Банкеръ Weekly



A hot winter awaits the managers and employees of DSK Bank. After the general meeting on October 21, 2003 approved the credit institution's new Supervisory Board and strategy for development by the end of 2008, one of the heads of the bank's Sofia branches said: Socialism is over. Now we'll whirl in such a centrifuge that our heads will reel.DSK Bank's general meeting appointed a new Supervisory Board, to be chaired by OTP's President Sandor Csanyi, and the Hungarian bank's CEOs Zoltan Speder and Laslo Volf will be his deputies. Laslo Sandor will be Secretary of the Supervisory Board. In the words of the Chairman Csanyi, two more members will be appointed to the supervisory body, but only after the amendments to DSK Bank's statute (approved at its general meeting) are registered in court. The operational management of DSK Bank has been entrusted to a 7-member Management Board, chaired by the CEO Krassimir Angarski. The board includes the executive directors: Georgi Zhelev, responisble for retail banking; Diana Miteva, resonsible for services to companies; Violina Marinova, responsible for internal supervision. Stoyan Penkov remains a member of the Management Board and will head the Human Resources and Legal Issues department. Mr. Csanyi explained that negotiations are currently being held with a Bulgarian for the position of executive director, responsible for the operations with the other banks and financial institutions. OTP's President said they intended also to appoint to the Management Board a member, who would be responsible for the ITs, as this is one of the spheres in which there would be huge changes in DSK Bank. Mr. Csanyi specified he projected an increase of DSK Bank's assets from EUR800MN in end-September 2003 to EUR2.5BN by the end of 2008, and its profit to reach EUR100MN. However, he and his colleagues from the Supervisory Board did not comment what dividend OTP expects to get from DSK Bank. Information on that is quite contradictory. Some of the credit institution's dismissed employees claim that the Hungarians plan to collect 80% of the bank's net annual profit. But OTP's consultants in the privatisation deal are adamant that the entire profit will remain with DSK Bank, and it will be the main source of financing for the promised investments of BGN600MN in the bank. The aim is to raise DSK Bank's price significantly within five or six years. This will result in an increase of the price of its stocks and when after some time any of the big foreign banks decides to acquire it, its shareholders may sell their paper at a higher profit, a financial expert, working for OTP who preferred to remain anonymous, told the BANKER weekly. He claims that the Hungarians will insist on the strict fulfillment of the targets in the 5-year programme for the development of DSK Bank, as according to them that will guarantee the bank leading positions on the domestic market and high profits. According to some of DSK Bank's employees, the 5-year strategy for development, announced by OTP's President Sandor Csanyi after the end of the bank's general meeting on October 21, is mildly speaking aggressive. It projects that the return on its equity capital would increase from 18% in 2002 to 25% in 2008. DSK Bank's operational efficiency, which reflects the ratio between the expenses for its operation to all proceeds, is planned to improve from 66% to 50 per cent. The Hungarians project that after 2008 the volume of credits to citizenns would increase by 17% on average each year. The aim is that DSK Bank retains its present positions on the market of consumer loans, from which it has registered a continuous fallback over the last two or three years. In 2000 it launched 83% (BGN473MN) of all credits to citizens, while in end-September 2003 its share dropped to 50% (BGN745MN). The target set by Mr. Csanyi is that in 2008 DSK Bank should hold not less than 44% of that market.Not less ambitious is the aim that DSK Bank should had issued 2,000,000 debit and credit cards. By now it has marketed about 350,000 debit cards and the expected 6-fold increase may be achieved only if the institution offers additional extras to that product, such as a grant life insurance and a higher size of short-term credits with interest rates appoximate to those of the consumer loans. DSK Bank may attract more clients by offering competitive terms for its credit cards, to be launched in November - e.g. annual interest rates not higher than 15% (in the other banks they are between 17% and 20%), and one-year term for repayment of the loan (the term for the credit cards, launched so far is from one to six months). The Hungarians' strategy projects also that in end-2008 DSK Bank should be holding 8%-10% of the company credits market. The task seems unfeasible, having in mind that in end-September 2003 it was controling about 3.2% of it. However, it should be born in mind that the bank has huge experience in the allocation of company loans, especially concerning credits in foregn currency. Mortgage loans will be also among DSK Bank's priorities. By end-September 2003 it had extended housing credits worth a total of BGN146.8MN, accounting for 51% of that market. OTP's President said he expected the Bulgarian real estate market to develop quickly over the next few years. Mr. Csanyi specified that DSK Bank would establish a special Real Estate Agency as its subsidiary, that will hold 10% of the domestic land and buildings market by the year 2008. The Hungarians plan to set up a network of companies, including all segments of the financial services market. In that sence, DSK Bank will grow into a financial group with an insurance, leasing, and pension companies, and an investment company for management of funds. Some of these firms already exist as structures of DSK Bank. Its aim is to become a majority shareholder in them and restructure them.
Since 1999 the bank has been holding 36.36% of the shares in the life insurance company Bulstrad DSK LIfe and is currently holding negotiations with the other shareholder - the insurance and reinsurance company Bulstrad for purchasing its stake. OTP wants to have its own insurance company that will be selling life insurance policies to the citizens who draw consumer credits and to insure the mortgaged real estates, by which the housing loans leased by it are collateralized. DSK Bank is present on the social insurance market as owner of 95.5% of the capital of the Rodina Savings Cooperative Pension Insurance Company. In addition, it is a single shareholder in DSK Transsecurity (a company, specialized in cash collection activities) and in DSK Tours (a firm that owns and runs the rest houses of DSK Bank). For the time being the Hungarians do not intend to sell these companies.
OTP's heads project to establish within a year jointly with DSK Bank a firm, specialized in car leasing, through which they plan to step onto the market of financing the purchase of cars. This task has been directly entrusted to the curator Nikolay Marev.

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