New dawn for ING CB in Europe

The appointment of Ernst Hoff as head of Commercial Banking European network countries, Europe for ING Commercial Banking (CB) heralds a fresh era for the bank. In the past, ING – like most other banks – managed its European network on a regional basis with Central and Eastern Europe (CEE) and Western Europe operating as distinct units. However, in November, ING announced two new operational groups based on whether it has both commercial and retail business in a country or primarily commercial banking.

“The rationale behind the change is straightforward,” says Hoff. “Historically, there has been a clear division between East and West in terms of economic development. But 25 years after the end of the Cold War – and particularly in the light of the experience of the financial crisis – that division is redundant. Many CEE countries, such as Poland or the Czech Republic, performed better during the crisis than some southern European countries and have more attractive economic prospects.”

A segment-based grouping enables ING to optimise its commercial strategy, according to Hoff. “For countries where ING has both commercial and retail banking, multiple departments are involved and there must be close coordination,” he explains. “ING also tends to have a broader presence in these markets and is therefore capable of reaching clients in different ways.” Hoff is responsible for CB in countries where ING offers solely commercial banking. This diverse group comprises Bulgaria, the Czech Republic, Hungary, Kazakhstan, the Nordic countries (which are grouped together as a single operational unit by ING CB), Russia, Slovakia, Switzerland and Ukraine. “Clearly, these are very different countries, although some have similar economic characteristics,” says Hoff. “But from a product perspective, it makes sense to develop a regional strategy.”

Creating a regional plan

Discussions between Hoff, the nine country CEOs in his group and four functional representatives will take place over the coming months to develop a regional plan. “I don’t want to pre-empt that plan, but clearly the strength of our international network will be a central element of our approach,” says Hoff. “Our objective must be to make a corporate customer’s experience in Bulgaria or Ukraine as similar as possible so it is easier for them to work with us.”

While Hoff’s countries will offer a common customer experience, there will also be similarities with what is available in countries where ING has both commercial and retail banking. “ING’s product groups serve both CB and CB/retail countries and the head of structured finance for Europe, for instance, will also oversee countries where ING has both retail and commercial banking, so there will continue to be plenty of commonality between the network and non-network groups,” says Hoff.

Given the varied nature of countries managed by Hoff, the regional plan will retain some flexibility to cater to national requirements. “We envisage an 80/20 rule regarding strategy, with 80% shared by all countries and 20% being unique to a specific country,” says Hoff. “The same strategy will apply to the differences between network and non-network countries: our overall strategy will have roughly 80% in common with ING CB operations where there is also a retail bank.”

 

Challenges and opportunities

Economic growth in much of Europe remains fragile. Moreover, many of the most developed economies in Europe, such as France or the Netherlands, face significant challenges to restructure their economies and regain competitiveness, according to Hoff. “One of the solutions to these challenges – some of which, such as demographics, are extremely long-term in nature – lies in greater integration between the economies of CEE and Western Europe.”

Hoff says that the CEE economies are well positioned to help Western European economies to recover. “They can export both educated young people and competitively made products, with benefits for all of Europe,” he says. “However, greater integration will be a balancing act. If it is not handled well, it could lead to a more polarised Europe and the potential for integration to go into reverse. I’m optimistic it can be handled well.”

ING CB’s ambitions to be a genuinely pan-regional bank in Europe chime with Hoff’s analysis. “ING CB should aim to be a leading commercial bank in Europe,” he says. “It’s an extremely competitive market. But our size, network and strong home markets in Netherlands, Belgium, Luxembourg, Germany and Poland mean we can grow with our clients as they take advantage of greater integration across Europe. As a network bank, we can offer them a valuable common approach across the region.”

Hoff says his 20-year experience of ING – recent  roles have included head of structured finance, Western Europe, head of clients, Turkey and head of structured finance, CEE – will enable him to help clients in his new role. “I know many clients from my previous jobs so I can add value by comparing their business practises with what goes on in their countries and sectors,” he says. “Obviously, business information is confidential but ING can use its knowledge to help facilitate best practise by companies.”

Furthermore, Hoff can use his experience to help clients to navigate ING’s structure. “Our matrix system, with regional and functional representatives, serves the bank and clients well,” he says. “However, it can be complex for clients to navigate. My experience can help to align internal stakeholders so that we don’t burden clients with our internal challenges.”

 

Committed to Russia and Ukraine

Hoff acknowledges that Russia and Ukraine currently face some of the greatest challenges in the region. “Even excluding the political situation, Russia and Ukraine have serious – yet different – economic challenges,” he says. ‘Despite this, ING CB is  committed to both countries and to our clients there. We believe both countries have significant potential and we’re there to stay.”

Hoff reiterated that ING CB’s presence in Russia and Ukraine is unchanged from 18 months ago. “Our business as an international advisor with an international network is unchanged,” he says. “Obviously the events of the past year have been detrimental to trade but it is important to note that Russia’s trade flows, for example, were already changing dramatically from being West-focused to being more China-focused.”

 

Understanding what clients want

While ING must constantly seek new ways to improve its business model to serve clients more effectively, it must also reflect on the realities of corporate life. “Banks sometimes have the impression that clients think about them all the time,” says Hoff. “The reality is that for 50 weeks of the year, clients simply want banks to deliver everything they’ve promised, perfectly. Only for two weeks of the year do clients appreciate banks’ ability to add value and develop innovative solutions.”

Hoff adds: “Our role for the majority of the year is simply to be an operationally flawless supplier – for 50 weeks a year, we’re essentially a utility. But every now and then an opportunity will emerge when we can be smart, client-centric and creative. We have to be ready to take advantage of that opportunity, whenever it appears. It’s a useful reality check that some banks have yet to go through – ING has already been through it and emerged wiser.”