Leadership Skills And The Leading Leadership Practices Of Top Managers In Qbo
Introduction
The aim of this study is to examine the importance of leadership practices and quality management for an organization whose status is the most favourable from an established teritory and should be permanently reinforced. Romanian Commercial Bank is the most representative bank of our banking system, the banking market leader in Romania, which is I we chose the development of a research study for monitoring the development of this performance recorded in recent years. Beyond the fact that a bank always represents a reliable example for a leadership and quality analysis, a BCR case study is a better example for a well-known economical struggle- the secret of permanent success.
Financial results, continued growth in business volume and quality of professionalism confirm BCR employees and management, in a permanent improvement of risk management, customer relationship bank, business partners, as well as management costs. There are many factors that can reinforce the credibility and the reputation of a bank as solid, balanced and dynamic and a good management of leadership skills and quality excellence are primary. As a result of a successful mixture of skills and business plans, BCR is nowadays considered the most powerful and efficient bank system.
Bank performance analysis is crucial, the banking system in the economy a main circulatory system. Banking sector development is one of the essential operations of promoting economic reform and consolidation of a market economy development.
The objectives of this paper will be revealed across the evolution of the text which begins with a conceptual basis for quality and different means of measurements. This part will continue with a theoretical basis for leadership practices and the challenge of business excellence and it will end with a case study about financial evolution of BCR and the applied leadership skills and quality management seen across the evolution of the most important bank from Romania during five years.
Chapter I Quality Based Organizations
“Quality is a transformation in the way we think and work together, in what we value and reward, and in the way we measure success. All of us collaborate to design and operate a seamless value-adding system that incorporates quality control, customer service, process improvement, supplier relationships, and good relations with the communities we serve and in which we operate – all optimizing for a common purpose.”
(Peter Senge et al. The Fifth Discipline Field book)
The concept of quality
”Quality and customer satisfaction have long been recognized as playing a crucial role for
success and survival in today’s competitive market.” Not surprisingly, considerable research
has been conducted on these two concepts. The most commonly found studies were related to the ‘antecedents, moderating, mediating and behavioral consequences’ relationships among these variables – customer satisfaction, service quality, perceived value and behavioral intentions. However, there have been mixed results produced.
Defining quality is a stupendous task in itself. A wide range of definitions have been offered in the course of its evolution. Product acceptance or rejection by inspection was the early stage of quality control. Finding the inspection of each product a cumbersome procedure, sampling methods were devised. This, along with statistical tools, gave rise to statistical quality control. In course of time, various new technique. The concept of quality is equally applicable to products and services. And the research on the aspects of quality has been pursued differently in different disciplines. Various disciplines – economics, manufacturing, management and marketing – have their own parlance, many times resulting in conflicts (Garvin 1984). Nowadays, the researches on quality aspects are pursued separately in economics, management and marketing. Specifically, the work possesses the tone of the discipline in which it has been pursued. Although there are many differences in approaches, it is well-known that every study has a significant contribution. Even though these approaches seem to be isolated, they are important for the holistic perpective of quality. The struggle concerning these approaches is to be assimilated so as to evolve to quality management.
Does the word ”quality” denote a desirable characteristic in output goods and services? Or, does it describe processes that make and deliver those outputs in ways that please customers? Or, especially when appended with the word management and preceded by the word total, does it refer to an even bigger picture – an overall approach to running organizations? The answers are yes, yes, and yes. The quality concept is both comprehensive and complex. According to the ISO [113], a quality of an artifact, a product or a service is the degree to which a set of inherent characteristics of the artifact, process, or service fulfills requirements. As we can notice,qualities can be classified in terms of characteristics and sub characteristics; but, in order to obtain a clearer terminology, we introduce will the general term quality dimensions or, simply, dimensions, instead of characteristics/sub-characteristics. There are two modalities used to assign a value to quality dimensions, namely • a measure, performed with a measurement procedure that results in a metric, namely a value in a domain and • the evaluation of perception of users with questionnaires and focus groups.( Quality Assessment Gianluigi Viscusi, Carlo Batini and Massimo Mecella)
If we analyze the first modality, we can conclude, according to G.Viscusi, that a measurement procedure consists in a sequence of steps that leads to measuring a value for the dimension in a specific domain. For instance, an efficiency dimension for services is temporal efficiency, which corresponds to the time related to service provision. According to Viscusi, we can observe that a first possible metric for temporal efficiency is the user time, namely, the time the user has to spend in (i) service request, (ii) possible further interactions with the administration, and (iii) service acquisition. Also, if the macro-process involved in service provision crosses more than one administration, it is also necessary to identify the inputs and outputs associated with the different processes, in such a way that they can be univocally related to the service request.
1.1.Quality perception through time
We can notice that temporal efficiency can also be evaluated through user perception. In this case we are looking for an average perception, since we can find intolerant users and patient users, so the user’s sample has to be chosen in such a way to be representative of the universe of users. For methods related to the choice of samples and segmentation of users. Not all perceived dimensions can be measured with a measurement procedure, e.g., the kindness of the front-office personnel of an administration cannot be measured, it can only be evaluated through the perception of users or else of a third-party human observer. Perceived quality is now widely viewed as an effective basis for differentiation based competitive strategies (Aaker and Jacobson 1994; Phillips et al. 1983). Perceived quality is becoming the most essential corporate attribute in the emerging global economy. In the new value equation, perception is a silent partner of the quality factor and can tip the scales (Polly 1994). Brown (1995) coined the term “nation equity” for perceived quality of a product from individual nation’s point of view. He observed “Since the products do not start from the same basis in each market, nation equity is likely to play an increasingly pivotal role in quality perception.” Pursuing the best aspects of definig quality, we cand observe, that the perception of quality was described across the literature through “perceived quality” and “quality perception” that are interchangeable terms.In many descriptions, the “perceived quality” has been the favorable term when discussion involves the assessment of quality, on the basis of customer responses.
The literature on quality is characterized by many proposals on how to model and assess the quality of services. One of the most popular proposals referring to the user’s perception concerns Parasuraman. In the approach of Parasuraman, user’s service expectations are compared to user’s service perceptions; this is done using questionnaires whose questions refer to a set of quality dimensions. In the original approach, such dimensions pertain to the following categories:
• Tangibles, namely the appearance of physical facilities, equipment, personnel, and communication materials.
• Reliability, the ability to perform the promised service dependably and accurately.
• Responsiveness, the willingness to help customers and provide prompt service.
• Assurance, the knowledge and courtesy of employees and their ability to inspire
trust and confidence.
• Empathy, that is, caring, individualized attention the firm provides its customers.
Nowadays, it’s hard to fiind a business that doesn’t have some manner of formal program for ensuring quality in the goods or services that it provides. Hospitals, schools and universities and government agencies have also joined the movement. A quality assurance system, therefore, does not necessarily result in products or services of desirable quality but rather assures that an organization has adhered to a documented quality blueprint.
TQM – a possible lack of clarity
Even though the widespread attention to quality was pleasant to consumers, some observers lament the lack of clear definition. For example, Crosby and the late W. Edwards Deming, both respected pioneers in the quality movement during the 20th century, avoid the term total quality management (TQM), arguing, respectively, that it lacks clear definition or even meaning. Joseph M. Juran, another respected voice in the quality field, says that part of the problem stems from a failure to distinguish quality goals from the steps taken to reach those goals; that is, quality and total quality management need to be defined separately. Following Juran approach, "quality" means those features of products which meet customer needs and thereby provide customer satisfaction. In this sense, the meaning of quality is oriented to income. We also can identify the purpose of such higher quality in trying to provide greater customer satisfaction and to increase income. However, providing more and/or better quality features usually requires an investment and hence usually involves increases in costs. Higher quality in this sense usually "costs more". As the quality movement has evolved, so has the definition of quality. To keep demanding customers happy, businesses have expanded the concept of quality and at the same time have improved their ability to deliver on a wider array of quality dimensions. The following example contains two itemized lists that exemplify this broadened view. The first was proposed for services; the second is more good oriented. Despite gaps in wording, the lists share two characteristics:
• Both reflect how customers think about quality.
• Both suggest action – things managers at all levels need to address if quality is to happen.
SERVQUAL and quality expectation
The interest in studying satisfaction and service quality as the antecedents of customer behavioural intentions in this paper has been stimulated, firstly, by the recognition that customer satisfaction does not, on its own, produce customer lifetime value(Appiah-Adu,(1999).
“Conceptualization and measurement of service quality perception have been the most debated topics in the service marketing literature. This debate continues as is evident from ongoing and largely failed attempts to integrate the SERVQUAL conceptualization into new industries” (Brady and Cronin 2001). Brady and Cronin (2001) then revealed a new approach to service quality perception by integrating the “Nordic” perspective (Gronroos 1982, 1984) with the “American” perspective (Parasuraman et al. 1988). Service quality is an abstract and elusive construct because of three features unique to services: intangibility, heterogeneity and inseparability of production and consumption (Parasuraman et al. 1985). In the absence of objective measures, an appropriate approach for assessing the quality of a firm’s service is to measure the consumer perceptions of quality (Parasuraman et al. 1988). The SERVQUAL model or integrative approach for service quality perception sees the perception through the consumers’ eyes. SERVQUAL is a multiple-item scale for measuring consumer perception of service quality (Parasuraman et al. 1988). The difference between expectations and perceptions form the basis
for measurement of the perceived quality of services. Overlapping was reduced and the five dimensions were finalized through the scale purification approach. These are tangibles, reliability, responsiveness, assurance and empathy. The measures about customers’ expectation and perception of service quality are developed in a questionnaire for each of the five dimensions. The customers are contacted and responses are obtained on a 7-point scale. Scores are computed as perception minus expectation, and after statistical processing the perceived quality is revealed. Thus the SERVQUAL model became the major approach for perception
of service quality. The perception analysis has been carried out separately in different disciplines.
As we discussed in the above paragraphs, the different approaches to quality were conducted to their specific domains. According to this, quality perception is normally pursued in marketing science by using the marketing science approach and without the knowledge of information asymmetry. The expected quality from economics and the perceived quality from marketing science should resemble the same force; however, these are becoming different entities. Intuitively known, the perception of product quality in marketing science is relied on customer response through sample survey. This method is suitable where items are intangible. The SERVQUAL model uses this method fittingly for service quality. On the contrary, product quality perception is the perception of an objective quality. It can be computed as most of the involved dimensions are measurable at the industry and market end.
Perceived quality in marketing science literature is based on the objective quality and prior expectation of quality. Prior expectation of product quality is a kernel in perceived quality. Customers’ expectation of product quality can be true to some extent, but it cannot be the complete truth. There are many products that are manufactured as a part of technology change and considering customer expectations for perceived quality as the only criterion may lead to erroneous results.
Some approaches to Quality Management in Business Organizations
In order to facilitate the flow of the service organization, it is totally necessary to highlight the fundamentals of service business. These ones include proper planning, setting up objectives, promoting customer relationship, promoting supplier relationship, dealing with competition and use of accounting. There is left one task that must be accomplished – managing these aspects and this will spell the difference between success and failure in business. It is also important to know the legal aspects affecting the business and the need to adhere to business principles. To be sure that one would be a successful in business management, the company needs to consider some salient points. Questions don’t have to be addressed all at one time but should be considered as one move along. It is also important to solicit the aid of professionals or people conversant of the process so as to facilitate the transition. If we operate with morals and business ethics, than it is necessary getting into business with the commitment of a long-term job, not only a full-time job. It takes some time before the company’s efforts show on the financial statements so committing to the cause should be number one on the list. Without it, once obstacles show, it would be hard to go on. One needs a reason, a goal to attain in order to be clear on what on what to achieve, when, where to go and how to go about it. Commitment to business should be considered thoroughly before resources are allocated to such purpose. Commitment from senior management is critical to the success of the endeavor. Looking at the situation on a long-term basis would enable the company to overcome initial disappointments and the hassles in business. Operating costs involved early on may seem unjustifiable compared to the sales but it pays dividends in the long run. Commitment is necessary to be able to continue in the face of obvious impediments. Quality management is a method used to make sure that the activities pertaining to design, improve and apply a product or service performs efficiently. The primary role of quality management is to always aim for the quality improvement of the product, service or organization.
2.1. ISO standards
"ISO 9001 family" Standards is a collection of standards that contain requirements for the various processes carried out within the organization (such as process design, marketing, production, service delivery, sales, purchasing, handling non-conformities, etc.).
An organization can be said (to certify) that has a competitive management system (quality management system) if you meet the requirements of ISO 9001:2000. In the early '90s, the ISO 9000 standards have gone through a review process, which was intended to correct some discrepancies and errors that were highlighted during its worldwide, to improve the standard language and make it applicable and not working organizations in the production. The revision ISO 9000 standards family was adopted officially in 1994 by the International Organization for Standardization (ISO).
In 2000 international ISO 9000 family standards were revised. This last form has a different structure, ISO 9000 standards family being developed in terms of procedural approach of the organization. Thus, ISO 9000 standards family has become more access from this organization, focusing on continuous quality improvement, on ways to increase sastifactiei organization to its customers.
ISO 9001: 2001 is a standard that establishes requirements for a quality management system, which provides:
– Identify the processes, the mode of development and links between them (management processes, to ensure resources for implementation and monitoring services);
– Documentation of the Quality Management System Quality Manual, procedures, system procedures and work instructions;
– Determining how to develop, review, approval documents and levels of responsibility involved and the rules of distribution and withdrawal of documents;
– Establish rules for making changes in documents and data;
– Establishing rules on external documents;
– Requirements concerning the identification, preservation, protection, withdrawal and archiving of quality records, the maintenance of which demonstrates the operation of the Quality Management System.
In the new edition, it is required to ensure quality standards and to assess the organization's ability to meet the customer. The standard is used by organizations that want:
– to demonstrate “ability to consistently provide products that meet customer requirements and applicable regulatory requirements ";
-To increase "customer satisfaction” through effective application of quality management system, the development process of continuous improvement, prevention of nonconformities.
This standard specifies requirements for a quality management system. These requirements can be considered for certification or for contractual purposes. Certification under this standard aims to provide confidence in compliance with the implied or specified requirements of their products. Standard aims at the same time, ensure growth efficacy, quality management system in terms of customer satisfaction.
Six Sigma
Six Sigma is a method used by the management company that is based on information theory and statistical methods, focused on data processing, which proecedurile structures to increase the quality and following the development company's five main steps (Define, Measure, Analyze, Improve, Control). The method is not only intended to provide guidance for carrying out planning activities but develops the original quality management structure, based on reality.
Six Sigma user improves performance, increases efficiency process by analysis of measured data, whose size is simply of million order errors procedures per object.
Experts working with Six Sigma defined indicators, launching the idea of PPM (parts per one million), which is simply wrong number of products per million, and have developed several concepts in DPMO, meaning Defects Per Million Opportunities one, facilitating the measurement of any process that might cause a defect. From manufacturing to services, these indicators can be used anywhere. In order to stay competitive, organizations must continuously improve their processes.
Lean Six Sigma is a process, but also a discipline which measures how many defects there are in a process and then determine in a systematic way how to improve it some of busness. Although the initial Six Sigma comes from industry, is now widely used to improve business processes in all areas such as banking, telecommunications, distribution, etc. Six Sigma services paote be used as easily as in the industry as demonstrated by organizations such as GE, Bank of America, Dupont, etc.
Lean Six Sigma (DMAIC) is a rigorous methodology to increase capability and reduce defects in any process. This is achieved through constant monitoring and readjustment process.
Lean Six Sigma leads to the following main results:
* Six Sigma focuses on customer satisfaction is achieved increasing consumer
* Six Sigma defect reduction achieved, increase profits, improve product quality and increase employee satisfaction.
* Six Sigma projects resulting in reduced operating costs and significant recovery of investments;
* Six Sigma results in a change mode of operation: "Working Smarter Not Harder."
* Six Sigma projects results have fewer defects and improve the lifecycle of products / services
* Six Sigma promotes a philosophy of excellence.
Chapter II Leadership skills and leading practices
Leadership and business excellence
Organizations are different in many aspects, for example, size, complexity and types of customer. Some people argue that what you really want to know about an organization is impossible to measure. I believe, or rather hope, that this is not true. The fact that most organizations do measure their performance, and, in my view, should continue to do so, means that there must be substance in organizational performance measurements. This
book aims to reveal whether today’s models are used to their full potential or if there is room for improvement. Over the last ten years the term ‘business’ or ‘organizational’ excellence has become frequently used in quality and management literature. BE, as used by many authors of quality management literature, has the same or similar meaning as Total Quality Management (TQM).
1.1.The concept of leadership
While leadership has been of interest to society for thousands of years (discussed in Greek and Latin classics, the Old and New Testaments of the Bible, and writings of ancient Chinese philosophers), the scientific study of leadership began in the early part of the twentieth century. Over the last decades, in particular, there has been an extensive research on leadership.
A review of the literature suggests that there are almost as many different definitions of leadership as there are researchers who have attempted to define the concept (Bass 1990, cited in Kakabadse and Kakabadse 1997). It has been defined in terms of individual personality traits, leader behaviours, responses to leader behaviours, interpersonal exchange relationships, interaction patterns, role relationships, follower perceptions, task goals, organizational
culture, and nature of work processes (Yukl 1989, cited in Mello 1999). The origins of the concept appear to be found in folk psychology when it was used to explain social influence on groups (Andrews and Field 1998).
Du Brin (1995, cited in Shriberg et al. 1997, p. 4) conducted an exhaustive literature review on the matter and found five representative definitions of the concept:
• Interpersonal influence directed through communication, towards goal achievement
• The influential increment over and above mechanical compliance with directions
• An act that causes others to act or respond in a shared direction
• The art of influencing people by persuasion
• The principal dynamic force that motivates and coordinates the organization in the accomplishment of its objectives.
From the proposed definitions, it may be easily argued that leadership inevitably comprises an influential component. After this review, Du Brin adopted the view that leadership is the ability
to inspire confidence and support among people who are needed to achieve organizational goals. Northouse (1997: 3) defines leadership as ‘a process whereby an individual influences a group of individuals to achieve a common goal’ and emphasizes that viewing leadership as a process has the advantage of focusing attention on the transactional and interactive event that occurs between the leader and his/her followers.
Functions of Managers and their Various Skills of Leadership
It is a well-established belief that effective leadership is one of the most crucial factors in the implementation of change and without a positive commitment, any strategy for change is likely to fail. Leaders in the context of introducing change face two fundamental tasks: first, to develop and articulate exactly what the company is trying to accomplish and, second, to create an environment in which employees can figure out what needs to be done and then do it well and it is how the products and services are managed that will provide the source of competitive advantage (Zairi 1995). In a recent survey, Prabhu and Robson (2000a,b) found that ‘world-class’ organizations and less successful companies were clearly different in terms of leadership practices (such as the development of a service culture, customer orientation, establishment of human resources strategies, innovation and existence of a quality mindset).
Darling (1999) reports that the analysis of a large number of multinational companies led to the confirmation of the success of the four leadership strategies as follows:
• attention through vision (which is essential to create a focus for the organization);
• meaning through communication (capacity to articulate a compelling image of the future and develop shared meanings and interpretations of reality, facilitating coordinated action);
• trust through positioning (trust provides the foundation which maintains organizational integrity; through establishing and sustaining a position, i.e. a set of actions to implement the vision, the leaders establish trust);
• confidence through respect.
Values and leadership excellence
The importance of having strong values is not to be underestimated. As Peters and Waterman (1982) found out in their research, the best organizations are those that are ‘value driven’. This is exactly our understanding as well, since the values provide the foundation for the vision, mission, strategy and other key components of the leadership role. We believe that leaders have a crucial role in defining and communicating the organizational values, but, at the same time, the organization’s values also have an impact on the type of leadership that fits a particular company at a given moment. They generate the patterns of behavior prevalent in the organization. This suggests that any major change to be introduced in an organization needs to start with considering, and eventually modifying, the existing values. However, it is important to notice that this change is extremely difficult and requires much time and effort. New values cannot simply be imposed. Probably the most useful idea is that of continual learning in order to be willing to progressively adjust organizational values and align behaviours with the new environmental demands. Georgiades and Macdonell (1998) propose that an adaptive culture is based upon six core values and beliefs:
• Open and Trusting Relationships (only trust makes people present their points of view and contributions freely; trust demands that promises be kept).
• Commitment to People.
• Participation in Problem Solving Through Teamwork (teamwork enhances efficiency and creativity).
• Commitment to Change and Innovation (to declare that the organization
is not dedicated to the status quo and is constantly pressing for improvement and change is the first step in the commitment process).
• Commitment to Individual Autonomy (each individual, provided with and committed to a vision of what the organization could be, should be given freedom and autonomy to act in the best interest of the enterprise).
• Obsessive Commitment to Loyal Customers (gathering systematic feedback and responding constructively to it).
For each of the core values identified, action-oriented behaviours must be articulated
Leadership measurement instrument
Measurement is essential in order to have a clear indication of the effectiveness of the leadership and to ensure that the deployment of best practices is in place.
Open and trusting relationships
A manager keeps promises and commitments (builds a reputation for standing by the commitments that have been made; ensures consistency between plans and actions). A manager shares key information with subordinates. A manager is honest; never dissembles (is consistent and dependable; behaves in a way he/she would expect from others; sets organizational interests above self-interest). A manager builds supportive relationships with peers, subordinates and bosses.
Commitment to people
A manager is concerned with welfare and well-being of subordinates (does not compromise on issues of health and safety; listens to problems when there is need to talk through). A manager encourages frank and open discussions about subordinates’ performance (prepares for appraisals, asks questions and listens to answers; follows up on agreed corrective actions).
A manager agrees on clear performance objectives (negotiates targets rather than imposing them; accepts the possible impact that external factors might have on performance; is prepared to accept his/her own share of blame for missed targets).
Participation in problem solving through teamwork
A manager helps the team to understand their role in the wider Organization. A manager encourages the team to define team goals; encourages the team members to define individual roles and responsibilities; encourages frank and open discussion about the way the team works.
Commitment to change and innovation
A manager constantly responds to customer feedback; encourages subordinates to try out new ideas (rewards and praises attempts to try new ideas; is willing to allow time and put resources to try new things); encourages benchmarking. A manager constantly tries learning new things and gets training
Commitment to individual autonomy
A manager gives authority to act and make decisions without upward reference (expects individuals to monitor their own timekeeping; praises individual initiatives) A manager encourages others to act in ways that promote the best interests of the business
Obsessive commitment to loyal customers
A manager meets and talks regularly with customers; constantly seeks customer feedback; encourages staff to be involved with customer
Managers are required to establish and maintain the environment within the company to encourage efficiency among employees. The functions of managers involve planning, organizing, directing, and controlling of resources. The resources of the company are people, positions, raw materials, buildings, patent, technology, equipment and cash. The business environment is proactive, challenges and changes occur almost instantaneously. The functions of management are influenced by goals set by the management. They are related to each other and mutual. Successful organizations working with clients in creating products and services, thus integrating their core customer processes. They adopt new channels to engage and communicate better with customers. Analyzing existing data better, successful managers make their primary priority customer privacy.It leads the company towards its goals. Organizing is the management function that coordinates the resources needed to implement the plan. In organizing, company structure is established, relationships are formed and resources are allotted appropriately to realize the objectives sought for. Directing refers to a management function that directs and supervises employees to attain the company objectives. Finally, controlling is confirming if the plan is carried out in actual situation.
5.Leadership and creativity
Managers have said creativity as the most important quality of leadership for the next five years. Creativity is essential when there is a high degree of uncertainty when they are expected to be materially different from future lessons. When uncertainty is high can not repeat successful practices of the past expecting similar results, but must find new ways of thinking, new ways of operating and new ways of behavior. IBM study says as follows: "Creativity is often defined as the ability to bring into existence something new or different. Creativity is the "disruptive innovation and continuous reinvention," we said a professional serivicii CEO in the United States. In addition, this requires objective thinking and focus. Leaders, they say, must be prepared to change the status quo even if it is successful. They must be familiar with and committed to continuous experimentation. It is not just that managers now realize the importance of creativity in the need to bring the market innovative products, processes and customer experiences. Even in 2004 the managers told us that "CEOs around the world have been refocused on growth and innovation began to look as a way to get there." Today, however creativity itself has become a style of leadership. Traditional approaches to managing organizations need new ideas, ideas that intends to change the status quo. "
Top managers and global leaders are experiencing levels of increasingly high complexity and uncertainty, where "8 out of 10 managers expect the operating environment to grow increasingly more complex and less half of them think they know how to manage it successfully." This new environment creates a pressing need for leadership. Since this study explored what managers believe that should be the qualities of leadership that will be needed over the next five years.
It appears that in a period that emphasize his effective leadership. There is often to have the opportunity to reinvent how we live and work. We live in interesting times indeed!
Chapter III Methodology of the study
Paper purpose and objectives
According to a well-known definition of effective leadership that seems to be proper for the next research in the banking domain, a good analysis of leadership practices must include the business context and the available resources within the internal and external environment. All this ”for the attainment of organizational or societal goals."
The goals of this study are to identify the business context of BCR products, to analyse the evolution of BCR in the last 5 years of activity and to examine quality management practices and future improvements. The study also includes a SWOT analysis.
Research approaches
The main method of the following analyse was collecting and comparing data from the period 2006-2010 BCR financial evolution which represents the structure of the others segments of study like leadership practices and quality management. As a necessary starting point, the overview of BCR introduced the context on analyse. The next level was the application of the two main leading concepts: quality management and leadership parctices to BCR financial evolution and business organziation. The principal criteria of the case study were identyfing methods of successful quality management of BCR, leadership practices at BCR and comparative analysis of income evolution and product developement across five years, from 2010 to 2006. I also included a SWOT analysis as a fundamental for business planning, considered necessary for business strategies and leadership practices and also quality management.
Research limitations
Research limitations were caused by the lack of minutious informations about the different segments of analyses. There was also a lack of direct contact with some members of management board who could highlight some aspects directly.
Further research
Further research should investigate new areas or variables that affect the financial evolution of BCR and try to propose a better financial plan, even though there are included the crisis circumstances.
5.Expected results
The case of BCR seems to be a role model for others banking strategies, but despite the excellent leading practices and the continuous struggle for mantaining a successful status, there were some difficulties during the crisis period which diminished BCR income. In nine months, net profit was 494.5 million (117.7 million), down almost 30% compared to same period last year. Bank uses an average exchange rate for the third quarter of 4.20 lei / euro, even after NBR calculations was 4.25 lei / euro. The result of the third quarter is explained by an increase of 63% provision for bad debt expense compared to June 2010, to about 1.6 billion lei (373 million).
Also, Dominic Bruynseels, BCR executive president said that the bank lost about 3 million by eliminating the early repayment fee on retail loans, while the Treasury lost 17 million euros by the negative revaluation of positions currency leu / dollar in July and September. At group level, the result was affected by the reduction of 28 million book value of assets in the balance BCR Leasing, a subsidiary with the largest share after the bank.
Chapter IV BCR case study
BCR -overview
In 1990 the commercial banking operations of the National Bank of Romania was taken over by Banca Comerciala Romana (BCR). Nowadays, BCR can be considered the most important financial group in Romania, including companies on the leasing, asset management, private pension and housing bank market, as well as mobile banking services.
According to the level of clients’ trust and to the number of those for whom BCR is the main institution they bank with, BCR is the most valuable financial brand in Romania.
”BCR offers a full range of financial products and services in most Romanian towns of more than 10,000 inhabitants. BCR is the No. 1 bank in Romania on the cards and banking transactions market. It commands, to the benefit of its clients, the largest national ATM (over 2,200 machines) and POS (over 18.000 terminals) network, together with a complex offer in electronic banking services, including Internet banking, phone banking and e-commerce services.” Banca Comerciala Romana (BCR)is the most important financial group in Romania, including the operations of universal bank (retail, corporate & investment banking, treasury and capital markets), as well as the companies on the leasing, asset management, private pensions, housing bank and mobile banking services market. BCR is the No. 1 bank in Romania assets-wise (over EUR 16 billion worth), the No. 1 bank according to the number of clients and the No. 1 bank on the saving and lending segments. BCR is the most valuable financial brand in Romania, according to the level of customers’ trust and to the number of those for whom BCR is the main institution they do banking with.
BCR has full range of financial solutions and services across the entire financial life of their clients in a “one-stop-shop”: savings, investments, lending, consulting and advisory, covering banking activities, corporate and retail banking, capital markets, leasing and insurance.Their regional focus is on the Romanian and Moldavian market (via 100% owned subsidiary, BCR Chișinău), while offering clients active abroad financial services and advisory via the Erste Group subsidiaries across Central and Eastern Europe.
Since 2006 BCR is a member of Erste Group, which was founded 1819 as the first Austrian savings bank. From 1997 on Erste Group has developed into one of the largest financial services providers in Central and Eastern Europe, with more than 50,000 employees serving more than 17 million clients in 3,200 branches in 8 countries (Austria, Czech Republic, Slovakia, Romania, Hungary, Croația, Serbia, Ukraine).
According to the leading position considering financial evolution of BCR, the bank was well placed to benefit from the opportunities provided to the Romanian financial markets. There were some favourable attributes as positive development in the economy, decreasing inflation (lower than targeted inflation) and the favourable evolution of exchange rates led to an increase of internal demand for financing of feasible projects. Meanwhile, decreasing interest rates and increasing credit demands generated supplementary pressure on liabilities management and profit margins.
As a strong catalyst for customers trust and leadership commitement, the Romanian banking system is in the full process of strengthening its credibility and consolidated its performance. Furthermore, the main catalyst being increased competition for various segments of clients, and products offered, by the top ten Romanian banking institutions, often supported through direct capital investment in other financial areas.
Managing Quality at BCR
If our analysis concerns are quality and top managers practices, then we should mention that, regarding these aspects, BCR won in December 2005 the JURAN Trophy at the 5th Edition of Romanian Quality Award JM Juran, awarded by the JM Juran Foundation.
Another concern for quality was rewarded with the distinction of being the first Romanian bank to implement the Security and Labour Health Management System, which sets requirements that allow an organization to keep its risks under control and continuously improve its performance.
“As a result of the audits carried out in July, Moody International unconditionally recommended the certification of the Security and Labour Health Management System. The implementing of this standard is part of BCR’s efforts to align with the European Standards and to observe the Directive 89/391/CEE”, according Gabriel Drilea, head of BCR Human Resources Division.
Based on third party audits performed by the certification body Moody International, BCR received the unconditional recommendation for the certification of the Security and Labour Health Management System, which observes the provisions of the BSI – OHSAS 18001:1999 referential for the certified field – banking activity and support activity. The project for extending the certification was also started by BCR according to the BSI – OHSAS 18001:1999 referential, for county branches too.
More than this, BCR was the first Romanian bank to receive the certification for the Quality Management System (observing the SR EN ISO 9001:2001 provisions), from the prestigious international certification body – Moody International.
2.1.Future goals
The Austrian Erste Bank, majority shareholder of Romania’s largest bank is targeting territorial expansion and market share compared with its main, the Frenchowned Romanian Development Bank-Societe Generale (BRD-SG), competitor through recovery from its lag.
The integration programme which BCR started following its takeover by Erste Bank in 2006 gradually diminished the bank’s market share in terms of assets by some two percentage points, from over 26 percent.
2.2.Aiming to quality excellence
As it is claimed in BCR’s credo, Romania’s largest bank has in view approaching quality under all its aspects and view making employees aware of sustaining a high level of quality.
Regarding self-improvement and obtaining the best level of business quality, BCR’s message to their clients is:
“We are permanently concerned by improving ourselves, by correcting and eliminating errors and nonconformities, intending to reach Excellency and to build a long-term partnership with our customers”. BCR seeks long-term relationship with clients in all segments, offering accessible and transparent products as well as personalized consulting services.
The leading of BCR also promise credibility and human touch related to the customer-counsellor relationship as representative principles which clients cand perceive and feel. Another important concern is to adapt banking products and services to their customers’ needs. The three main directions of actions for the period 2008 – 2011 are as follows:
making their clients loyal to the bank by means of effective handling of their relationship with them, in order to consolidate their position within the Romanian banking system;
satisfying their clients’ demands by means of increased orientation towards their needs and expectations and by carrying out all bank processes and activities as few failures as possible;
approaching customers’ problem solving by means of internal collaboration, in a way in which both parties may benefit.
2.3.Strategic quality objectives are:
i.maintaining BCR position in top 3 among the banks in the Romanian banking system
ii.increasing staff performance in selling bank products and services by implementing the service quality standards, by approaching a professional behaviour during the selling process
ii.improving the complaint management process within the bank, emphasizing and benefiting from the feedback role of complaints and intimations.
2.4.International activity
The development of relationship with foreign correspondent banks, is a certain priority for BCR Group, as well as with international financial institutions, rating agencies and export credit agencies (ECA). BCR reconsidered its correspondent banking activity, developing a new approach based on partnership and cooperation (instead of competition), in order to grow concern about the international climate and the uncertain economic environment affected by the events occurred in 2001. Based on a very careful selection of business partners, close monitoring of their activity and increased flexibility in its customer relationships, BCR was able to anticipate and to efficiently react to market endeavors. The implementation of a strict know-your-customer policy was seen as a measure of high priorities.
BCR's great concern was focused on the consolidation of business relations and strong financial institutions. This is certainly the solution which would enable favorable and secure business conditions to its clients.
The road to excellence emerges from this accomplished terms, the advantages deriving from its expertise, technical abilities, network, customer basis and, last but not least, excellent financial results. This can be considered a strong evidence that recommends BCR as the favorite partner of international banks in Romania.
BCR created new opportunities for its customers and extended their business activities with new partners recommended by correspondent banks, all this based on reciprocally beneficial agreements concluded with European and Asian banks (Vneshtorgbank, Russian Federation and Industrial and Commercial Bank of China, respectively), 835 correspondent banks and 1550 banks with SWIFT arrangements in place represented as many alternatives proposed by BCR to its customers for conducting their business.
BCR – attaining business quality
2.5.1.BCR Quality Management Policy
A strong bank quality policy is achieved through quality management system well documented and implemented, consistent with ISO 9001:2000
The purpose of the bank in the quality policy is to ensure customer satisfaction and expectations by:
– Providing quality products and services,
– Increasing the professional competence of employees
– Performance management at all levels.
Objectives set out in the field of quality are:
– Increased flexibility in providing expeditious bank products and services according to customer needs and expectations,
– Building a sustainable and friendly partnership with clients,
– Implementation of quality management system designed and documented according to SR EN ISO 9001:2001.
Bank staff qualifications, improved systematically through various forms of training is guaranteed to achieve goals, permanent objective of the bank is continuously improving quality.
Each employee of the bank is responsible for the quality of the work is influencing customer satisfaction and financial performance of bank default.
This effort supports the bank's strategic objective to achieve, maintain and strengthen its leading position in a growing competitive market, management at the highest level being directly involved in increasing the efficiency of the quality system.
Quality management involves power and influence for the person. The basic principles of service business include proper planning, establishing objectives, enhancing customer relationship importance , promoting supplier relationship, dealing with competition and use of accounting.
This thing can be considered fundamental for greatly facilitate the flow of the service organization. The difference between success and failure in business is spelled by these aspect already mentioned.
2.5.2.Strategic planning
Success begins with a clear vision of the future and the underlying guiding principles, mission, and understanding of your unique selling proposition whether you’re a large organization or a family-owned business. In order to obtain optimum performance, it is crucial to opperate with clear goals and objectives is crucial for optimum performance. The team at BCR brings creativity, experience, and objectivity to the strategic planning process to ensure that the plan is reliable, innovative, and addresses the mission, values, and long-term goals of the company. As we will see from the following evolution aspects during 5 years, BCR Group has acheieved a high level of performance and development strategy.
The process of developing an organizational strategy involves three distinct steps:
* Assessment – trying to establish the real current state of the organization. This helps its leaders identify plans for getting the organization where it needs to be and to improve overall performance. There are used various technological, means, assessment tools, and consulting expertise to get a true and accurate picture of the state of the organization's developing strategy.
* Executing Strategy – Once the current state of the organization is defined, our approach engages people at all levels in the organization to execute the new strategic direction. Our tools and processes help the team commit to and implement the strategy and direction.
* Managing Change – change is often the hardest struggle to work through, even though we are introducing a completely new+ direction for the organization or simply reorganizing a department. Even if we need to involve entire employee groups, or coach a single executive, we offer varous tools and techniques to help people manage.
For example, BCR Strategy 2005-2007 is a strategy of growth through concentration, based on product development and market, according to the major objectives of development in this period, subordinate representation and adequate protection of the interests of shareholders, customers and employees of the Bank, focusing on:
1. Strengthening leadership in the occupied Romania and in Central and East by developing business in each market segment where it operates Group and exploitation of competitive advantages offered by well-known brand distribution integrated high quality financial services;
2. Increasing shareholder value by maintaining a high level of profitability capital, due to productivity gains and a control of costs, according to corporate business development and retail portfolios and more aggressive approach to investment banking activities, insurance.
3. Increase customer satisfaction for financial solutions offered by the bank developing its capacity for innovation and flexibility and improving access to products and services as a result of promoting the concepts of unit proximity multidistributie and modern partnership in traditional relationships;
4. Strengthening capital base having as fundamental principles used intensive and efficient allocation of capital to risk adjustments, so the bank develop a sustainable and profitable manner;
5. Improved risk profile by improving process control procedurare and a proactive management, and upgrade techniques and monitoring tools used to align the requirements of Basel II and implementation of appropriate policies to prevent money laundering and customer due diligence;
6. Improving human resources management to encourage initiative, innovation, commitment and efficiency in work designed to enhance the contribution employees to create value added.
7. Annual growth of 5% in customer satisfaction in the relationship with BCR.
2.5.3. Business plans
A business plan is, unfortunately, changed or structured without being sufficiently understood. Many entrepreneurs invest in business without taking the time to plan and understand the playing field in which they are operating. This type of business will very often will run into problems or possibly even face failure. Plans and goals can work like magic for a business. With a well researched and structured plan, the road map for the organization is clearly defined and provides focus for the organization to determine how it is going to function. The road map for business organization can be much easier traced if there is a professional plan and this is obvious in BCR strategies. Being the most powerful bank from its area doesn’t necessarily mean that keeps the success secret, but this status allow favorable opinions regarding the quality organization management. BCR has an extensive experience in planning and establishing strategic positioning as following: offering full range of financial solutions and services across the entire financial life of their clients in a “one-stop-shop”: savings, investments, lending, consulting and advisory, leasing. Regarding the geographical approach they focus on the Romanian and Moldavian market (via 100% owned subsidiary, BCR Chisinau), while offering clients active abroad financial services and advisory via the Erste Group subsidiaries across Central and Eastern Europe. Client approach means that long-term relationship with clients in all segments are maintained through offering accessible and transparent products as well as personalized consulting services.
2.5.4.Swot analysis
A fundamental and integral element of the business plan is the assessment of an organizations strengths, weaknesses, opportunities, and threats (SWOT).
The mean of identifying these factors provides business owners with a holistic view of their internal and external environments. With this knowledge, business owners are equipped to recognize and acknowledge opportunities and limitations, set achievable, realistic goals, and implement well-thought out business ideas and concepts.
STRONG POINTS
1. Successful implementation, through the Total Quality Management, the sound business principles such as focusing on getting results, customer satisfaction and leadership by involving both employees and the management in developing partnerships with social behavior responsible, proving that the whole community is directly and actively engaged BCR in achieve true excellence. (BCR became the first bank in Romania to receive Quality Roman Award "J. M. Juran ")
2. Communication – the essence of bank-client relationship
"Communication is the transfer of a message from one side to the other so that message to be received, understood and consequently to acquire "(Peter Drucker).
The bank communication supports:
-to be perceived;
-to be understood;
-to be accepted;
-to cause a reaction.
BCR emphasizes prompt and open communication with all parties so that the bank's top priority remains constantly adapting business practices for sustainable development, managing risk exposures through an increased corporate governance.
3. The bank promotes business, while, have a positive impact in terms of economic, social and environmental sponsorship encourages activity, through culture, education, health and sports (eg ROMANIAN OPEN BCR), the high standards of integrity, contributing to socio-cultural environment in which people become professionally and personally enriched.
4. Net income rose to 178 million, according to IFRS not only exceeded forecasts, and is representing 35% of net profit of the entire banking system Romanian. Moreover, BCR Group has consolidated its financial strength based on a increased efficiency, resulting in a steady increase in assets to about 9 billion.
5. Gross loans increased by 37.2% in real terms, almost doubled the proposed target, while retail loans reached 37.9% of total loans, based on a prudent lending behavior, without restrictions, and improve quality portfolio, marked by a diminished rate of bad loans from previous years.
6. Quality policy applies not only to product quality and services, but also the quality of the bank's overall is applited to activities and processes. The strategic quality objectives are: improving quality performance in serving the area; training all staff in the process of continuous improvement, through activities systematically carried out in order to optimize preventive all bank processes.
7. Bank is aware that the most important potential for the financial progress of company is its human progress. The truth behind the policy of human resources made various mutations in the profile of bank worker, from the provider services to business partner. Thus, since the establishment of the bank, its management concerned with improving the quality of permanent professional employees through knowledge acquisition and necessary skills to carry out duties effectively, as well as gradual development of personal potential. Bank will continue to encourage changes in the concept of work and professional competence by increasing mobility and flexibility of the workforce, fostering team spirit, facilitating the integration of professional graduates.
8. Wide range of banking products and services offered e-commerce, eBanking etc.
9. B.C.R. remains on the market based on the following criteria:
-Confidence in the stability of the bank and its financial capacity;
Quality of products and services;
Quality of staff;
A good reception of customer and market demands;
-Customer satisfaction with reasonable costs.
10. Romanian Commercial Bank (BCR) opened on October 4, 2005, the first corporate university in Romania – UBCR – University BCR. BCR University Bank offers special conditions for training employees and self, by integrating training with knowledge management and change management, in close with management and career development. This new approach focuses on training continuous learning by aligning employees with company vision and strategy, with a direct positive impact on business performance of the bank and its clients by increasing the quality of solutions offered to customers problems.
11. Alignment with Western practices in network on-line units communication, the use of cash management facilities, promoting market development cards and fast currency transfer through Money-Gram.
WEAKNESSES
1. Weaknesses of the Bank are, in general, weaknesses of the Romanian banking system, which along with the other countries in Eastern Europe, is among the most exposed currency risks related to loans granted in foreign currencies, as it Study shows financial evaluation agency Standard & Poor's.
2. The focus is on offer ranging from lower interest on loans, longer grace period, and financial products to package, looking just basis for any bank, interest on deposits. This makes the difference between interest on the loan and the deposit to maintain a high level, compared with European states.
3. Weaknesses of the site: the visitor must make too many clicks to Seeking information reach. The site loads slowly, especially if the user has a poor connection.
4. Inevitable attacks on bank ATMs (ATMs ghost who cheating clients' trust), cloning of cards (losses brought the bank).
5. Excessive exposure to certain customers of the bank and the introduction in Her portfolio of clients with questionable reliability
6. BCR shares are not traded.
POSSIBILITIES
1. BCR has created its own finance departments in Europe, immediately after it became clear that Romania will join the EU early next year. Romanian Commercial Bank inaugurated the office "EU Office BCR" whose role is to provide complex information and complete bank clients on the implications of accession to European structures. The office offers both consultancy services and a wide range of products for financing / co-investment projects, to increase the accessibility of bank partners funding.
2. Merger with Bancorex in record time, which led to strengthening the Romanian Commercial Bank position and to domestic and international development.
3. BCR has contracted the International Finance Corporation (IFC), Division Investment World Bank loan, thet worth EUR 75 million for support lending to Small and Medium Enterprises and for lending to support development of the population. The loan also contribute to improving the balance sheet structure of the BCR by increasing maturity in foreign currency resources raised, which will reduce gaps between assets and passives in foreign currency.
4. major opportunities for economic development: increased consumption and accelerating the movement of money.
Leading Practices at BCR
3.1.Present activities concerning improvements leadership skills
BCR and International Business Promotion (IBP) created the most complex platform for entrepreneurs from Romania www.bcrclubantreprenori.ro. The interactive portal gives entrepreneurs access to information, online training, interaction with other entrepreneurs and specialists from various fields, support and business opportunities. The platform is intended to facilitate the access of micro-enterprises to promotion on the internet and bring together potential clients and providers, while also offering information and training that entrepreneurs need to develop their business.
BCR involvement into leadership skills development determined the creation of the most complex platform for entrepreneurs from Romania www.bcrclubantreprenori.ro. This platform is an interactive portal dedicated to entrepreneurs and small enterprises from Romania; 5,000 micro-enterprises have already registered on the portal.
Facilities:
* The platform gives entrepreneurs the possibility to promote their business on the internet, meet potential clients, send offers and receive product and service requests, as well as access to trainings and specialized counseling for efficient business development;
* BCR strategic priorities: improving banking services and identifying simple and inexpensive financial solutions for small emerging businesses.
There are already 5,000 micro-enterprises registered on the www.bcrclubantreprenori.ro platform and the estimates indicate a number of 50,000 micro-enterprises that will benefit from the portal’s facilities for support and business opportunities.
“Due to their significant ability to adjust and transform, small entrepreneurs provide the economy with the resources for revival and development. We developed the www.bcrclubantreprenori.ro platform because we strive to understand the entrepreneurs’ needs and give them the necessary tools for sound growth,” stated Sorin Mititelu, Director of Retail Segments Division, BCR.
“The economy’s sustainable development depends mostly on private initiative to maximize the opportunities of producing and selling products and services, mainly for markets or market niches that have been underserved so far. Banks have the responsibility of involvement in all stages of any entrepreneurial initiative, from the information stage to sustainable development, providing information, easy access to banking services and actual support for business development. Given such a favorable environment, we expect an increase in the number of entrepreneurial initiatives and successful Romanian businesses.” added Sorin Mititelu.
The main themes of the articles from this platform are topics like business management and development, legislation, taxation etc. and also training and consultancy on business management topics used in order to offer accesible pieces of advice to young and unexperimented entrepreneurs by authored specialist. Furthermore, this platform also include business resources for entrepreneurs as:
* Means of communication and contact with other entrepreneurs
* Access to products and services offers
* Promoting own offers, access to requests of products and services
* Search engines on various criteria (companies, products and services, business solutions etc.)
* Platform for sending online offers
Seen as a very important regional impact over the challenge of starting a private business, BCR has also introduced an offer for micro-enterprises.
“BCRClubAntreprenori is intended for both entrepreneurs and anyone who thinks about starting a business. In addition to detailed information about managing and growing a business, the portal provides online business courses and promotion for companies. The most interesting part for us (IBP) was integrating the BCR brand’s promotion needs and the bank customers’ development needs with the need to train and inform regular online users. The portal is the outcome of teamwork of both IBP and BCR teams, carried out over more than one year. We hope the portal becomes a useful tool in any entrepreneur’s daily work,” Dumitru Ion, General Manager – International Business Promotion (IBP).
3.2.Product offering
BCR services are oriented to the following client groups:
Private individuals: They offer support to all their clients to fulfil their aspirations while securing their financial wealth now as well as in the future. BCR offers the complete range of services and products, from Housing financing (mortgages), consumer loans, personal accounts (including dedicated packages for entrepreneurs, students, NGOs & foundations), payment & credit cards, direct banking services (controlling one’s account via the Internet, phone, GSM), Investment and savings products, consulting and sale of financial market & treasury products to Private Banking customers.
Small and medium-sized enterprises as well as large corporations: customised products, specialised programmes and consulting for micro- entrepreneurs, small and medium enterprises as well as large corporations.
Municipalities, public and non-profit sector: Due to our historical strong relationship with municipalities, the public and non-profit sector we developed to be the first choice address for tailor-made financial solutions (including special financing for national, regional and municipal infrastructure projects).
3.3. Financial evolution analysis and leadership efficacy
3.3.1.Financial results 2010
Operating result raised to RON 2,304.4 million (EUR 548.4 million) in the first three quarters of 2010 up 3.6% on nine months 2009 based on continued revenue generation and cost control.
Operating income growth slowed (up by RON 57.4 million or 1.6% on nine month 2009) and was combined with a decrease in operating expenses (down by RON 23.6 million or 1.9% y/y) Net profit after taxes and minority interests amounted at RON 494.5 million (EUR 117.7 million) down by 29.3% on end-September 09 mainly on higher provision expense due to the tough market conditions heavily impacting BCR's customers and due to OUG 50 implementation impact on fees.
High efficiency and positive risk management in a very challenging economic environment
'The positively managed operating result demonstrates BCR capability to respond to the difficult market conditions. We are taking a prudent approach to our risk positions as the economic environment remains tough. BCR is well equipped for successfully coming through this period and we will continue to provide support for our customers and look for ways to help Romania return to a growth path' stated Dominic Bruynseels, BCR CEO.
BCR Group’s operating profit increased by 3.6% to RON 2,304.4 million (EUR 548.4 million) from RON 2,223.4 million (EUR 528.0 million) in the first 9 months 2009 as a result of the operating income growth combined with improved and efficient cost control. The operating income slightly rose from RON 3,492.5 million (EUR 829.3 million) to RON 3,549.9 million (EUR 844.9 million). The main driver of this improvement was the increase in net interest income (up by 7.3% or RON 197.2million y/y) from RON 2,689.7 million (EUR 638.7 million) to RON 2,886.9 million (EUR 687.1 million) albeit pressured by the lower interest rate environment, increasing competition for quality business and low demand.
Risk costs
BCR is adjusting risk provisioning appropriately to the still difficult current economic conditions. NPL formation has slowed down in 2010 compared to 2009 on lower interest rates, relatively stable local currency and on reduced unsecured retail lending provisions, but remains at high levels and is not expected to decrease on the short run.
BCR continues to focus on finding sustainable solutions for helping customers reorganize their finances to deal with their individual situations – thousands of families and companies are already benefiting from these solutions which help our customers through these difficult times. At the same time BCR has a prudent approach in lending, adapted to the current environment.
Business activities brief 2010
Despite the troubled economic environment, BCR continued to manage a positive and sustainable business in line with expectations . Total assets of the bank increased by 1,62% to RON 65,569.9 million (EUR 15,349.4 million) as of September 30th, 2010 from RON 64,526.8 million (EUR 15,231.8 million) as at December 31st, 2009. BCR has preserved its market position in lending to around 22% market share in line with its business and risk strategy and with expectations in a troubled economic environment as well due to positive gains in housing loans (+0.8 pp y/y) and rather stable position in corporate segment.
Lending has developed in line with expectations on a weak eligible demand. The volume of aggregate Loans to customers portfolio (before provisions, IFRS) slightly rose by RON 325.9 million (up 0.70%) to RON 46,840.0 million (EUR 10,965.9 million) from RON 46,514.1 million (EUR 10,979.8 million) as at YE 2009 and by 1.96% on end – September 2009, and maintains well balanced by customer segment and industry.
“BCR Prima Casa” success is expected to continue, BCR being the most reactive bank in the program with a total of over EUR 465 million lent to almost 11,500 families starting with August 2009 who thus could have their first home of their own. A stronger renewal on the mortgage lending is expected to be further seen due to Prima Casa program.
The share of loans in domestic currency in bank’s portfolio – of 42% of total loans – is above the market average and showing an adequate currency structure of the portfolio. FX loan portfolio is dominated by EUR (56% of the total portfolio). No loans were extended in CHF or other “exotic” currencies. The bank also successfully enhanced the functionalities of its Internet Banking and Phone Banking services (known as “BCR 24 Banking” financial services), continued to develop the cards business and extended the range of services at ATMs as well.
“BCR 24 Banking” financial services are seeing a constant migration of transactions from cash to online banking – the number of transactions via BCR 24 Banking is increasing by more than 10% on a quarterly basis – 40-50% year on year growth. In Q3 2010 only, BCR customers have performed more than 1,000,000 online transactions through Click 24 Banking service and more than 600,000 foreign exchange operations via FX ATM.
BCR continued to expand its ATM network by adding 19 new machines in Q3 10 up to 2244 ATMs (8% y/y increase) and its POS network to 18400 units (11% increase y/y).
3.3.2. Financial results 2009
Operational result increased to 2223.4 million lei (528 million) in the first three quarters of 2009, up 24.9% compared to first nine months of 2008. The main driver operational income was increased (higher RON 387.4 million or 12.5% compared to the first nine months of 2008), while operating expenses decreased moderately (55.3 RON million, -4.2% respectively compared to the end of quarter 3 of 2008) in the context of continued expansion network of facilities and currency depreciation. Net profit after taxation and minority interests is 699.5 million RON (166.1 million euros), down 43.9% compared to the end of September 2008, mainly due to higher provision expense and lower income commissions generated by reducing consumption. Focus on increasing efficiency and risk management according to a positive environment challenging economic the cost / income ratio has improved to 36.3% in Q3 2009 (compared to 42.7% at the end of September 2008). Return on equity (ROE) decreased, as expected, to 14.5% in Q3 2009 (31.1% at the end of September 2008), in a difficult economic conditions. Loans non-performing (NPL) continued to grow as expected due to market conditions effects that affected customers, but remained on the sidelines of control, with a comfortable coverage rate 120% (guarantees and provisions). Evolution of bad loans led to an increase Risk costs to EUR 1486.0 million RON (almost four times the the first three quarters of 2008, while provisions for loan balance increased 37.6% compared to the value at the end of 2008, reflecting the expected actual losses).
3.3.3. Financial results 2008
Highest net profit recorded in the first quarter of BCR history. Reported net profit after tax and minority interests increased by 82.4% from RON 209.8 million (62.0 million) from 382.74 million RON (103.6 million EUR). Operating income increased by 48.5% from RON 664.5 million (EUR 196.3 million) to EUR 987.2 million (EUR 267.1 million). Profit before tax increased by 88.8% from 243.27 million RON (71.9 million) from 459.24 million RON (124.2 million EUR).
• Excellent growth efficiency as a result of the transformation process. Return on equity (ROE) increased from 19.4% in first quarter 2007 to 30.7% in first quarter 2008. General administrative expenses increased slightly to 6.87%, from EUR 367 million (EUR 108.4 million) to EUR 392.2 million (EUR 106.1 million). Cost / income ratio has improved significantly from 55.2% in first quarter 2007 to 39.7% in first quarter 2008.
• Strong growth in revenues. Net interest income increased by 63.2% from 419.54 million RON (123.9 million EUR) from 684.59 million RON (185.2 million EUR). Net commission income increased by 61.9% from 153.38 million RON (45.3 million) from 248.35 million RON (67.2 million).
3.3.4. Financial results 2007
– Net interest income increased cu11, 6%, from 1224.1 million (EUR 344.9 million) to 1365.9 million lei (413.3 million EUR)
– Net commission income increased by 45.6% from RON 407.8 million (EUR 114.9 million) from 593.8 million lei (179.7 million EUR)
– Operating income increased by 21.2% from 1849.8 million (EUR 521.2 million) to 2241.5 million lei (678.3 million EUR)
– General administrative expenses increased by 20.5% from 1029.9 million (EUR 290.2 million) to 1241.4 million lei (375.7 million EUR)
– Net profit before tax increased by 19.2% from RON 733.2 million (EUR 206.6 million) from 874.2 million lei (264.6 million EUR)
– Net profit after taxation and minority interests increased by 21.2% from 599.0 million (EUR 168.8 million) from 725.8 million lei (219.6 million EUR)
– Cost / income ratio improved slightly from 55.7% in financial year 2006 from 55.4%
– Return on equity (ROE) increased from 18.8% in financial year 2006 to 22%
– Total assets increased by 16.4% to 47435.8 million lei (14019.7 million) on 31 December 2006 to 55214.0 million lei (16510.9 million)
3.3.5. Fiancial results 2006
BCR's total assets at the end of 2006 increased by almost 39% and consolidated net profit increased by 16.4% from a year earlier.
• Net interest income increased by 20% from 1405.0 million (EUR 398.5 million) to 1686.4 million (EUR 478.3 million)
• Net commission income rose by 5.5% from RON 536.9 million (EUR 152.3 million) from 566.5 million lei (EUR 160.7 million)
• Operating income increased by 16.8% from 2.156 million lei (EUR 611.6 million) to 2550.1 million (EUR 723.3 million)
• General administrative expenses increased by 12.7% from 1250.1 million (EUR 354.6 million) to 1409.1 million (EUR 399.7 million)
• net annual profit before tax increased by 21.3% from RON 764.5 million (EUR 216.9 million) from 927.7 million lei (EUR 263.1 million)
• Net profit after tax and minority interests increased by 16.4% from RON 649.9 million (EUR 184.3 million) from 756.3 million lei (EUR 214.5 million)
• cost / income ratio experienced a 57.2% improvement from the 55.3%
• Return on equity increased from 17.6% to 18.8%
• total value of assets increased by 38.6%, from 34.235 million lei (EUR 10.118 million) to 47.436 million lei (EUR 14.020 million)
• Tier 1 capital was 3588.7 million lei at the end of 2006 (previous year: 3335.1 million) reached 11.06% solvency rate (previous year: 15.04%).
"Through a unique blend between work efficiency business oriented, successful completion of privatization and an entry into an encompassing transformation program, we managed to have a great year in 2006. We obtained excellent results With an increase high asset and at the same time, BCR's net profit before restructuring costs increased by deducting 38% to 254 million euros. These results confirm the really promising potential of BCR, "said Nicolae Danila, BCR executive president.(2006)
3.4.Rewarded findings
BCR has achieved a net profit of 488.5 million lei in the first half of 2010, 19.5% less than in the first half of last year, with 36% less than S1.08, but 5% more than in S1. 07 and by 27.6% more than S1.06.
As a result of the transformation of financial institutions, revenues have increased steadily, while the number of employees has decreased. Thus, in late 2007, the Bank reached about 10,500 employees and total revenues of 6.9 billion lei. BCR Group, which is the largest bank in the middle market, reported a third quarter net profit of 6 million lei (1.4 million), down over 93% against the same period of 2009 .
The result is calculated as international reporting standards that allow a lighter treatment of provisions. Bank's retail division recorded a loss in Q3 nearly 14 million euros, according to data published by Erste Group, the parent bank of BCR.
"Austerity measures adopted by the government have a clear effect and we expect this to continue in 2011. Do not anticipate any significant decline in the cost of provisioning. (…) You will probably be a deterioration in the SME and larger companies during the winter and the first half of 2011, "said the head of BCR.
Conclusion
After analyzing the results of what becomes clear is a recurring theme, the manner in which every economic change has impact on customers, business and society. The world will not simply return to "normal business" after returning from a cyclical expansion. It underwent a significant change of paradigm and will never be the same, because causes are not reversible.
The evolution of the banking sector over the last decade was marked by major changes in business environment, mainly due to privatization, reduction of restrictions legislative and technological changes occurring in this economic sector in many countries Europe, including Romania.
Changes in the supply of banking products and financial services were demand stimulated by changes of coordinates, consisting of revenue growth and power consumer purchasing, and an enhanced level of information consumers financial institutions on new entrants and offer them. This has suffered but drastic changes due to the consequences of economic crisis as advertised.
Heavily involved in the economic – social situation, Romanian Commercial Bank activity reflects positive developments, but also some shortcomings that we have seen recovery and restructuring processes of the Romanian economy during the transition to market economy, measures taken in the monetary field, rate, tax. For the Romanian Commercial Bank general objective for the next years, from the results so far obtained by the bank continues to be keeping the main place they occupy at present in the Romanian banking system and especially the strengthening of this place.
The strategy adopted by the bank's own development objectives and principles are insrise to take forward and strengthen the bank's efficiency and profitability criteria and the widest possible recognition domestically and internationally.
In recent years Romanian Commercial Bank has been the most active operator on the Romanian banking market and managed, following a clear strategy and well grounded in the realities of the Romanian economy, to strengthen its place in the system and get results to match.
The real economy is at the forefront of concerns BCR and demand for this area is also a priority.
In these circumstances, the loan has been and remains the main investment bank that encourages profitable customers and especially those in the private economy.
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