Handlobank, Millennium change retail banking sector
While the latest entrants to the retail banking sector, Handlobank and Millennium, still have a long way to go before dominating the market, analysts are agreeing that their mere presence last year significantly changed the banking landscape by improving the quality of customer service and ease of access to accounts.
The result of the new entrants' modern approach is that now even the most conservative retail banks such as Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP) have announced plans to open small and fully automated branches and to launch new distribution channels such as phone banking.
"What was a novelty at the end of 1998 is becoming the norm right now," said Marek Juras, banking analyst with Erste Securities Polska.
But while significant differences in the level of customer service exist, all banks, including Handlobank and Millennium, offer more or less the same products such as current accounts, time deposits, debit and credit cards and standard loans.
"One could have expected a revolution here," said Artur Szeski, banking analyst with CDM Pekao Securities. "But nothing like this has happened."
Handlobank, a retail arm of Bank Handlowy, and Millennium, which is a retail division of BIG Bank Gdanski, opened their doors in fall 1998, offering small outlets, friendly customer service and 24-hour access to banking services via phone and multifunctional ATMs.
At the same time, the banks have chosen slightly different development paths. Millennium selected a "cluster strategy," or opening a relatively high number of branches in one city or region, usually in residential areas, all at the same time. Right now Millennium has 115 branches and almost 100,000 customers, according to the company. By the end of 2000 the bank expects to have 250 outlets.
Handlobank, however, proceeded more slowly in developing its branches, and so far has 37 outlets serving more than 60,000 customers. By the end of 2004, Handlobank plans to open 200 branches and to increase its customer base to 1.5 million, according to Maciej Lebkowski, Handlobank's managing director.
"Looking at the number of customers, the results are not bad," Juras said. "But one question remains: How profitable are these customers?"
Neither Handlobank nor Millennium would reveal any details about the size of their customer deposits. During last week's press conference, Handlobank's Lebkowski said "deposits from individuals make up one-fourth of Bank Handlowy's deposits (about zl. 66 million/$16.9 million)," but he refused to say how much of that comes from Handlobank.
"It still doesn't solve Handlowy's main problem: How to increase the number of deposits from individuals," Juras said. He added that originally Handlobank had planned to gain 4% of the deposit market, but that task has proven difficult.
"Let's put it this way: simple reserves dried up and both banks have to make really serious efforts to attract new customers," Szeski said. By simple reserves, Szeski means easy-to-reach customers who are willing to try new services or do not have a bank at present.
He said the main problem is that in spite of improved customer service, the product offerings of both Handlobank and Millennium are not that impressive.
Handlobank is also planning by the end of this year to introduce a new distribution channel via the internet called Handlonet, joining Bank Pekao and Bank Przemyslowo-Handlowy in offering on-line banking services. As part of the deal, customers will also be able to have a Visa credit card.
In addition, those customers planning to plow money into the Warsaw Stock Exchange (WSE) can combine their new investment account at brokerage Centrum Operacji Kapitalowych Banku Handlowego with their current account at Handlobank.
Millennium's representatives said they were also interested in internet banking, but had no plans to introduce it in the near future.
"It's still more of a gadget than an effective distribution channel," said Wojciech Kaczorowski, public relations department director at BIG Bank Gdanski. But he agreed that internet banking could become more prominent in the next year.
In terms of credit cards, Millennium, which cooperates with the Visa network, said it does not plan to widen its offering into Visa-sponsored Europay cards. However, the bank does intend to offer American Express cards to its wealthiest customers.
