Can We Help You Save Some Time?

If you want to co-operate well with somebody, first lend them an ear. This has become an important guideline of the NLB in its attitude to companies. The NLB counts on extensive knowledge of its advisers and a wide array of financial instruments for doing business in Slovenia and on international markets. How has the NLB changed then? We talked about this with Janko Medja, a 41-year old from Kranj, with many years of managerial and expert experience in banking. His main task has been restructuring and optimisation of the Bank's operations which will last for at least three years. He bets on responsiveness, transparency and high-quality knowledge and services.

After a long time, the NLB disclosed operating profit. Please explain where this profit results from?

First I should like to make clear that without extraordinary measures of the Bank's owner and the Bank of Slovenia, our Bank would not have survived and we would not have good quarterly results either. Thanks to the increase in the Bank's capital we have now witnessed the results of the efforts invested in the Bank throughout 2013. The result of the first quarter is mainly the consequence of our business decisions and successfully completed activities and projects in 2013; up to one-third it is also the consequence of the above-average performance in the first quarter. The revenues of the Group rose on average by 14 percent over the first quarter of 2013. Throughout 2013 we strived to cut costs and the savings accounted for 10 percent which is 34 million euros less in annual terms. The Bank has improved its management of liabilities by decreasing the costs of refinancing from abroad, as well as its management of the deposit portfolio. A positive effect was also contributed by the result on financial markets which may not necessarily be repeatable, as we had a very favourable downtrend in the risks related to Slovenian securities i.e. the Slovenian country risk.

The Management Board can influence the internal processes and client relationship the most. What have you done in this area?

Most of all, we have been listening more to our clients and considering their needs. We do not just wait but seek contacts – we ask for feedback and look for opportunities to support the clients' business. This includes a series of measures, but mostly a change in our corporate culture and its development. Our account managers again regained their trust in the Bank's ability to do business. The NLB perhaps lost this self-confidence in the past years as it actually withdrew from many markets. With the help of our sales team, we discovered that we could be even better, that we wanted to be competitive and that we would do our best for our good clients – and this is what we are doing now. Our clients have already noticed this and we have concluded many interesting and promising deals, even though the reality of the situation on the market is still harsh.

How do the clients respond? Are they surprised, satisfied, wary?

They respond according to our expectations. When we tell them for the first time that the NLB is on the market, that we are interested in the deal and will struggle for it, they often respond politely, with a hint of doubt: "Ok, fine, then send us your offer." With each new contact where my colleagues show the clients that we want more and are able to provide more than many of our competitors, the clients realise we are serious and thus also successful. Most of all, we want to understand profoundly the business models and we adjust our offer of services to them; we do this through personal visits to the offices of our clients which, in our experience, is very positively accepted.

The NLB is focusing strategically on small and medium-sized companies. How will these companies feel this?

Given its relatively high market share, the NLB's presence in the segment of small or micro companies for the bulk of transactions is smaller than in other segments. This opens a window of opportunity for us. We see a potential in demonstrating our client what we can do in a better way We aim to improve access of these clients to the Bank, provide a sales officer for potential clients, with a name and surname, or at least a contact person who will listen to them. This year and the years to come, we aim to improve the procedures for higher responsiveness towards these clients as well as facilitate exchange of information and conducting business via our electronic channels. When these companies grow, require more complex products and their need for knowledge increases, we can offer them educational and networking events, exchange of good practices and presentations of good use of products. There was an event on international business recently, where we presented practical solutions with which the Bank can successfully support the companies in their international business operations.

How about the responsiveness of the NLB?

We are investing a lot of efforts into improving the processes and shortening the responsiveness for credit products. For example, there is no need for the Bank to wait for 14 days to reject the loan application (which contained all required information). If the Bank must say 'no' it should say it within a reasonable time. The first steps were taken in the smallest companies when we assessed the credit rating of those clients which had loans worth up to 100 thousand euros. Already last year, towards the end of the summer, we improved the credit rating system for those clients and shortened the time of the Bank's response. We will also prepare new and attractive products, improve access via tablet computers and smartphones as well as other electronic channels. One of our tasks is also to facilitate the clients' access and perhaps even save their time.

Medium-sized companies, lets say the export-oriented ones, need a different type of support.
These companies already have their account managers and advisers. Here we have to invest in the quality of our account managers so that they can advise clients correctly, lead them and help them find the solutions. In terms of its offer of international banking solutions, the NLB is undoubtedly the leader on the Slovenian market – we boast extensive knowledge and a wide array of products.

Medium-sized companies are often caught up in large supplier chains and even in the process of restructuring of large companies and groups of companies. We try to help them or find the means to help them reduce their dependence on such processes, for example the restructuring in the economy. We are heading towards a period of deleverage in the Slovenian economy which will last for several years and will be quite painful. We cannot prevent insolvency proceedings or similar, but we can find solutions together and, again, we can save time with a clear communication.

How will the NLB assess the financial soundness of the companies in the future and will it also assume higher risks?

It is the same as asking a doctor how they assess a patient's health. Health is a complex issue and there are tens of different specialisations in medicine. We are more of a general practitioner. We, bankers, try to understand the clients and advise them from the perspective of their life cycle, development level, analysis of the past, future prospects, we can try to understand the needs for investment and comment the development of the markets in terms of sales potential and risks. We can assess the general picture very well – based on the results provided by the client, but we are not specialists in some types of surgeries. Sometimes we advise our clients to get help from the outside, from market research specialists, for example. Or we point out to them that Tier 1 capital can only be provided by specialised equity investors, not the banks. When we identify the need for an intensive operational restructuring, we openly and professionally point that out to the clients and, if required, help them get external assistance. The Bank is willing to assume a risk when it has a transparent insight in the volume and sustainability of the cash flow as well as when it can trust the companies' management and owners to implement all the necessary activities to maintain the sustainability.

As a result of these changes, the NLB expects from companies to have more trust in it. Will the NLB have more trust in the companies as well?

Every business deal and especially long-term partnership is a combination of a personal attitude and institutional ability. Trust is established through business deals when you meet someone in person and you establish what a person knows and is able to do and then the institution sets a stable course of action and fulfils everything it has promised. After 2013, a difficult year of restructuring, the NLB confirmed what it had said. We conclude with companies 400 million euros of new transactions annually – over the last years the figure was several billions a year but the fact that we reactivated ourselves in 2013 and returned to the stagnant market is in itself a success. In 2014, the Bank has even increased slightly its market share in retail and corporate crediting.

Has the genetic code of the NLB finally changed or can the process still be redirected?

To some extent the changes are irreversible because the environment has also changed. If we are not persistent some of the processes may stop. As often said, such restructuring takes several years and anything can happen in the environment in the meantime. We are changing our conduct, climate, culture and work methods. For me, the genetic code of the NLB is the fact that it employs people with a positive attitude. But for some time in the past, this team was not managed well or was not managed at all. It is our goal to lead the NLB and develop it as an international banking group which operates and recruits its staff internationally and is thus an interesting employer for the most talented people in the broad region.

How do you assess the situation of small and medium-sized companies in Slovenia? What do they lack?

One of the things I would like to emphasise regarding small and micro companies is that a large proportion of them do not consider becoming a medium-sized company. Many small companies do not have a long-term perspective. I am not saying that every small company should become large but if someone has ambitions to do business over a longer period of time, they should be aware of the growth phases of the company, what needs to be done during those phases and which pitfalls to avoid – the Bank can share its experience and facilitate connections with other companies which have already taken these steps.
Another thing is to consider the ideal growth of the company. Medium-sized companies can attract new clients and business deals but are often unaware of the pitfalls of excessive growth. There are risks they should not assume if they wish to survive – the higher the growth the lesser the safety. If companies grow too fast, their working capital may run dry. Of course they turn to banks but we can service them only to a certain degree, until they become overindebted. Growth should be planned so that you are able to finance a large part of your working capital needs with own profit, own accumulation. Working capital cannot be financed only from bank sources. When growing into a bigger, medium-sized or even large company, additional financial sources for heavy investments are often needed. Slovenia is unfortunately still reluctant to attract equity investors and its dependency on loans, along with desire for loans, is too big. The loan enables the owner to keep control over the company but no one would want to join the owner in their risk capital venture; moreover, the loan still has to be repaid before any return is earned.

Was the attitude of the companies on the market to capital also problematic? Several years ago the growth was persistent.

Yes, the growth in Slovenia years ago was also unhealthy. We can even say that some companies were excessively encouraged by the environment and the banks to grow. The entire society acted that way. Some were not satisfied if return on equity was below 25 percent. The risks were accordingly high.

What is the role of the bank when a company is looking for an investor?

Such services and/or assistance in finding equity investors are more a domain of investment banks. The NLB is not ambitious to become an investment bank in this respect, but since we have established a lot of contacts and worked with companies of all sizes, we want to and know how to advise on healthy growth methods, along with the information where to find equity investors and which decisions to consider.

How do you know that your employees are such good experts?

Over one year and a half, I really frequently felt enthusiasm for the knowledge and views of some individuals with a huge potential. This is my personal judgement, as I compared them with other people engaged in similar areas of work. We have restructuring experts, we know the markets, both Slovenian and international, and we also have a good overview of the know-how of our employees in the Bank. Because of the NLB's history, this Bank only needs to build the attitude, the right character, as the knowledge and competencies pose a small and manageable challenge. Rest assured, we will develop our talented staff even more intensively and, to further increase the Bank's professional and business impetus in the future, we will also invite internationally experienced bankers to co-operate with us.

In the past the state did not prove itself to be a good owner practically everywhere, how is this in your case?

Since my arrival at the Bank, I have not received any request from the representatives of the executive power for the NLB to conclude bad business transactions (excluding the unfortunate statements of the politicians in the pre-election rallies). We are co-operating constructively with the owner and the NLB adopts decisions based on professional judgements and standards, in the best interest of the Bank and its depositors as well as for the benefit of the capital which was entrusted to us. We must not lose it but increase its value so that in a few years' time we can start paying it back to the owner.

The NLB has an international Management Board which is not a common practice in Slovenia. What are the advantages?

The Management Board boasts a rich work experience (over 80 years in total) from many international banking groups. We know our rivals very well. We are familiar with the markets, processes and best practices in the international arena. The NLB was looking for people who knew how to restructure the Bank. We complement each other very well and know how to constructively find the solutions, sometimes also in a loud dialogue but always with respect for differences. The foreign members of the Management Board can look at some issues without the burden of assumptions from the domestic environment which is extremely important for an objective and professional management of the Bank.

You have completed a complex streamlining process – will this influence the quality of your services for companies?

The influence is favourable. Of course the self-confidence of the employees can sway but, in the long run, we will be focusing on good and excellent staff we currently have and will continue developing it. This is where we will build our competitive advantage. We have carried out 80 percent of the planned streamlining related to the downsizing of staff in NLB d.d. (700 fewer employees in total). We are proud of the fact that more than 60 percent of the headcount reduction is or will be soft – agreements, retirement and other means, which means no lay-offs. In the cases of hard redundancies the Bank (i.e. our Human Resources which has to be commended for this) engaged intensively in the process by helping all those people find new jobs.

How about the NLB Group's presence on the market? Was it more present in the past years than today?

NLB d.d. is the core, accounting for over 70 percent of the operations of the NLB Group. About 15 percent is non-core business: we are owners of leasing and factoring which we consider to be non-core investments and want to reduce their volumes and offer our clients some alternatives. In the core part of the business, the Group consists of banks and also NLB Vita, življenjska zavarovalnica, and NLB Skladi. We have two banks in Bosnia and one in Serbia, Montenegro, Kosovo and Macedonia, respectively. All are healthy in terms of liquidity and have a chance of becoming solidly profitable – most of them are such already today.

What is the advantage of having a ramified bank network in the Balkans?

The banks can support the companies locally, both with their services and by assisting them in establishing local contacts. All our banks, except in Belgrade, are among the top three in the local markets and have access to decision-makers, all companies and local partners as well as regional communities.

Text: Igor Savič, Primož Inkret, PM, poslovni mediji, d.o.o.
Photo: Peter Irman

Janko Medja, President of the Management Board of the NLB