Eric Lemmens Subtitle Tatiana Lichnerová, Jana Mravcová Eric Lemmens, the new chief of Citibank in Slovakia, begins the interview with a memory of the town where he was born. Brining us back to the times when the treaties setting the criteria for the adoption of the common European currency were signed in Maastricht. With a smile on his face he recalls how a bad meal, served on that occasion, eluded a peculiar expression on the face of Margaret Thatcher. He then turns to Citi, the bank he has been with for the past 16 years. Since you ve been in Slovakia for more than a year now, it shouldn t be difficult for you to look back and share with us what you have found here. I am personally surprised at how much the market moved forward. I was in Slovakia for the first time in 1996. Back then, we were in a different building, and the city looked differently, too. We were one of the the first to build a bank subsidiary on a green grass here. Today, there are eighteen foreign banks on the market, banks which privatised some of the original banks. The business is largely concentrated in the hands of a few. If you look at the top five banks, they control approximately 85 percent of total net income. The concentration is indeed high. It is a challenge, isn t it? What Citi is doing everywhere and what we will be doing even more so here is that we focus on the customer. The customer must be the first. We want to offer our customers new products from other countries, for example. Our product centre for the EMEA region[europe, Middle East and Africa] is in London. We have already implemented a number of such products and other will follow. We will also be focusing on specific tailor-made products designed specifically for corporate banking in those countries that are developing in the aftermath of extensive privatisation that initially required large syndicated loans. However, the today s needs of companies are different. Apart from large customers, we also focus on small and medium corporate customers. We consider SMEs [small and medium enterprises] very important. Given our experiences and network covering over one hundred countries around the globe, multinational corporations are our natural customers. For those represented here, locally, we naturally want to become their bank. If we provide good service to their head-offices, we can naturally attract this business also locally. And finally, we are also interested in the public sector. Don t you think that there could be a problem in bringing ready-made products from abroad, which don t necessarily respect local specificities? No, in fact it is an advantage. Every market is at a certain stage of development. London, New York, Eastern or Western Europe, everybody is somewhere. At the same time, there is something like a natural lifecycle of products. If some of them prove their worth in the most developed markets, they are useful for other countries. You are saying that SME segment is important for you. Isn t it a disadvantage that you don t have such a representation across Slovakia as some of your major competitors?
Yes, we ve got to bring our marketing people close to our customers. This is why we are expanding our distribution network. In terms of GDP regional distribution, we have people in the most important cities. On the other hand, our customers are very sophisticated and they do not expect to be having to visit Citi every day. We are making sure that our customers can do all their necessary banking operations electronically. Whenever we ask people from the major Slovak banks, they unisono claim that SMEs, rather than large corporations, play a pivotal role in their corporate banking. How do you view your position in this competition? And how should it develop? Maybe my answer will differ from what other bankers said... Proper composition of customer portfolio is of key importance to any bank. It is necessary to have the really big ones, because their volume of transactions is important to sustain the branch network. We gradually introduce the products that they use also to smaller customers. Some of our products are specifically structured for this particular segment. This is where we are very strong. I am sure that banks with extensive branch networks are very strong in some areas. But we are not afraid of competition. How successful have you been in attracting new customers investors coming to Slovakia? For Citi, as an international bank, it is very important to have a large share of these incoming customers. They are among our priorities. Thanks to cooperation with our parent account managers, who know the managers of the incoming corporations, we always know that they are about to come. That is a very strong weapon. And I think we ve been fairly successful in attracting these customers so far. To a certain degree. Naturally, I want us to be even more successful. How does it work in real business? Isn t it natural that if, for example, a French company comes in here, its French banker follows? Most international corporations cooperate with several banks. When they enter new markets, they are looking around trying to find out who is there to provide them with the best service, best technologies and best people, and also whether they can link such service to the services they use abroad. At the end of the day, every company takes a rational decision. This does not mean that We necessarily do business with each and every American company which comes here. You said that you were satisfied, to a certain degree, with attracting new customers. What is it that you have not been successful in? If we were successful in every single case, one hundred percent of foreign investors would be doing business with us. Such things can only happen in a world of no competition. In what sectors do you major customers do business? Citi globally focuses on 4 main industry sectors. We have specialists oriented on these segments. These specialists are based abroad. We receive from them, for example, information on the degree of risk to which exposure is admissible in this or that industry. These include: Petroleum, Energy, Chemicals and Metals; Industrials; Telecom Media and Technology; Branded Consumer and Retail. Treasury is a part of the corporate banking business. What will be the implications
of the introduction of euro in Slovakia in 2009? Meaning the currency effects will no longer be there. A part of our current business is linked to euro. Of course, that part will no longer exist. However, Slovakia is not the first country to adopt euro. Our responsibility is to make sure we have in place, ahead of time, new products through which we will continue to expand our business. If you look at the countries of Western Europe, such as the Netherlands, Belgium or Germany, most banks there are doing better now than before the introduction of euro. Because new business opportunities opened up and filled in the gap. It is a part of the natural life cycle of some products. A global bank may profit from products to which it has easier access in other countries compared to the banks without such a global business. I am not afraid of the end of koruna. I think it is very healthy for our customers and for the country, and we will make sure to replace the revenues related to eurobusiness with other services. We have witnessed a significant appreciation of the Slovak currency in the recent months, which is not quite to the liking of Slovak exporters. Have you noticed any increase in the demand for hedging? Are the businesses more interested in hedging their positions? Customers come to us in different stages of currency valuation. This is not something new, neither for us nor for them. What may be perhaps new is the urgency of their need. When such fluctuations occur, customers realise that they perhaps should have hedged their position and they come back. So they come back late? They are more aware of the risk and they oftentimes realize that they should have taken measures to protect the company. Our customers want to earn money through producing and selling their core products and services, rather than making or losing money on currency volatility. Bank groups are clearly moving further East, they are interested in Ukraine, Russia and China, of course. What acquisitions is Citigroup preparing in these regions? You know, our policy on this is clear: never comment on any rumours. We have been present on these markets for quite some time, for example since 1994 in Russia. Ukraine was our number 100 on the map. We have a rich history in acquisitions. Also in this region just recall Bank Handlowy of Poland. They are a natural source of growth, which complements the organic growth. In spite of your no comment policy, we have to ask you about Slovakia. Do you see only room for organic growth in here or do you admit the possibility of acquisitions? Citi s team in Slovakia is focussed on organic growth. How do we want to achieve it? We will expand our distribution network. Apart from Bratislava we have four other branches in Slovakia, with one more to come in Trenčín possibly this year. Another way is through the transfer of know-how from London to our customers. We also invest in local people. It is very important, in my view, to make sure that they develop continuously. Some of our best people in Bratislava have a regional CEE responsibility. We organise exchange internships, e.g. we have a Korean colleague in Slovakia, servicing our Korean customer base, and we have Slovaks sent for
exchange to London and Prague. We also export top talent. During last year we promoted Slovaks to positions at Citi in Russia, Bahrain, Kuwait, New Your, London. So you are not contemplating any acquisition of your competitors? Slovakia is not an isolated country. It is a part of the many regions where the bank is present. The bank takes its decisions from a global perspective as to where it makes most sense to invest money. What results would you like to see in your balance sheet at the end of the year as concerns the growth in loans, deposits or profit? Yes, many banks evaluate themselves based on their balance sheets. I would like to evaluate myself based on the satisfaction of our customers. From the shareholders perspective I would rather focus on PNL [profit and loss analysis]. But how do you measure customer satisfaction? Isn t it reflected in the end-year figures? Yes, that s true. Yet, we also measure satisfaction trough surveys that we do. It is also important to listen to what the employees are saying, through our Voice of the Employee survey.if they are satisfied, they will work better for the customer and the customer will be satisfied, too. It is an interaction. We are doing these surveys on a yearly basis. Private banking is another area where you could become active in Slovakia. Is it interesting? Currently, we don t have a special private banker in Slovakia. It is one of our global strengths, we speak about internal international cooperation. International private bankers may come to Slovakia and identify certain potential customers. The EMEA region is an attractive one for private banking. Some parts of the business do not need to have people in the country, they may optimise their operations. We want to be as efficient as possible for both our customers and shareholders, which means that we do not necessarily have to have people specifically designated for Slovakia. Where would you like to see Citibank in Slovakia five years from now? For the bank it is very simple I want to see progress and satisfied customers. We will be bigger than we are today thanks to our organic growth. I expect us to move up the charts. In general I expect the Slovak banking market to become more concentrated. We see how consolidation advances in Western Europe. It wouldn t make sense to think it will bypass Slovakia. So the market will look differently. The introduction of the euro will also change the scene, some banks are earning a lot on the euro-koruna transactions. Their replacement will require more rational decisions. The introduction of Basel II will also be important. We will see a more appropriate competition and a healthier market. It will be better prepared for a possible recession in the future. I am not saying I expect it, but one should be ready. Overall, I am excited about the strong economic development and outlook of this country. CV: Eric Lemmens (age 45) was born in Maastricht, the Netherlands. He graduated from Nijenrode University and obtained his MBA at the
IESE of Barcelona. Slovakia is the sixth country of his Citi posting. In the past sixteen years he worked in the Netherlands, USA, Germany, Colombia and the UK. He joined Citibank Slovakia last year as Managing Director Corporate and Investment Banking. At the end of March this year he became the CEO and Chairman of the Board of Directors.