We are here to support business growth and people's consumption
Tamas Hak-Kovacs, Chairman of the Management Board and Chief Executive Officer of DSK Bank
Mr. Tamas Hak-Kovacs is Chairman of the Management Board and Chief Executive Officer of DSK Bank, since November 2020. Previously, since 2012, he has been Chairman of the Management Board and CEO of JSC OTP Bank, the Ukrainian subsidiary of OTP. Before that Mr. Hak-Kovacs worked as Chairman and CEO of the Commerzbank subsidiary in Hungary (2000-2007). From 2007 he led the Commerzbank subsidiary in Moscow and from 2010 headed a division of Central and Eastern Europe (CEE) Commerzbank. Mr. Tamas Hak-Kovacs graduated from the Budapest University of Economic Sciences, MA in Finance and Accounting. He also studied at the University of Saarland, Saarbrücken, Germany, at the University of Vienna, Austria and at the International Institute for Management Development, Lausanne, Switzerland. Since 2004 he holds the Chartered Financial Analyst® designation.
Мr. Hak-Kovacs, it has been a little bit over a year for you at DSK bank. If you have to summarize this year in one sentence, what will that be?
In one word I would say it was busy. There is so much to do and so little time.
You are in charge of the largest retail bank on the market, which also serves and finances the business needs of many corporate clients. Looking at the results from the last two quarters what is your forecast – can we start talking about economic recovery or is it still too brave to draw such a conclusion?
In my opinion there is already recovery. I can proudly say that the banking sector in general and DSK Bank in particular have contributed significantly to the recovery. Credit markets are growing, we expect them to continue to grow next year. The election and the new government may even give a push by improving the investment climate. If investments grow, lending is going to grow so we could be very optimistic for next year in this regard.
Everybody’s big concern are the high inflation rates. What is your forecast – is it a temporary trend or inflation rates will remain high for longer?
It is very difficult to say because there are two big, once in a century changes happening right now. One is the disruption, caused by the pandemic. The second is the reaction to climate change.
It is important to understand that continuous high inflation occurs if there is the so-called wage inflation spiral, which happens when wages increase is higher than the productivity increase. I don’t see the reason that there should be a continued high inflation. I see it more like an increase of prices due to this adjustments to the new situation. The question is how long this adjustment will take – one, two, three years.
How will short term inflation affect the behavior of companies and their willingness to invest?
If you just take it on a very simple level, inflation means that prices are increasing. If prices are increasing revenues of the companies are increasing so why wouldn’t I invest if I can earn more money? In this regard, this inflation is more like an opportunity for the corporate sector. Inflation actually in this regard should be positive for the investment behavior because we want to earn more money and if we can earn more money why shouldn’t we.
Can we expect in a short term, let’s say within one year, finally an increase in interest rates?
If you look at current market expectations, you can’t expect high interest rates. The euro interest rates will remain negative territory next year. Small changes may be expected, but certainly nothing dramatic.
What factors will drive the cost of credit for citizens and business?
Number one is the base rate, number two is I would call it the balance of supply and demand. Supply is high, at least in Bulgaria, there is a lot of capital, a lot of liquidity and there is a lot of risk appetite for the big banks, but I expect that demand is going to increase as well so I would expect interest rates for citizens and businesses to be stable on the current very low levels also for next year.
What determines the negative interest rates on bigger deposits and savings for both companies and individuals at the moment?
You can talk a lot about this, but here I would emphasize that we are trying to pass on the cost that we have. And we can’t even fully pass it on. Because if I have a retail deposit and I keep it at the national bank that’s -0.7 plus all the cost of collecting the deposit, plus the deposit insurance cost, the minimal reserve cost - there are a lot of regulatory costs. Both banks and customers are victims of this situation caused by the ECB's monetary policy.
What is your comment on real estate and housing loans? Is it continuously developing and increasing but is there a risk of a bubble on this market?
Real estate bubble is rapid and unsustainable rise of prices and most people think about just the first part, i.e. the quick rising. But here the question is whether this rise is sustainable or not. And my opinion is that it is sustainable for a very simple reason. Real estate compared to average salaries is not more expensive in Bulgaria than anywhere else in Europe. But Bulgarian salaries are rising much faster, incomes are rising much faster in percentage points due to the convergence of Bulgaria to the European Union. Because in the end we compare the price to what we can afford, right? There are additional factors – one is the pandemic, people want to live in bigger houses and are not as dependent on their workplace as before. The second is negative interest rate, it becomes much cheaper to service a loan so if you can afford a bigger loan, you can afford a bigger house or flat. I believe that the environment is sustainable due to rising wages.
What will be the next year for DSK Bank?
Firstly, it is important to say that we are here to help finance the recovery and to accelerate the convergence of Bulgarian economy towards the European Union. We have the capital, we have the liquidity, we have the know-how and we have the risk appetite to support our clients. Apart from this, our emphasis is going to be to improve the customer experience and create products that customers like to use.
In one sentence - we are here to help our customers improve their lives.
Source: Noblesse Oblige magazine by Bulgarian Industrial Association