With the coming of ING’s mass retail business in Luxembourg, Spuerkeess is at an important strategic turning point. The state-owned universal bank is seeking to attract these new customers and integrate them quickly, while maintaining the quality of its service. It is major challenge, but also an opportunity to strengthen its market position, as Charles Pletsch, head of retail banking at Spuerkeess, stated during an interview.
Guillaume Meyer: Do you have any idea how many ING clients have chosen to switch to Spuerkeess?
: For the moment, we don’t have any concrete figures. The situation is still developing and there is what we call a ‘pipeline effect’. We’re talking about hundreds of new customers, which represents a considerable volume of work. We are working hard to optimise our services to reduce the waiting time for new accounts. It is crucial that the overall experience of our new customers is positive from the outset.
How many new clients can Spuerkeess onboard in a day?
The current cruising speed is 180 customers a day on average. At the peak of demand, we were over 200 customers a day.
Does the arrival of these new customers require Spuerkeess to recruit new staff?
Although it’s only a recent development, ING’s decision means an increase in our customer base, and it’s essential to guarantee the immediate availability of our services across all communication channels. We were already anticipating the recruitment of several dozen account managers before this announcement. We will probably have to increase our target to meet demand.
Are you planning to recruit ING staff?
We are looking for experienced advisers. ING’s staff do indeed offer an opportunity to strengthen our workforce with skills already honed in the sector.
There is an expatriate clientele that all banks would like to attract
ING’s decision was announced rather suddenly and without prior notice. Were you surprised?
Yes. We are both members of the Luxembourg Bankers’ Association (ABBL) and there was no prior discussion of the matter within this framework. A warning would have been appropriate. What shocks me is, of course, the impact on customers, but above all on employees who, after years of dedication to building customer loyalty, find themselves faced with a fait accompli. It’s an unusual way of going about things, to say the least.
What is your interpretation of the reasons that led ING to withdraw from the retail market in Luxembourg?
I am expressing a personal opinion here, which is not binding on Spuerkeess. ING has suggested that, despite its best efforts, it has not reached the critical mass of customers needed to become profitable. I also think that it was facing major investments, particularly in IT. Perhaps it felt that the costs were too high in relation to its marketshare in Luxembourg, which is around 5%.
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Do you think that other banks could also withdraw from the market for similar reasons?
While ING’s decision is particularly striking, some banks are following a similar, albeit less spectacular, path by squeezing out certain customers, for example, those who come to the branch to make bank transfers in-person. This has been going on for several years. Many of these customers then come to Spuerkeess. This doesn’t make our job any easier, or that of Post, because we have a societal mission. We have to generate a minimum income from customers, and some of them are not profitable.
If ING’s customers are not necessarily profitable, why do other banks, including yours, put so much effort into to attract them?
ING customers are interesting. In particular, ING targeted expatriates arriving in Luxembourg, who saw their sign as soon as they arrived at the airport. So there is an expatriate clientele that all banks would like to attract. Although we have a societal mission, Spuerkeess is also a commercial enterprise that seeks to be profitable. That’s why we continue to launch marketing campaigns to attract these customers and demonstrate that we are the best choice.
Interest income accounts for around 80% of our total income.
ING’s decision raises questions about the overall profitability of retail banks. Is banking profitability under threat, as the ABBL claims?
Having worked in the banking sector for several decades, I am struck by the major changes in regulation. The processes for onboarding and monitoring customers, with the KYC (know your customer) and KYT (know your transaction) requirements, have become much more restrictive and rigorous. Simply updating an identity card requires a disproportionate effort if the customer is not responsive. In addition, digital security, particularly protection against phishing attacks, also represents a significant cost. All these factors impact on the profitability of our sector.
How did Spuerkeess’ retail banking interest margin develop last year?
It rose by 59.4% to €457.1m.
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To what extent is this increase linked to your commercial activities, in particular the loans and deposits business?
The rise in our interest income is mainly due to the favourable trend in interest rates. Although we have granted fewer home loans, our volume of savings deposits remains high. Spuerkeess is fortunate to have more liabilities than assets: the volume of deposits exceeds the volume of loans by a few billion. This means that we do not need to refinance our loans on the market, which is a considerable advantage.
Previously, this situation penalised us when we suffered negative interest rates without passing them on to our customers, resulting in losses on savings deposits. Now the situation is reversed. To give you an idea, we apply a rate of 2.5% on savings and around 4% on mortgages. With more deposits than loans, we naturally generate more income.
How dependent are you on interest income?
Interest income accounts for around 80% of our total income, with the remainder coming from commissions and dividends. This interest margin, which is affected by the level of interest rates, was very low for many years because of low interest rates. Recently, as interest rates have risen, the situation has improved, particularly for a bank like ours with a high volume of savings deposits.
But unlike in countries such as Belgium and Germany, where banks kept rates low to preserve their margins, Spuerkeess took the initiative in Luxembourg to raise rates on savings in order to give customers a fair return on their deposits. We believe we have played an exemplary role as a leading retail bank and as a state-owned bank.
Originally published in French by and translated for Delano