WE ARE DISCUSSING THE STRATEGY FOR THE MERGER BETWEEN BULBANK AND HVB BANK BIOCHIM
Mr. Harold, did you celebrate Christmas in Bulgaria?
- No, I was at home with my family and immediately after the holidays I arrived in Sofia with my daughter Elizabeth. We were at my mother's house near Vienna. My daughter and my son decorated the Christmas tree, we went shopping, and we walked my mother's dog - a golden retriever. We had a wonderful time and I had a good rest.
Which was the the most urgent job for you after coming back to Sofia?
- First of all we had to wait for 15-20 minutes at the airport for the passport control. The reason was that at the same time we landed with the evening flight from Austria planes from Germany and Italy had arrived too, and there were many passengers at the airport, whose passports had to be checked. There were some 700 people. So, we had to wait although six or seven desks for passport control were working.
And what was your first task in the bank on the following day?
- The balance sheets and the revenues and expenditures reports of HVB Bank Biochim and HEBROSBANK for 2005. You know that the banks are drafting two balance sheets - one according to the national accounting standards, and another one according to the international accounting standards. We also have to specify the size of provisions we'll set aside to cover the expenses for the integration with BULBANK.
Will there be huge differences in the financial results which HVB Bank Biochim and HEBROSBANK will report in the balance sheets, prepared in accordance with the national and international accounting standards?
- This is yet to be specified, but I do not think the differences will be very big.
HVB Bank Biochim and HEBROSBANK are in a unique situation. The merger between them has not been finalized yet, and the integration with BULBANK is forthcoming. Which are the challenges accompanying such a process?
- The merger between HVB Bank Biochim and HEBROSBANK will be the fifth one in my career. I worked on the merger between Bank Austria and Creditanstalt, after that on the integration between Bank Austria and Hypovereinsbank, next came the consolidation in Croatia around Splitska banka, whose executive director I was, later on - the merger between Biochim and HVB Bulgaria, and now we are at the stage of the merger between HVB Bank Biochim and HEBROSBANK.
From my experience I know that the first challenge in these processes is to motivate the people working in the banks which integrate. It is a complex task because the employees are worried about their work on one hand and that might influence adversely its quality. On the other hand, our rivals are trying to attract some of the people who work for us, promising them more stable professional positions. Moreover, competitors are trying to take advantage of the process of integration and attract the clients of merging banks with the argument that they will offer them better services.
Some weeks ago we got from Bulgarian authorities a permission for the integration between HVB Bank Biochim and BULBANK. However, there is no transparency yet as to how that will be accomplished. There is not even database about the banks' clients. Currently, we are discussing with BULBANK Managment Board Chairman Levon Hampartsoumyan the strategic alternatives for the integration between these credit institutions. But there will be a merger for sure.
You mentioned strategic alternatives. Which are they?
- They concern the way the two banks will integrate. Will the new structure have subsidiaries? Which will they be? For instance, HVB Bank Biochim has an independent company for encashment services, called Optima. BULBANK, on its part, has not entrusted these services to a subsidiary. And now we have to decide if Optima would continue operations after the merger or its services would be undertaken by the new structure.
It is important to make a decision about the info system of the new credit institution because we are using different software now...
Are your system and that of BULBANK incompatible with each other?
- Yes, they are. But after the banks merge they should operate with one and the same info product. The best solution for both institutions is being sought now. And it does not concern the purely technical parameters of the software alone, but also the products which the new structure will offer.
In addition to discussing these issues, we are working to set up a strategy for the development over the next three years. It is true that according to many financial parameters the two merging banks are leaders on the Bulgarian market. But it is extremely dynamic and we should have a very clear vision about maintaining and expanding our positions on it.
In fact, even after the merger between BULBANK and HVB Bank Biochim the new structure won't become a leader in the services to citizens, mainly in consumer and mortgage crediting. Do you think it's reasonable to struggle for leadership in that sector of the financial market?
- I am not a person who wants to be No 1 in each sector, at any cost. After all, our main purpose will be that the return on equity of the integrated bank meets the new owners' requirements. And we should find the best solution for the fulfilment of that task. Don't forget that a bank may be a leader in terms of volume of a certain service, but that might not bring it profits and even result in loses.
Do you think the market of loans to citizens will continue to be the most attractive one for banks after the introduction of BNB's successive restrictive measures on crediting?
- BULBANK has strong position in mortgage loans, while HVB Bank Biochim and HEBROSBANK - in consumer credits. The integration between the three credit institutions will bring us a huge potential for development on the market of services to citizens. Of course, in that activity, as well as in any other respect, we'll be strictly adhering to the restrictions, imposed by the central bank.
The merger between HVB Bank Biochim and BULBANK will obviously mark the two credit institutions' business in 2006. You said that special provisions will be set aside to cover the expenses for the integration between the two banks. What will be their amount and how much will that merger process approximately cost?
- I can't tell yet because the numbers are to be discussed and approved by the two financial institutions' supervisory boards.
I am asking that question because in 2005 HEBROSBANK set aside considerable provisions, amounting to several million BG levs, for its integration with HVB Bank Biochim.
- That's right. Now, some of these provisions will be released, but new provisions will be set aside for the merger between HVB Bank Biochim and BULBANK. But I cannot tell you the exact amount now.