Stability & flexibility

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.

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.

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.

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.

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.