenge you. Every three months, we announce our quarterly results and organize conferences with the investors. We are not doing things just to help boost the price of the share in the short term. We also invest in the long-term success of the bank.

In terms of your brand, what do you want to evoke in the minds of consumers and also potential investors when it comes to BT?

First of all, we are very proud to be a local bank. We managed to deliver good services, products, customer satisfaction and create value for Romania. Our approach is one of “yes we can.” For our customers, it doesn’t really matter if we’re the most profitable bank or not, but rather that we are a solid bank. We want to be the best bank in Romania. We want customers to remember us as the bankers who were available whenever they needed us, and as a bank that doesn’t disappear during volatility or crisis periods. Banking is in the service sector, and banks tend to forget about that and focus more on the financial markets and the financial sector. But we are here to provide excellent service, and this is what we want to be known for.