strategies for a changing marketplace
In an era when customers demands are constantly changing,
Maltas banks are gearing up to make the adaptations needed. Frank
Xerri de Caro, Bank of Vallettas chief officer for credit management
and retail banking, outlines some of the new strategies that have been
put in place to MIRIAM DUNN
Banking has changed greatly over the past few years. Which changes
do you regard as being most significant?
As far as Bank of Valletta is concerned, the main strategy we have implemented
is the segmentation of our customer base.
This process, which is now finalised, is more efficient for the bank
but also allows us to concentrate on our customers differing needs
and provide them with the expertise necessary.
This followed a process of changes we began implementing three years
ago, which are now finalised.
When we changed our system set-up, the main aim was to make it customer
rather than product-orientated, which took about two years of planning
and one of implementation. In line with this was a change to the branch
layouts. This configuration has been finalised and our branches are
now laid out to place an emphasis on relationship banking. Perhaps the
most difficult change we had to make was the culture of our staff, but
that too has been successfully achieved.
Although the core bank business is still the same, we wanted to make
it clear we were offering a wide variety of financial services to our
clients. Customers can, of course, still make deposits and do their
everyday banking, but there are different services on offer, such as
fund management and bancassurance.
Getting our relationship banking strategy in place put us on course
for segmentation and I am pleased to say the feedback we have had has
been very positive.
For credit, we have separate client categories - personal, business,
corporate and also recoveries.
When dealing with personal customers, we have a computerised system
of credit scoring which gives a fast response time and uniformity throughout
For businesses, SMEs can be dealt with at the branches up to certain
limits and, over and above these ceilings, they are seen at one of our
four business centres, which are located around the island. The business
centres not only serve as points of reference for our business clients,
but they also ensure customers get added value, since we can concentrate
exclusively on their requirements.
Our corporate clients, where we are talking about Lm500,000 or over,
are handled through our corporate centre, which is fully tailored to
meet their requirements. Then we have the recovery department that assists
clients whose repayment terms are in arrears. In this sector it is important
to bear in mind that we do our utmost to help clients get back on track.
Although we are recovering for the bank, we are also trying to help
them recover for themselves.
Where retail is concerned, we have similarly segmented our clients and
give value in accordance with the nature of the holdings. In each branch
we have a savings and investment officer to give advice on certain issues
and products which the bank sells.
What specific patterns are you witnessing in client demands?
There are a number of trends in evidence.
One is the interest in which customers are showing in investment rather
than savings. This has increased tremendously, partly, I believe, because
of the success of the Malta Stock Exchange. We have become very active
in this field, being aware that it is what our customers want.
Customers have also started becoming aware of the importance of having
life or equity-linked products. Previously, there was a very low penetration
in this area, with statistics showing, for example, that total premia
collected in relation to GDP was only 1.5% whereas the European standard
can be as high as 7%.
We have had to adapt ourselves alongside the changes in our customers
requirements, ensuring we offer the products they want while channelling
the way we sell them.
The large investment the bank made in ATMs is an example of this.
I remember when we wanted to install the first ATM network in 1991,
we werent sure how many people would make use of it.
Ten years later, our figures tell us that there are almost half a million
transactions per month, leaving the counters free for relationship banking.
Other services, such as PC and telebanking are also proving popular
and we are enhancing these services because we know people want them.
Small businesses are recognised as being vital for Maltas economy.
How does Bank of Valletta try to assist them?
In the current marketplace, many businesses are trying to diversify
and internationalise, which is very important, bearing in mind the market
limitations we have due to our size. The internet is helping many SMEs
to do this, and we also try to assist them in seeking out new opportunities,
especially with the smaller businesses.
One strategy we have adopted is to open representative offices in Tripoli
and Tunis two areas where there is business potential
to help clients tap opportunities abroad.
Small businesses might have an interest in seeking out possibilities,
but do not know how to go about it, or simply find it too costly and
time-consuming and that is where we can help, by bringing interested
parties together and acting as a liaison.
For example, we recently took 15 entrepreneurs on a trade mission to
Tunisia, which proved to be very successful. We already have some businesses
operating from Tunisia and following this last trade mission three companies
signed agreements immediately, while Im sure others will follow.
There is, undoubtedly, a wealth of opportunities for Malta to do business
with North African countries, and even to act as a gateway for EU member
states in this respect.
Of course, we also give great importance to encouraging foreign investment
to come to Malta and we have offices in Milan which deal specifically
with this side of business.
Much has been written about the importance of having a good business
plan in todays competitive marketplace. What are your own comments
There is no doubt that business plans are very important.
We regard them as vital so that both the client and the bank know where
the business is heading, in terms of strategy, product marketing, costings
and what competition they are up against.
Most of our clients understand that this is the way forward in todays
marketplace. Admittedly, we encounter people who ask why we would want
a business plan when theyre providing us with collateral, but
we try to make them understand that it is for their benefit and not
Additionally, although we insist on business plans being drawn up, we
also take a pro-active role in assisting clients in this regard.
In fact, our SME unit helps customers to do their business plans. The
staff there work out the business plan with the client and then approach
the branch manager together for financing, which is a very positive
way of doing things since it means that the customer and bank staff
are trying to achieve the same goal, so to speak.
Is the bank concerned about the cashflow problems that businesses are
We are very much aware that there are serious cashflow problems on the
island and this, of course, worries us.
This problem is specific to the business sector. In personal banking,
ironically, customers evidently have a lot of money to save and invest,
but many businesses are completely stuck.
There is no doubt that the culture of bartering restricts cashflow,
and we try to dissuade clients from this practice as much as possible.
Another possible reason for the jam may well be the governments
efficiency in collecting revenue.
Collecting taxes when theyre due is good for the government, but
it has probably restricted cashflow. Previously, I suspect that businesses
had cashflow which pertained to government, but which was being used,
even if wrongly, for these purposes.
Of course the impact of the general recession overseas is also being
felt here. However, we are a small country and that is helping us to
adapt better than some others, so Im very optimistic in this regard.
The figures coming out are all positive.
The importance now being attached to business plans is also helping.
People are growing more conscious of the returns they expect from their
own business and have specific goals they want to achieve, which gives
them a greater awareness of whats going on and the need to nip
problems in the bud.
So you dont view Malta as being in the throes of a recession?
Granted, there has been slower growth, but I am hopeful on many accounts,
especially since certain targets which the government hoped to achieve
are on line, in some cases even ahead.
Spending is also picking up and, while there is no doubt that we have
some problems, the budget addressed many specific areas.
There is no doubt that we are feeling the effect of the 11 September
attacks, both directly and indirectly, alongside the uncertainty we
have over EU membership, as well. And consumers might be more cautious
than usual during Christmas spending, possibly with some concerns over
job security, especially with so much in the press about redundancies
in foreign companies.
This could be a problem, since, although we are pleased to see the public
saving, we need consumer spending to generate economic activity. But
I think that in general, things are fairly balanced, where spending
and savings are concerned.
So who is spending more?
There is no doubt that the younger generation is spending much more
than the generations before it had done. I believe this is linked to
a change in mentality, with younger people feeling more comfortable
taking loans and using credit cards.
The bank is aware that some observers are critical of this credit culture,
but we view the use of credit cards as a fairly safe form of credit
since the limits are relatively low, about Lm300 Lm500, and if
there is a problem we can stop them very quickly.
Home loans are also on the rise, and it is true that people are borrowing
more for this purpose. But in the very great majority of cases people
keep up with their repayments, primarily, Im sure, because they
treasure their homes, so we are happy to assist people in this manner.
Working out what people can afford and ensuring they keep within certain
perameters is the key to keeping customers satisfied and bank operations