AIB's Polish subsidiary is reaping the rewards of a booming economy and has ambitious expansion plans, writes Ciarán Hancock, Business Affairs Correspondent
THERE AREN'T many company leaders that could acknowledge losing 110,000 customers over the past four years and yet retain a positive outlook. This is what happened at Bank Zachodni WBK, AIB's banking subsidiary in Poland. The country's accession to the European Union saw two million Poles head for the nearest airport in search of jobs in Britain and Ireland, the only two existing EU countries that threw open their borders to workers from the new states.
In an interview with The Irish Times in Warsaw last week, Mateusz Morawiecki, president of the management board at BZWBK, insists there is an upside to the mass emigration.
"We continue to have contact with many of them," he says, by way of reference to his bank handling substantial remittances from Ireland, while also selling mortgages to Polish people living abroad who want to get on the property ladder now in anticipation of returning home in a few years.
About 100 Poles are working in AIB here to help channel that money home and the Irish bank has thousands of Polish customers, he adds.
Fortunately for Morawiecki, the Polish economy has boomed over the past two years, compensating handsomely for the flight of so many locals.
Economic growth has hovered between 4 and 6 per cent, foreign investment has mushroomed, unemployment has fallen steadily and lending has grown substantially.
Poland is displaying many of the characteristics of pre-Celtic Tiger Ireland. Almost half the population is under-35 and well educated, wages are modest, corporate taxes have been slashed to 19 per cent, and EU aid of about €80 billion is set to be poured into the country. It's the ideal backdrop for AIB and its Polish subsidiary to operate.
In 2007, BZWBK increased its profit by 26 per cent; total loans increased by 39 per cent; and business lending growth of 32 per cent was booked.
It even tidied up its book of bad loans. Last year, these accounted for 2.8 per cent of its overall lending. While about four times the level in Ireland, it represents a dramatic improvement on 2000 when the figure stood at an eye- watering 33 per cent.
Morawiecki is now hatching ambitious growth plans. Traditionally based in western Poland, BZWBK is going national. It plans to open 80 new branches before the end of the year at a cost of 1 million Zloty each.
"We aspire to being in the third position [it's currently fifth] in the Polish market in the next three years," he said. "Now, we are going to make towards the east and the Krakow region. We want to expand to all important locations in Poland."
It also plans to double its network of ATM cash machines; is setting up dedicated SME centres; has established a private banking arm and has one million internet customers.
It is even weighing up changing its brand name, at a possible cost of €100 million. "We might change it [ the brand] over the next couple of years or we might not," Morawiecki said. "The branch network expansion is much more important than tinkering with the brand." Morawiecki said a decision on the name would be made in 2009 and didn't rule out the AIB brand appearing in the market. "This is their [ AIB's] decision," he said, "but I wouldn't be against it. It is a good brand; a very solid brand."
AIB could also be about to strengthen its ownership of BZWBK. Ireland's biggest bank already owns 70.5 per cent of the Polish company's shares, with the balance traded on the stock market in Warsaw.
Morawiecki said talks are taking place with the treasury ministry with a view to acquiring the state's 1.8 per cent stake. "I have received a positive reply," he said, adding that deal could be completed within the next few months.
He acknowledges that Poland is not immune to the effects of the global credit crunch. Economic growth is set to slow to 5.2 per cent from 6.5 per cent in 2007, while credit expansion has slowed and many businesses are restructuring. The Zloty has also strengthened against the major currencies, nibbling away at the foreign earnings of the Polish diaspora.
The runaway property prices are also cooling. "In 2006 and 2007, housing prices went up quite strongly, but in the last six to nine months they have flattened. There won't be any crazy price increases this year."
That said, real estate experts locally say there is demand for about 1.5 million new apartments in Poland. The country has also been boosted by UEFA's decision to make it a co-host of Euro 2012. Four Polish cities will stage matches, attracting hundreds of thousands of visitors.
On the flip side, Poland's entry to the euro currency in the next four to six years would erode BZBWK's foreign exchange revenues. The hit would be "a couple of percentage points to the bottom line", Morawiecki said without a flicker of emotion.
"Our biggest challenge is to grow very strongly as far as brand expansion and customer expansion is concerned. In two to three years we want to have full country coverage, which would be 550 to 600 branches. We want to be everywhere."
