In January 2010, Jan Pokorný was appointed the new Chairman of the Board of Directors and Managing Director of Modrá pyramida. He spent last year in a position outside of the Czech Republic and the building savings sector. What is his assessment of 2009? How does he view the impact of the recession on building savings and Modrá pyramida?
“In my opinion, the economic crisis affected the building savings sector in general quite significantly but, paradoxically, more in the positive way, even though there were some negative impacts from the clients’ perspective in that perhaps they could not save as much as they thought they would, or they simply couldn’t take a loan as large as they wanted to. The positive impact is that the building savings system, in its present form, proved to ensure considerable stability in the financial market and also provide for personal security of each client. In total, people have saved about CZK 415 billion in building savings, which represents a certain financial cushion for each and every one of them and, primarily, the possibility to attain a favourable loan for an acquisition of a new home or improvement of the existing one. To sum it up, the past year has reaffirmed that the building savings system is a viable and integral part of the financial sector that is instrumental for individuals in motivating them to increase their own funds and offering them the option of obtaining favourable home financing loans.”
How was 2009 for Modrá pyramida in the context of the economic downturn?
Undoubtedly successful, regardless of the economic turbulence. The sector of building savings banks is much more stable than, for instance, financing of mortgages. The mortgage market in 2009 tumbled by some 40%, in contrast to building savings lending which fell by 11% only. This is because we finance not just large purchases of apartments and real estate, but also minor repairs and renovations. For a CZK 300,000 refurbishment, a building savings loan is much more fitting than a mortgage. And in the time of recession people prefer to renovate rather than buy new property, which benefits the building savings segment.
What Modrá pyramida definitely succeeded in last year was expansion of the network of financial advisors and accomplishing the planned density. An important factor is that these advisors have worked with us on a long-term basis and are interested in further development. We intend to continue to expand the business network in the future with the key objective of improving customer service. Another success is Modrá pyramida‘s relationship with both new and existing clients. We marketed some new product variants in the savings segment; for instance, the current customers could prolong their savings through a new product, Prodloužení Plus (Prolongation Plus).
Looking back at the past year, building savings was the most attractive product on the savings market. Why? Because it provides the client with a very interesting, for the large part guaranteed yield at minimum risk; in addition, client deposits are secured the same way as they are in banks.”
If you compare Modrá pyramida with other building savings banks, what are the differences?
“There isn’t much room in building savings for marked differences as its boundaries are laid down by law. In general it applies that one cannot come up with many innovations in the basic range of banking products, including building savings. All offerings are quite similar. But we most definitely want to be different in the quality of customer service, the quality of communication with the client, the quality of processes allowing for flexibility to serve different clients in different ways. Primarily, the common denominator must always be the high-quality customer service. That, in my view, is the only way to differ from the competitors, to stand out and be better.”
That means to keep bettering the service?
“Yes, but not in the traditional sense of the word. When I say service, I mean relationship. Communication, knowledge of the client, and relationship – these are the three key factors that play a very important role. Only communication allows us to get to know the clients perfectly, offer them just what they need and, based on the relationships we build, we can acquire critical information on the financial position of the particular clients and their entire families. After all, building savings has from the beginning retained one important advantage or role, which is education. In the long run, building savings banks have been teaching their customers to look into the future, to be aware that if I want something I must know how much money I need and for how long I must be saving.”
Do you feel the recession has taught us some caution?
“Absolutely. And again it highlighted how critical is communication between the financial advisor and the client and that, particularly in a volatile economic climate, clients find communication much more important than the product itself. That they can call their advisor and get pertinent explanation. Before the crisis, the financial sector had churned out new and new products; bankers offered them and clients purchased them. Few thought about potential risks. Suddenly the crisis hit and people began to think. They also compare a lot and ask more questions. So it’s not just about our advisors to be able to “sell” building savings, but they must also be able to compare the specific product with alternative products and explain to the client why it’s a good choice.”
What is important for Modrá pyramida to be even more successful this year?
We would certainly like to increase our market shares in the deposits and lending segments. To put it figuratively, we want to get a larger bite of the market pie, which means to raise the number and quality of financial advisors and broaden the product offer. Aside from building savings and loans, we currently offer supplementary pension insurance, insurance, current bank accounts, credit cards and other products. But the key priority this year from my viewpoint is – and this is not a cliché – to keep working on the quality of customer service. I would like to see Modrá pyramida assume the role of actual financial advisors, a kind of family financial doctors, who will thoroughly get to know the clients’ situation and help them resolve the financial needs of their families. When we meet after a year and it will be apparent that Modrá pyramida’s key attribute is quality, by which I mean the quality of customer service, the quality of communication with the client, I will be satisfied.”
