Investors information

Investors information

Basic information

Business name:	Prima banka Slovensko, a.s.
Registered seat:	Hodžova 11, Žilina 010 11
LEI:	315700K45LRKNGMUIW27
Telephone:	+421 41 5111 111
Website:	www.primabanka.sk

Bank holds Slovak banking licence and it is a Slovak bank (credit institution) under the Act on Banks.

History

Prima banka Slovensko, a.s., identification no. 31 575 951 (hereinafter referred to also as ,,Prima banka“ or „Bank“) is a legal entity that was established by 193 Slovak cities and municipalities by the foundation deed of 14 May 1992 as a joint stock company under the Commercial Code, under the name of PRVÁ KOMUNÁLNA BANKA a.s. (First Municipal Bank). The bank has specialized in providing services and financing to municipalities in the Slovak Republic.

Since 16 December 1992, it has been registered in the Commercial Register of the District Court Žilina, Slovak Republic, Section: Sa, Insert No.: 148/L. Bank is a joint-stock company established for an indefinite period of time and it carries out its business in compliance with Slovak law.

On 1 October 2003, Bank changed its name to Dexia banka Slovensko a.s. after entry of a new majority shareholder Franco-Belgian banking group Dexia. At the same time, Bank has started to build its position also in the retail banking sector.

In 2011, Central European private equity group Penta Investments acquired majority shareholding of Bank from Dexia. Subsequently on 1 January 2012, Bank changed its business name to Prima banka Slovensko, a.s. and as a part of the new strategy, it started to focus predominantly on retail clients with revised simplified products and services portfolio as well as on the expansion of the branch and ATM network.

In 2016 the majority shareholder Penta Investments acquired Sberbank Slovensko, a.s., which was subsequently merged into Prima banka Slovensko , a.s. on 1 august 2017. Bank became legal successor, being the surviving entity. The business integration is completed, with no connections to the Sberbank Group.

Business overview

Prima banka is a Slovak bank and operates on the basis of the Commercial Code and the Act on Banks. Bank’s scope of business includes banking activities performed on the basis of a banking licence granted to Bank in compliance with the Act on Banks. The banking activities performed by Bank are listed in Bank’s articles of association and are registered as the scope of business in the Commercial Register, and are carried out in compliance with the applicable generally binding legal regulations.

Prima banka considers individual clients, self-employed, small and medium enterprises and municipalities as its core client base. The principal products and services offered by Bank to its clients include account maintenance, acceptance of deposits, provision of loans and domestic and cross-border payments. At the core of relationship with each customer there is typically a current account that is further supplemented by other products and services pursuant to client preferences and needs.

Products and services are offered to customers through a country-wide branch network and also online channels. The bank currently operates third largest branch and ATM network (124 branches and 300+ ATMs) in the country while being also one of only three banks having branches in each of the 79 administrative districts of Slovakia. It operates very customer friendly and easy to use Internet banking and its mobile banking application is the market best rated one by the customers (Google Play). Being very competitive in both the physical presence and also online channels gives Prima banka a strong advantage as also independent research (Retail banking Monitor - GfK/Go4insight) confirms the group of customers using both branches and online channels grows the most rapidly, while e.g. the group of customers using online channels only is significantly smaller and grows only very slowly.

Prima banka significantly strengthened its position since 2012 mainly in retail banking, in which it is the fastest growing bank over the period. It continues growing at a significantly faster pace compared to the rest of market mainly in retail lending and number of active customers. It also keeps a leading position in the segment of Municipalities as majority of them continue using Prima banka as their main bank (more than 2 thousand cities and municipalities of a total 2,9 thousand in Slovakia).

The growth follows on consistent execution of a long-term strategy, is driven by simplicity, transparency and attractiveness of the products and services as well as the swiftness and simplicity of related processes. This together with a strong customer focus of the whole organization helps Bank to maintain the highest customer satisfaction and loyalty among the largest banks in the Slovak market over the last few years¹. Prima banka growth is also built on the above mentioned wide distribution network and also on its consistent marketing activities. These made its spontaneous brand awareness grow more than that of any other bank over the last few years. The Prima banka spontaneous brand awareness is currently not far behind the TOP 3 banks in this respect, well ahead of a number of bank brands that operate in the market for much longer time.

Strategy and key strengths

The strategy of Bank is to build strong retail-focused bank, with sustainable business model and distinctive competitive strengths that transform step by step into improved market position and financials.

Main values:

Speed and Simplicity
Transparency
Expertise and Credibility

Main pillars of Bank’s strategy

Bank considers individual clients, self-employed, small and medium enterprises and municipal segment as its core client base. Bank’s strategy has remained constant since the entry of the new shareholder in 2011. The cornerstone of the strategy is to build long-term relationships with clients, so that they use Bank as their main banking institution. The strategy is built on three pillars: (i) to grow the number of active customers, (ii) to build lending excellence, and (iii) to simplify and grow effeciency. Each of these pillars is further discussed below.

Grow active customers

Bank is, as part of this aspect of its strategy, focused in particular on the following areas:

Current account as a base for the relationship
Branches & ATMs, Coverage and Accessibility
24x7 Accessibility, Internet/Mobile
Brand, Marketing and PR
Customer Satisfaction and Loyalty
Activation and Retention
Regular savings and payments
Future generation

Consistent step by step implementation of the strategy helped Bank to significantly grow its active customer base and grow its main bank share more than any other bank in the market and thus strengthen its market position significantly. Attractive product portfolio, together with wide accessibility through currently the third largest branch and ATM network and also online channels, consistently high customer satisfaction and also growing brand awareness all contributed to the growth.

Build Lending Excellence

Competitive strength and excellence in lending are developed in following areas:

Loans to support Relationships
Consumer Loans
Housing Loans
Overdrafts to activate
Operating and Investment Loans

Within this pillar of the strategy, Bank primarily provides clients with fair terms and conditions of loan products and enables them to obtain funding through fast and simple processes without unnecessary complexity. This is achieved through focus on rather lower risk customers and financing incl. refinancing of customers with positive track record, avoiding riskier segments and financing. This allows the processes to remain straight, simple and fast and allows for high level of automation. The overall lending process simplicity also avoids the need to provide lending only through selected specialists and allows each personal banker in each of the branches to provide full scope of service.

Thanks to consistent strategy execution in this area is Bank clearly the market fastest growing bank in retail lending over the last 7 years while strengthening its position mainly in the lower risk mortgage business. The success in mortgages also supports growth of the active customer base and main bank customers.

Simplify and Grow Efficiency

Focus on this area allows Bank to operate as efficiently as possible while also improving the processes for customers and increasing the value for them.

The specific focus under this part of Strategy includes:

Products and Processes
Speed and Simplicity
Reliability and Responsibility
Transparency, Easy to understand
Focus and Prioritization

At the conduct of its banking business, Bank aims to achieve that its products are simple, valuable, easy understand and transparent for the customers. Bank provides a key core product in each product category, with no unnecessary exceptions or modifications which keeps the overall product management and customer servicing very simple and efficient. Following the same philosophy, Bank also strictly simplifies its internal processes and also organizational structure which is very lean and allows for more efficient internal operation and also better customer service.

Bank does not offer complex and potentially opaque products which it does not perceive to be strategic and which are not among those really needed and required by meaningful share of customers, such as investment products, mutual funds, equity trading, treasury trading, credit cards etc. Bank doesn’t offer foreign currency financing or trading, focusing instead on providing services mainly in euro currency and lending only in EUR. At the same time Bank does not maintain its own trading book, which significantly reduces or even eliminates additional types of risks at the level of the overall business model.

Bank’s strategy in mortgage lending

Mortgage lending business helps to attract new clients and provides a good base for building long-term relationships with them. It also represents a meaningful low-risk area to generate income for the bank.

Bank has set up fast and simple processes for providing mortgage loans and also mortgage refinancing, which represents a significant competitive advantage in the market. The mortgage lending approach of Bank is reflected also in the following core principles:

Strong focus on refinancing of a mortgage loans from another banks. Bank was among the first Slovak banks introducing simple process of transferring a well performing mortgage loan from another bank. Bank is nowadays significant player in the field of refinancing, approximately half of new mortgage loans are refinancing loans where there is a proven repayment track record and history of the customer and lower overall risk level.

Credit risk diversification/no hunt for big ticket mortgages. Bank does not hunt for volumes and big tickets mortgages, focuses instead clearly rather on higher number of customers with lower ticket sizes. The average mortgage in the portfolio on Bank books is very significantly lower compared to the competition. This provides much better diversification and avoids concentration of risk in big ticket mortgages.

Simple and fast underwriting processes, automated approval of mortgage loans. Bank has established criteria on the basis of which a mortgage loan can also be approved by an automated process. In such a case, the process is extremely fast and client satisfaction increases. Even where the mortgage loan application requires manual approval, the processes are similarly quick and simple, making Bank very competitive. The simplicity and high level of automation is enabled also by the fact Bank focuses on simple, straightforward types of income of the customer and also on mainly simple purpose like refinancing or purchase with no or minimal exceptions.

Each personal banker at each branch sells all products including mortgage loans. This universalist principle ensures sales efficiency at branches and enhances the relationship between client and personal banker for all products and is again enabled also mainly through the product and process simplicity supported by very user friendly bankers front-end system.

A mortgage loan is available at every branch and in every district. Bank has the third largest network of branches and ATMs on the Slovak banking market, with branches in each of the 79 Slovak districts. As a mortgage loan is perceived as a relatively complex product, personal consultations with bankers at branches are valued by the customers. In this case, the proximity of the branch plays an important role and it forms one of the key competitive advantages of Bank.

Mortgage loan interest rate is the same for each client. The client is aware from the outset at what price the product is purchased from the bank – thus ensuring transparency, fairness and also much easier sales process. The client’s credit rating is reflected in e.g. maximum LTV or value of the loan, not in interest rate.

Structure of mortgage loans and collaterals is simple. Bank does not generally provide loans backed by real estate in development projects, minimises the number of construction loans and avoids lending to customers with potentially problematic or complex structure of income or problematic properties or projects. Likewise, Bank does not provide mortgage loans in foreign currencies nor does it finance a loan if the applicant receives a foreign currency income.

Strict underwriting standards. Bank sets rules in respect of client creditworthiness, collateral assessment, loan-to-value and debt-to-income ratios consistently significantly more strictly than is laid down by legal and regulatory limits and typically does not use the regulatory space to finance part of the business above threshold LTV or DTI levels.

Claw back conditions and incentive model for internal and external sellers. The bank operates a strict compensation/commission model for both the internal staff and also external partners. Its delinquency conditions clawback is tougher compared to other institution thus clearly signalling its focus on quality and lower risk to the sellers.

Selection of external agents. Bank uses a limited number of companies for the external sale of mortgage loans. The agents are subject to rigorous selection process, and their performance is regularly evaluated and reviewed. The commission clawback conditions are significantly tougher compared to the market standards which gives the partners a clear signal on quality requirements and is also translated into a very strong quality of the production.

Bank’s strategy for mortgage loans is to focus on lower risk customers and types of financing to allow for lower risk costs and also enable simpler and faster processes which also reduces cost and increases customer value. This overall set-up enables to offer attractive conditions to customers. Customers with more complicated type of income or type of financing can get serviced by other banks and are available to fast and easy re-financing to Prima banka in case there is a proven positive performance and historical track record.

As a result of the consistent strategy execution Prima banka keeps the position of the fastest growing mortgage player in the market over the last 5 years while still keeping significantly better portfolio quality compared to the overall market. At the moment Prima banka has built its market position to close to 10% market share in portfolio volumes, while in units the market share is already above 10% due to lower average ticket of a mortgage compared to the rest of market.

[1] Customer Satisfaction & Loyalty Survey TNS Kantar 2018