Mbank heads south of the order

Internet-based Mbank made a name for itself in Poland with a no-bricks-and-mortar strategy and offering free-of-charge personal accounts. It now plans to expand into the Czech Republic and Slovakia under the name Mbanka.

Mbanka's main competitor will be Ebanka, which started out as Expandia Banka in 1997, offering only online services, but quickly switched to both "clicks and bricks." Mbanka's approach is based on the widespread analysts' view that Czechs and Slovaks are more likely to accept e-banking services than they were in 1997.

"There may be more of a market [for online banking services] than there was seven or eight years ago, but Czechs are more conservative than Poles are and want to use e-services in connection with a well-known bank," said Marek Hatlapatka, a banking analyst at brokerage firm Cyrrus.

Poland's Mbank is the electronic retail banking department of BRE Bank, a Polish bank 72-percent owned by Germany's second-largest private-sector bank in terms of assets, Commerzbank. BRE Bank is already present in the Czech Republic through its 50-percent ownership of factoring company Transfinance.

Big plans

Sławomir Lachowski, CEO of BRE Bank, said in April that Mbanka is aiming to appear on the Czech market by the second half of this year, but could be ready as early as June. "This is kind of a cornerstone to see how the model we have in Poland could work on other markets," Lachowski said. Mbanka plans to launch operations in Slovakia at the same time as in the Czech Republic.

Lachowski said he expects Mbanka to break even in the fourth year of operations and that it will offer all its standard banking services.

Mbanka plans to use the company's Polish IT infrastructure, which Lachowski said will minimize the initial investment. He also saw the potential in offering personal accounts that come with no charges, something he said Czech customers aren't used to.

Piotr Gawron, president of Mbank, said the bank will specify in June exactly what service adjustments have been made for the Czech market.

History repeating?

The 14th-largest Czech bank by asset size, Ebanka was acquired by Austria's Raiffeisen International in October 2006. It has only turned a profit in two of its 10 years of existence, and it has now restructured into a standard retail bank.

In contrast, Mbank, founded in 2000, broke even after four years, last year making a pre-tax profit of zł.72.6 million. In the last five years, it has added more than 200,000 new customers annually.

Gawron says Mbanka will learn from Ebanka's fate. "Internet saturation today is much higher than at the time of Ebanka's beginnings," he said. Market research service Internet World Stats showed the Czech Republic with a 50 percent internet penetration compared to Poland's 29.9 percent by March 2007, he added.

"The ability of our target group to use internet banking [is where] we found the potential for our business model here," Gawron said. "Our goal is to make internet banking suitable for more than only the simplest banking offers," he said.

Mbank has more than 1.3 million clients in Poland with almost 1.9 million accounts. Its deposits totaled zł.5.9 billion at the end of March 2007. Its assets under management stand at zł.7.46 billion, compared to BRE bank's zł.42.3 billion and Commerzbank's E608 (zł.2,279) billion.

Bradley Gardner

This is an edited version of a story originally published by Czech Business Weekly