The subsidiary of the BO Bank, which has been operating in Estonia quite unnoticed, has significantly increased its number of clients and , according to manager Hannes Kaadu (HK), would like to invest even more in exporting enterprises.
Q: The OP Bank subsidiary is completing the construction of its new office. Does this also mean an actual expansion, hiring more people and introducing new services?
HK: This is indeed our direction. My desire is to increase the number of clients above all. But it is typical of corporate banking that the number of staff is not as high as in retail banking. The number of people is not growing as fast as the portfolio. But we will certainly need new staff in the future. We now have a staff of 33.
Regarding the Maakri block we are the financiers. But as the future tenants we and Seesam (an insurance firm in the OP Group) will only cover 10 percent of the floor area.
Q: So far you have been purely a bank serving enterprises. Will this continue?
HK: Yes, for the time being. We are clearly in corporate banking and have no intention of entering retail banking.
Q: How has the client portfolio been increasing?
HK: The bank began operating here in 2011; its leasing business had come some years earlier, so that we have not been in Estonia for very long. As I joined the OP Bank in 2015 the credit portfolio was 300 million euros, we increased it to 500 million within the first year and the current figure is 700 million.
Q: You have not been very visible as a corporate bank. Have you been considering increasing your image or would that be pointless?
HK: We had some advertisements in the airport last year due to the change of name (Pohjola became OP Corporate Bank – ed.) and we planned advertising in the streets as well, but I do not think it would be practical, considering the target group. I like more the idea of being a boutique bank which is known for what it does.
Q: The most interesting speculation I have heard about you is that OP is one of the candidates for buying the Nordea-DNB merged bank. Could that be an interesting idea for you?
HK: I cannot comment it in any way. My task is to grow the OP Bank organically.
Q: I understand that the idea is not completely impossible among the Finnish management.
HK: Well, everybody talks to everybody else here. I have no direct knowledge about what they say, but they are certainly considering all options.
Q: Would that be a good opportunity to enter retail banking business?
HK: The OP Group has currently no plans to adopt retail banking in the Baltic states.
Q: So you do not meet with Erkki Raasuke (head of the merged DNB and Nordea) and discuss it?
HK: I have not met with Raasuke.
Q: When talking to entrepreneurs and banking figures I have understood that there are some expectations regarding you and they are keeping an eye on your bank.
HK: The plan of the OP Bank was simply to enter corporate banking business in the Baltic states. Our present strategy does not say that we should expand into retail banking outside Finland.
Banking and especially retail banking in Europe will be at a turning point due to the coming in force of various directives and OP group is currently focusing on developing its present position in Finland.
As for our activities in Estonia, although our portfolio volume is several hundred million euros, we amount to less than one percent of the group’s overall balance. My goal and what they expect from us is certainly much higher. But the banking business is marathon rather than sprint.
Q: Which sphere has the highest potential in your opinion? Where is the highest growth?
HK. The real estate sector has always been very active in Estonia. I would like to see large investments in other sectors as well, in industry, for instance.
When looking at the Estonian economy, export also has a very important role. The largest trade partner, i.e. Finland’s economy has now begun to grow nicely, which should boost Estonia’s economy as well. I would like to see some Estonian exporting industry invest more in it. We would happily place our money there.
Q: How do you rate Estonia’s general tax environment?
HK: What I wish is that politicians could see the consequences of their decisions. It usually does not happen this way that if I see 100 euros on the table and impose a 10-percent tax, then I receive ten euros.
Changes are necessary for development, but the dynamics can be quite interesting and one has to be able to consider that. For example, the Finnish state decided to increase the car tax a few years ago, believing that since a certain amount of cars is sold annually, the tax rise would bring a certain amount of money to the treasury. But it resulted in lower car sales and the state actually earned less than previously from the car tax and sales tax. To say nothing about the side effects on car-related businesses.
I hope that Estonia’s tax environment will remain as simple as possible and will make investing here worthwhile.