Citibank has emerged as one of the fastest-growing banks in Poland. Charles Olivier talks to chief executive Shirish Apte.

“The market was opening up and we figured that with Poland being close to both Germany and Austria, it was likely to do well,” recalls Shirish Apte, chief executive of Citibank’s operations in Poland.

Citibank started out lending to the government and multinational companies operating in Poland. “Our first entry point had to be the corporate market, it was the best way to make contacts.”

But it soon branched out into broking, custody and investment banking when the privatisation programme began in the early 1990s and the stockmarket started to take off.

Citibank did not move into retail banking until 1995. Says Mr Apte: “We knew we would be a full franchise operation eventually but we did not want to move in to retail banking too early.”

Citibank’s first retail branch was established in Wroclaw -– close to many of the country’s car manufacturing plants. Branches were also opened in Posnan, Warsaw, Katowice, Gdinya and Krakow.

The bank’s retail products attracted quite a bit of interest in the local market and by the late-1990s it had more than 200,000 customers. But it soon became clear that Citibank needed more branches if it was to compete on a national level. This left Mr Apte with a difficult choice. Should Citibank build the network itself at the cost of $1m a branch or should it buy market share through an acquisition?

Acquire to grow

“We decided it was better to grow through an acquisition – that way we would gain branches and customers,” says Mr Apte.

Citibank looked at a number of acquisition targets in the late-1990s before finally settling on Bank Handlowy, a medium-sized private bank with more than 250,000 retail customers.

Handlowy also had good contacts with local Polish corporates – a segment of the market that Citibank had been finding it tough to break into.

Mr Apte started buying shares in Handlowy in March 2000. By July of that year, Citibank owned 89%. The cost of the acquisition was $1.2bn.

“The build-out option often looks cheaper,” cautions Mr Apte. “But, in the long run, it can turn out to be more expensive than an acquisition.”

Merger finalised

A year on, the merger of the two operations is nearly complete, to Mr Apte’s obvious delight. “The integration process has gone much faster than I had anticipated,” he says. He is confident that the new bank, Citibank Handlowy, can keep growing at around 15% a year and that it will also be able to maintain margins for the next three years.

He has some advice for international companies looking to invest in Poland. “It is important to remember that Poland is not one homogeneous market. There are about five million people living in the big cities who are as sophisticated as anyone in western Europe. But, outside the main urban centres, people are much more conservative. They tend to save more than people in the west and are not as keen on leverage.”