To sell the Gulliver, return money from Hungary and plan privatisation. What challenges has Yurii Katsion faced in his first three months serving as Oschadbank CEO?

When will Hungary return the stolen money and gold, what lies ahead for the Gulliver, and when will Oschadbank be privatised? That is what Yurii Katsion, Chairman of the Management Board of Oschadbank, talked about in his public interview to Roman Bondar, Senior Partner at Korn Ferry.

Almost three months ago, Yurii Katsion became CEO of the state-owned Oschadbank. And almost immediately he faced a number of challenges. In early March, Hungarian special forces stopped and forcibly detained the bank’s cash-in-transit vehicles, which were transporting $40 million and €35 million in cash, and 9 kg of gold, from Austria to Ukraine.

The following challenge for the new CEO of Oschadbank was the legal battle with Viktor Polishchuk, the former owner of the Gulliver Shopping Mall. Despite the legal disputes, Mr. Katsion announced that the shopping mall would soon be put up for sale.

The ‘Hungarian Case’, the Gulliver and the role of the state bank’s CEO

• You have been in the banking sector for 25 years, including Oschadbank, four years as deputy member of the Management Board in charge of corporate business and three months as Chairman of the Management Board. What has changed with the new position?

I chose the path of a banker when I was a schoolboy, and began my career in my third year at university. However, I never dreamt of becoming a chairman of a bank. Even a year ago, I hadn’t such thoughts on my mind. But I have never dodged responsibility, and perhaps this trait led me to this position.

A lot changes, but there is one key difference: whether it is an external or internal candidate who becomes the CEO. As a rule, an external candidate takes time to get situated and grow familiar with the business. An internal candidate does not have this chance – immediately he faces stricter demands and expectations. Everyone wants quick results and wins.

• On the other hand, it’s a little easier for an internal candidate, as he has a reputation and authority. That’s a fair expectation, isn’t it?

Yes and no. When you’re in charge of a definite business unit, there’s a clear focus on results, and you rely on established processes. When you take on responsibility for the entire organisation, it’s a greater commitment, which creates more pressure. My team in corporate business consisted of 120 people, whereas today I work and communicate with a team of 16,000. The scale has increased.

• The first three months at Oschadbank were far from an easy start. Do you have an idea when Péter Magyar will return the money (stolen by Hungarian security forces – Forbes Ukraine)?

A few days ago, I spoke to the Supervisory Board; we reported on the status of the ‘Hungarian Case’, and the first question I was asked was: ‘Yurii, what else has to happen?’.

The ‘Hungarian Case’ could be the plot of a Hollywood movie. An armed hijacking of a cash-in-transit convoy on the territory of a European Union country – it boggles the mind. The bank’s response strategy is to start from scratch, as no one has faced such challenges before. It is worth noting the swift and comprehensive response from the Ministry of Foreign Affairs and NBU. Thanks to joint efforts, our citizens were returned to Ukraine within a day and a half. The cash-in-transit vehicles were returned later. I am sure that we will return the funds in the near future.

There are plenty of other challenges too.

• Are you referring to the Gulliver Mall?

Such cases as the Gulliver are of historical significance for the investment climate and for changing banks’ approaches to customer lending.

We managed to seize the property that was pledged as collateral and take it onto our balance sheet despite fierce resistance and pressure from the former owner, who had long failed to meet his obligations. This confirms that the institution for the protection of creditors’ rights works, and this allows banks to reduce and soften their lending approaches.

• What will happen to the Gulliver?

Now there is a huge number of court cases regarding attempts to block the mall’s operations. Despite this, it has been operating as normal since 1 February.

This is a huge achievement for the Oschadbank team dealing with non-performing loans. We will soon announce the start of the sale of this complex on the Prozorro auction platform.

Oschadbank of the future

• What will Oschadbank be like in five years’ time, by the end of your term as Chairman of the Management Board?

We want to see Oschadbank as a technological, advanced, universal bank for all customer segments – retail, small, medium-sized and corporate businesses.

The first step on this path is the digitalisation of the bank’s processes and services. The second is to enhance the role and efficiency of the regional network, as this is Oschadbank’s unique advantage. And the third is to prepare and adapt the bank for EU accession. Ukraine will certainly be there; I cannot imagine a future without this membership. Compliance with the best European benchmarks shall prepare the bank, in particular, to attract potential strategic investors.

• Does the efficiency of the bank’s network mean reducing the number of branches or maintaining the current number whilst improving operational efficiency? Do you plan to cut costs on physical branches, which are already somewhat out of fashion?

The status of a large systemic social bank requires a broader approach to assessing the efficiency of each individual branch. Of course, there are criteria and metrics for evaluating the performance of each branch – profits and balances at branches, for example.

But we always keep in mind our social responsibility towards all our customers. Oschadbank is responsible for financial inclusion, that is, for the accessibility of financial services across the country. Today, 1,137 branches are in operation – this is the largest network in the country, and that comes with obligations.

• When will Oschadbank be privatised?

Today I have received a letter from the Ministry of Finance addressed to all state-owned banks, stating that, in accordance with the memorandum with the International Monetary Fund, the government must review the development strategy for state-owned banks. The Ministry of Finance is looking forward to proposals.

The memorandum with the IMF mentions that state-owned banks must update their strategies by the end of the year, including on the issue of privatisation.

While the active phase of the war is ongoing, it is probably difficult to expect a high valuation for the privatisation of any particular bank. It is up to the government to decide what strategy to adopt. But it is quite clear that it would be sensible to privatise large systemic banks after the war – perhaps partially, or perhaps through a combination of an IPO on the Ukrainian stock market, however grandiose that may sound. I believe in this.

In the medium term, we will have a plan for privatisation or for reducing the state’s stake in the banking system.

• Is being the Chairman of the Management Board of a state-owned bank a curse or an advantage over other colleagues in the banking market?

There are no restrictions from the regulator or the shareholder. All state-owned banks operate on an equal footing with private ones. The only things holding us back in our development are risk appetite and capital adequacy.

Apart from social responsibility, the advantages of a large systemic bank are its network and expertise in implementing investment projects. This allows us to make a significant contribution to the country’s post-war recovery.

• So, will the state use Oschadbank as a partner for future recovery?

I am absolutely sure that it will. The bank’s presence in almost all local communities provides this opportunity.

• How does this change the commercial logic, and does the fact that the state is actively involving banks and state-owned companies in national resilience processes create obstacles?

I cannot recall a period when there were so many support programmes for small and medium-sized businesses, the population, and specific sectors and industries. Therefore, this is not about pressure or obstacles, but, on the contrary, about synergy. The government is cooperating with banks, and we show good results in it.

• Is state support one of Oschadbank’s objectives and the very reason for its existence?

It is a synergy, especially taking into account that the government is the bank’s shareholder.

• It is difficult to say no to a shareholder. How do you assess the competition with fintech and other banks that have made significant progress in digitalisation? Oschadbank has certain cultural characteristics that need to be overcome. Will this allow it to compete effectively, and what challenges does it pose?

In the medium term, when Ukraine becomes part of the EU, we will not be competing with each other, but with the best European and global banks and fintechs.

The pace of fintech development is two to three times faster than that of traditional banking. And no matter how fast we run, we will fall behind, because customers prioritise speed and convenience of services above all.

A key feature of the near future will be the rapid development of the stock market, preparatory work for which is already underway under the leadership of the government, NBU, IMF and EBRD. Launching a fully-fledged stock market will enable the attraction of significant resources. By way of comparison: over 50% of US citizens’ funds are held in the American stock market and circulate within it – that’s $60 trillion.

In Ukraine, the figures are more modest, but the potential for attracting investment into economic development could amount to around $100 billion. This is more than all available programmes from the international institutions we work with.