- CSOB seeks to boost asset management, insurance market share
- CEO sees market prospects as Czech habits lag western peers
The largest Czech bank, dubbed KBC Groep NV’s “crown jewel” by its chief executive, sees opportunities for lenders to grow in the ex-communist European Union member as they coax thrifty clients into higher-yielding investments.
CSOB AS, which has accounted for 30 percent of KBC’s profit the past three years, has room to increase business in its insurance and investment services from a level equal to only about 5 percent of that at its Belgian parent, CEO John Hollows said in an interview in Prague.
“The Czech Republic proved to be the real jewel in the crown for our group,” Hollows said at Bloomberg’s office in Prague on Thursday. “If we can move a little bit more in the direction of the Belgian, French or British sort of appetite of ordinary citizens for attractive investments, then that’s a great opportunity.”
The Czechs, who shed communism nearly 27 years ago, have yet to catch up with their western peers in personal income and private savings. KBC’s Czech unit has about 9 billion euros ($10.1 billion) of assets under management, compared with KBC’s 192 billion euros in Belgium, according to the group’s website. Czech households still keep their financial assets predominantly in cash, while in Belgium more than two thirds are in stocks, funds, insurance products and bonds, CSOB data show.
The 60-year-old banker, who took over the Czech unit in 2014, says locals still are displaying a “deep distrust” toward equities, limiting their investment options. While the Prague Stock Exchange this month hosted its biggest initial public offering in eight years, delistings and stock plunges have pushed its total capitalization to $26 billion from a 2008 peak of $86.7 billion.
“It is, to me personally, a little bit disappointing that the stock market in Prague is not more lively and that Czech citizens are not more interested in different forms of investment,” Hollows said. “It’s more difficult, in my experience, to get people excited about asset management.”
The risk aversion may be slowly changing, as the Czech central bank’s key interest rate of 0.05 percent and negative yields at shorter-dated government notes are pushing savers into higher-yielding alternatives such as stocks or funds. Living standards are also expected to grow. Purchasing power is the highest of the EU’s ex-communist states at 85 percent of the bloc’s average, according to 2014 Eurostat data. That compares with 68 percent in both Hungary and Poland and 73 percent in Greece.
“The Czech Republic looks an attractive place to continue to invest, and I see nothing in general in the short term that would change that story,” Hollows said. “While salaries and household wealth in the Czech Republic have grown, they have still not reached western European levels. We see no reason why they should not, in due course, reach those levels.”