Helaba finds itself in a comparatively healthy position. Its business model, total capital ratios and reputation are all in good shape, so why the need for change?
Herbert Hans Grüntker: The action being taken is intended to safeguard the Bank's longterm future, no more and no less. The backdrop against which we are doing this is growing more complex all the time. Banking business continues to be shaped by the European Central Bank's ongoing zero or negative interest rates policy and we also face a steady stream of new legislation and regulatory measures. And then there is the whole issue of digitalisation, which demands innovation at a rapid pace but also offers real opportunity, especially for a Sparkasse central bank like Helaba. Financial institutions across the board are having to invest significantly to master these challenges and make the opportunities work for them. We are no exception. We know that we, too, need to become more efficient in our operations to create scope for future growth. This will be no mean feat at a time when the whole world is feeling the impact of the new coronavirus. The economic consequences of the pandemic will be serious, clearly, but we are not yet in a position to predict exactly how serious. Thankfully, although the environment is full of uncertainty, we still act from a position of strength. Our income from operations shows that we have found a way to manage the difficult interest rates situation. Our costs are moving in the wrong direction, however, so Helaba cannot help but make changes if it intends to carry on doing what it does best: simply being a good bank.
The most far-reaching changes in 2019 were probably the measures implemented under the "Scope – Growth through Efficiency" project. What did this involve?
Thomas Groß: The Scope project needs to be viewed in the context of our broader strategic agenda, which focuses on four aspects: growth initiatives, IT and digitalisation, corporate culture, and improving efficiency. Scope touches on elements of all four. The most noticeable effects at the moment stem from the comprehensive overhaul of our long-standing organisational structure that we completed in 2019 as part of the project. We determined that we could make ourselves significantly more efficient and effective by reorganising our divisions and streamlining Helaba at all levels. We decided to implement the necessary changes promptly, without interrupting our demanding day-to-day operations, and have been operating under the new structure since 16 March 2020.
Herbert Hans Grüntker, former Chairman of the Board of Managing Directors
A step like this is as much a cultural challenge as an organisational challenge.
Grüntker: Quite right. It is very important in times of change to have a clear focus internally. We have always taken great care to nurture an open corporate culture founded on shared values at Helaba and this is certainly proving to be a great asset at the moment. Establishing the new organisational structure will require us to reduce staff numbers significantly at the management level and we have announced that between 380 and 400 posts will have to go over the next few years. It hurts us to have to do this and we know it will be very taxing for the Bank and our people. We are quite convinced, however, that Scope will have a positive impact on our corporate culture along with the modernisation of our IT and the NewWork@Helaba initiative that is paving our way – in cultural terms – to a more agile mode of working. The new structure adopted at Helaba involves us working less and less in silos, which will allow us to unleash the individual potential of our employees to much greater effect across unit boundaries. Each of us will also be taking on greater responsibility as part of the same process.
Thomas Groß, Chairman of the Board of Managing Directors
Are any of the effects likely to be noticeable to the Bank's customers?
Groß: Faster decision-making, digital solutions and clear processes optimise business procedures for the Bank and its customers alike. We are seeing increased use of our portals for this reason. We are the leading arranger of promissory notes on "vc trade" and were involved with the platform's largest ticket of the year in 2019 in the form of an issue for Lufthansa, one of our oldest customers. We continued to expand our real estate lending business in 2019 too, bringing a number of different competencies within the Group together under one roof for the purpose: working with Helaba Invest, we have created a real estate loan fund exclusively for Sparkassen, many of which have been asking us for an opportunity to become involved with Helaba's loan portfolio. The real estate loan fund simultaneously opens up an additional funding channel for Helaba.
What are the implications of Scope for the product level?
Grüntker: We always aim to find a good solution for all of the parties involved and this is the approach we apply as we review our products. Take lending, one of our core processes, for example. The lending process at Helaba has sprawled out over the years as the many individuals working away in different departments – with at times very different objectives – have left their mark until it has almost as many versions as we have customers. One of the questions we are asking in the context of Scope is: how can we digitalise our products, either to a greater degree than at present or even completely? What are the key modules of the process, so that we can standardise it as far as possible without sacrificing the flexibility we need if we are to carry on meeting specific customer requirements? And, of course, we are thinking about how we can make the product even more sustainable along the way.
Thomas Groß, Chairman of the Board of Managing Directors
Sustainability is a most fitting keyword. The EU Green Deal was finalised in December 2019: how can Helaba support its customers on the way to a climateneutral economy by 2050?
Groß: The importance of the sustainability of our internal value chain and product range, which is already central to our business strategy, is only going to increase. Our transformation process harbours a wealth of opportunities to enhance our performance in this area. The digital green promissory note, for example, has only been available for a short time and yet we have already placed a number of issues. We acquired a stake in Arabesque S-Ray, one of the world's leading providers of sustainability ratings, through Helaba Digital at the end of 2019 too. We expect sustainability assessments to become a critical criterion for investment and lending decisions in the future and S-Ray makes the information needed for these assessments available faster and in a more transparent form.
Grüntker: We have toughened up our already restrictive policy on dealings in the coalbased energy segment and now explicitly rule out financing projects directly linked to the extraction of power station coal. This prohibition also extends to process chains directly and exclusively tied to power station coal extraction, such as conveyor technology intended predominantly for use with power station coal. Compliance with the OECD recommendations on environmental and social due diligence is generally a mandatory requirement for all export finance transactions. We implement these and similar measures not simply to comply with regulatory requirements but because we owe it to our customers and our society to demonstrate a responsible approach in these areas.
Thomas Groß, Chairman of the Board of Managing Directors
We cannot discuss Helaba's responsibilities to customers and society in the present climate without mentioning the new coronavirus and its consequences. What does the pandemic mean for Helaba?
Groß: We intend to stand by our responsibilities at this difficult time and customers contacting us over the next few months can expect to find us the same reliable partner as ever. It is still much too early to say how significant the impact of the coronavirus crisis will be, but clearly the global economy has already slowed dramatically. We have a particular role to play in our capacity as a Landesbank and the S-Group bank for the Sparkassen, who count a large number of SMEs among their customers. We are distributing the resources associated with the KfW programmes approved by the German federal government to our S-Group Sparkassen in Hesse and Thuringia for them to make available to their customers and the development programmes introduced by the state government in Hesse to support SMEs and the self-employed are being rolled out through WIBank. Rapid disbursement of these funds is a matter of existential importance for many companies. Our key accounts are going to face financial challenges too and it is essential that we – with the support of the politicians – develop effective ideas quickly about how we can help those affected. The current situation also requires us to revise our priorities in relation to our internal projects. We have decided to pause certain elements of the Scope project for the time being, for example, so that project work can concentrate on consolidating the progress already made and realising objectives that can be achieved in the short term. Every decision we take during this time of crisis will be made with the wellbeing of our staff as the number one priority. That way we can help them to stay healthy and minimise the disruption to our business procedures.
Mr Grüntker, one final question to you as you enter your last few months before retirement after 27 years with the Helaba Group. You have been a member of the Group's Board of Managing Directors for more than half of your time here and chairman for the last five years: what are your thoughts as your service comes to an end?
Grüntker: I am leaving the Bank at a time of great uncertainty – the transformation process, persistently low interest rates, the coronavirus and its consequences... But we need to remember that Helaba coped well with the financial and economic crisis in 2008/2009 relying just on its own resources and that we have good risk management inscribed in our DNA. This gives me confidence that Helaba has what it takes to weather the challenges ahead too. Helaba has demonstrated that even in times of crisis, it stands by its customers and carries on simply being a good bank. I'm proud to have had the opportunity to help shape Helaba's course for a bright future. Thomas Groß and I have been working together side by side for some years now and I have no doubt that with him as chairman of the Board of Managing Directors, Helaba is in the best of hands.
Mr Grüntker, Mr Groß, thank you very much for your time.
Ecological and social responsibility is an integral component of our business strategy.