Hungary's Erste Bank to layoff 15% of its employees

Erste Bank will layoff nearly 15% of its employees and close a quarter of its branches in Hungary, the bank has announced on Friday. The drastic measure is unique among the large banks in the country, although CIB Bank, a unit of Italy’s Intesa Sanpaolo, announced earlier this week that it would shut down 11 branches. Erste emphasised though that it will "remain a partner to the Hungarian economy" and consider providing financial services to businesses as one of its "core tasks".

Erste will not retreat from CEE markets 

At today’s Capital Markets Day in Vienna, Erste Group Bank AG stressed its commitment to Central and Eastern Europe, as one of the leading financial service providers in Austria and in the CEE region.

"We play a key role in the economic and social developments of these countries. Therefore, we believe it is our responsibility to provide our capital, our liquidity and our services - especially in difficult economic times - to the retail and corporate customers as well as to the sovereigns. To this end, we will shift resources from our international business and from other non-core business areas," explained Andreas Treichl, CEO of Erste Group Bank AG at the 8th Capital Markets Day.

In this context, Andreas Treichl asserted that Erste Group would not retreat from any of its CEE markets: "Even though some unorthodox economic policy measures have been implemented in some countries, and other countries need more time to adopt economic stimulus measures, we remain loyal to the region."

He obviously referred to Hungary and the special surcharges, the so-called "crisis taxes" imposed on profitable sectors (telecom, retail, energy and banks).

"With 17 million retail and corporate customers, Erste Group is present in those countries that in our view offer the best growth opportunities and are either members of the European Union or have chances of becoming members," added Andreas Treichl.

Adjusting to the harsh economic reality 

"This means, of course that cost structures will be adjusted to match the economic reality. This applies primarily to Hungary where a restructuring and realignment of the operations is under way (integration of subsidiaries into the bank, downsizing the branch network by 43 branches and reduction of staff by 400 - 450)," Erste said in a statement.

"Nonetheless, we will remain a partner to the Hungarian economy and consider providing financial services to businesses as one of our core tasks," added Treichl.

Radovan Jelasity, Chairman-CEO of the Hungarian Erste subsidiary said the unfavourable external economic events, the slowdown of the banking market and a marked rise in mandatory provisioning make it "inevitable" to restructure Erste Bank and streamline its branch network.

He also said the bank remains committed to the Hungarian market and customers, but it must revise its medium-term outlook on the country and subsequently its business strategy too.

The restructuring will cover more than just layoffs; it will bring about a comprehensive renewal in strategy, customer relations and risk management. While over the past years the bank’s growth was based on lending now it will focus on raising funds and taking full advantage of customer relations.

Source: Portfolio