Efficiency, further modernization and resilience are the three pillars of Oschadbank's new strategic program until 2028 (1/2)

Recently, the Supervisory Board of Oschadbank adopted a strategic program for 2024-28. It is a road map that defines in detail the path that Oschad should take in the coming years in order to continue to maintain and strengthen its leadership in various areas of the banking market. About the purpose of this document and what the proposed changes are - an interview with representatives of the Supervisory Board and the head of Oshchad.

The Supervisory Board is represented in the conversation by its chairman Volodymyr Lavrenchuk, independent member Elizabeth Nelson, as well as the representative of the government in the Supervisory Board Roza Tapanova. The Chairman of the Board of Oschadbank, Sergii Naumov, who together with the team will implement this strategic document, also joined the conversation.

All the participants in the conversation have considerable, but varied experience in the banking sector. Volodymyr Lavrenchuk headed the largest Ukrainian bank with foreign capital - Raiffeisen Bank Aval - for 15 years. For seven years, Elizabeth Nelson was the vice president of the European Bank for Reconstruction and Development (EBRD), the largest investor in the Ukrainian economy.

Roza Tapanova has ten years of experience advising banks on working with problem assets - she accompanied complex cases related to the collection of credit debts. The Chairman of the Board of Oschadbank, Sergii Naumov, has about 30 years of work in the banking sector.

Why did you decide to update the strategic program right now?

Volodymyr Lavrenchuk: Regularly updating the strategy is a common rule. Especially in the conditions of very big changes and upheavals, which we are in here, in Ukraine. We have the third year of a full-scale war, the migration of millions of people and thousands of enterprises, new risks and the need to protect the state and people. This requires financial resources. I can also say with confidence that the growing role of Oschadbank in the society and the economy has become obvious. This requires updating the bank's goals and ways to achieve them.

Elizabeth Nelson: The previous strategy had ‘expired’ and overwritten by new laws and regulations for the war-time environment. The Bank needed a sense of direction that could co-exist with the war-time environment, but to also move it in a direction for post-war Ukraine. While new state-owned Bank strategies are not expected during the war, we want to see clear alignment of the management bodies in the direction of the Bank, so decisions made now are moving the Bank in an agreed strategic direction.

Roza Tapanova: The adopted strategic program is the result of our long journey through crises and war. Through the affirmation of values, through the recognition of our capabilities, through the understanding that you know exactly how to help, through the realization that in times of war you do a lot of things first and get results. We strengthened the state, because otherwise the country cannot survive. This is one of the factors of victory: when a country has strong institutions, it itself is strong. And we realized that we are ready for an ambitious strategic plan, that we will definitely be able to implement it. We are changing the paradigm and strengthening the focus on customer orientation. We have determined that we are ready to become the bank of first choice.

Sergii Naumov: As the cat from Lewis Carroll's book "Alice in Wonderland" said, “If you don't know where you want to go, then it doesn't matter which path you take.” In recent years, we knew where we wanted to go, but the situation is constantly changing, and we cannot be left without new concrete goals. The plan was necessary despite the fact that our affairs are going well now. Oschadbank is trusted because of its reliability, accessibility, wide client base, comprehensive range of products in all segments.

Thanks to experience, reputation, cooperation with international financial organizations and the implementation of state programs, Oschad occupies a leading position in the segments of services for individuals, MSMEs and large corporations. Ultimately, we demonstrate high profitability - net profit for the three quarters of 2024 is UAH 11.8 billion. At the same time, the adoption of a new strategic program will help to provide worthy answers to future challenges for our team, including ongoing hostilities, negative demographic indicators, increased competition from traditional and non-banking competitors, etc.

Elizabeth recalled a previous strategy. What is the key difference between the previous strategy and the current one?

Elizabeth Nelson: I only arrived post the imposition of war-time governance. However, pre-war there was a core focus on commercialization and privatization of state-owned banks. The new strategic program continues the program of ‘commercialization’ which should be consistent with eventual privatization. Customer focus and experience - product development, service quality and client-base growth and retention, enhancing internal processes and efficiency, digitalisation / automation, development of technology capabilities, including data and analytic capabilities, data development as well as introducing ESG and responsible lending. The strategic program continues Oschadbank’s ongoing work to develop the Bank into the leading Ukrainian financial institution as a sustainable commercial, competitive, productive, efficient and profitable bank. It re-sets the business focus over time through recognition of the Bank in its role as a state-owned bank, delivering war-time support and set a post-war direction to continue to support to the recovery and reconstruction, supporting Ukrainian people, businesses and economic growth. 

Volodymyr Lavrenchuk: Unfortunately, the high risks of a country at war have dragged on for a long time and have become a new reality for us. Quite possibly, for a long time. We understand this, and therefore, over time, we decided to develop a new positioning of the Bank and a list of projects necessary to achieve important goals for the medium term.

Roza Tapanova: According to the strategy for 2021-2024, Oschad is a universal bank with strong positions in the retail, MSME and corporate segments, which actively lends. The main goal was to prepare for privatization. Our focus was on changing the risk management system, new management accounting, and reducing the share of NPLs. However, the full-scale war showed that some of our historical features are advantages and should not change, because they are the key to our stability. But the war also showed that we are ready for more ambitious changes. The Supervisory Board of Oschad has such competences and experience that we are confident that what is stated in the strategy will be implemented.

Sergii Naumov: As you know, the main document that determines the work of Oshchad during martial law is the strategic directions of the state sector banks, approved by the government on May 7, 2022. The new strategic program in no way contradicts this document. It complements it and is a signpost for changes in our bank, not only in the regime of anti-crisis actions. The new document is about the future, about business as usual, as well as about where we should be in four years.

What models did you follow when developing the strategic program?

Elizabeth Nelson: The development of the program was done with the support of McKinsey advisors. There was an assessment of the Oschadank internally and in the context of the Ukrainian market and wider market consideration.  The experience and access to market information and tools greatly assisted the discussions and development of the strategic program.

Volodymyr Lavrenchuk: We also focused on the best examples of banking activity in Central Europe, with the aim of promoting further integration of Ukraine into the European Union and the ability to compete in these conditions. We must prepare Oschad well to be an important participant in the reconstruction and development of the country after the end of the war.

Roza Tapanova: There is no modern example in the world of how a bank should work during a full-scale invasion. Oschad seems to be the only bank that did not stop lending for a single day at the beginning of the war. The Bank is the operator of all state programs to support the population. We were the first to offer businesses grants from international partners and the state. We were the first to start joint projects with regions with special programs for business. Oschad was mostly a pioneer among banks at the beginning of the war. And we continue this path.

The situation in the country is quite volatile right now. What are the forecasts on which the developed strategy is based?

Sergii Naumov: We hope for the best, but prepare for the worst scenario. The forecast for the financial model of the strategic program is based on two scenarios that take into account the duration, intensity and impact of the war on the economy and the banking system. The negative scenario predicts the impact of longer and more intense hostilities, which will be reflected in the mood of companies and households, the pace of return of migrants, and further damage to infrastructure. It is used to stress test the base model.

Elizabeth Nelson: The underlying base case and downside macro scenario are those developed by the IMF.  While the finance team did an excellent job to develop financial models to gain insight into performance potential, it was recognized that the current uncertainty meant we should not overly focus on financial forecasts.

Volodymyr Lavrenchuk: At the same time, according to any forecasts, the new strategic program provides for the active modernization of service and operational processes and will help significantly improve the client experience and the efficiency of our work and its results for all stakeholders.

Roza Tapanova: Oschadbank has impressive expertise in market analytics and macroeconomic indicators. We also rely on the experience of the National Bank of Ukraine, the IMF, international specialized institutions, and the data of our consultants. But if we did not have our own deep understanding of the Ukrainian market and macroeconomic trends, we could not be certain in any forecasts.

Original article is available here