While some mainstream media may be overly pessimistic about the Czech economy, there are some good news following from an independent survey by Komerční banka analysts. Although 2023 may well be another difficult year ahead of us, there is no reason for “dark scenarios”. Broadly speaking, our economy has overcome most obstacles so far. In Q3 and Q4 2022, we went through a very mild recession, and this year, we should see a slight recovery. We have weathered the energy crisis, while maintaining a high employment rate. We’ve talked about all this with David Formánek, Member of the KB Board of Directors responsible for corporate and investment banking. As Mr. Formánek emphasises, "The Czech economy was supported by foreign demand, as eventually there was no recession in the Eurozone countries. It also showed how viable and strong our companies and their leaders are, which is very encouraging."
Komerční banka had a successful year, based on your recently published results for 2022. What were the highlights in corporate banking?
I dare say it was a very successful year in this segment. We had very good revenues, but there was also a very visible growth in loan volume both for SMEs and particularly for bigger companies. Many large financial transactions took place and the whole corporate area was very lively.
You are in regular contact with business owners. From the bank's point of view, how have they coped with the new challenges arising before them?
It was a challenging year. Just to remind, it began with repercussions of the covid pandemic and accelerated inflation. Then came the war in Ukraine, which created, among other things, a huge energy insecurity. Inflation skyrocketed. Suddenly, business leaders had to ask completely new questions: Will there be enough gas/energy? Will we be able to pay for it? Can we still afford to invest? It must have been tough for companies to reconsider investing or expanding production with all this in mind. The eventual decision must have taken a lot of courage, because no one knew exactly what was coming – and in Q3 for instance, the fear of energy shortage was quite justified.
I really appreciate that most of our corporate clients faced the situation proactively and did not delay their investments. They tried to avoid the risks by investing in various solutions that increase their energy self-sufficiency, which eventually also reduced their energy expenses. Even those who had been rather sceptical about green energy began to think differently.
Some companies also searched for new business models and unorthodox solutions. How did you help your clients in this respect?
You know that KB relies on our knowledgeable bank advisors, so we wanted to give our best in this respect as well. Even before covid, we provided consultancy in energy, renewable resources, subsidies and tenders, all via our company KB Advisory. Last year we acquired Enviros, leader in energy and environmental consulting in the Czech market. We have thus become the only bank that can provide the full package of services from consultancy to sustainable financing. While we responded to a specific situation here, it is a major investment for the future, one that KB focuses on for the long-term.
As for business leaders, have you noticed any other big shifts in thinking?
Definitely in the field of logistics and supply chains. The "just in time" production approach got disrupted, and companies returned to classical stock management. Whoever had materials in stock and was able to deliver their product in time had the upper hand. So those who previously did not get rid of their warehouses now gained a competitive advantage. And those who did had to start building warehouses on a larger or smaller scale. Our bank often helped them finance these projects.
Being part of the Société Générale group, you are also active abroad. What can you offer our entrepreneurs in this respect?
On top of standard banking services, we can help with foreign investment. If a client wants to invest and expand their activities abroad, we can assist them in cooperation with our colleagues overseas. We can pick out companies that are healthy and could be for sale. Or we can find a minority investor or strategic partner for the company. We have already taken part in many such acquisitions.
What is your outlook for 2023? Are we finally past the worst?
2023 is also hard to predict. Inflation will continue to plague our economy, but it should gradually ease off towards the end of the year. There should also be less uncertainty around energy. It turned out that we can save some energy without much impact on the economy. We also know that we need to continue building new supply routes.
It turns out that a great business leader is the biggest asset.
Last year was definitely a good case of learning by doing for entrepreneurs in how to make decisions and operate in a turbulent environment. But it also proved that we are part of the Western world. The fact that we were able to go through the crisis period in this way is a demonstration of our maturity and something we can be proud of. I believe this is something to build on for the future.
Today’s business leaders must be ready for anything. They have already learned that they have to count with every possibility, that even the wildest scenarios can become reality.
Today’s business leaders must be ready for anything.
Your bank advisors also had a lot of learning by doing, along with your clients. Now they know what to advise to a business owner who tells them that they have no clue about what comes next.
Yes, they also learned to listen even better than before, respond to unexpected situations and look for solutions. And approach companies very individually. We look not only at the sustainability of the business model, but mainly at the quality and sustainability of the management. It turns out that a great business leader is the biggest asset.
To sum up, if you were to point out one thing that entrepreneurs should focus on this year, what would it be?
Cybersecurity. Also because it may have been slightly overlooked due to all the other big issues in the last years. But it's a huge topic, and the threat of cyber attacks is far greater than ever before. And it applies to everyone. But that’s almost for another conversation. Our bank is very active in this field, and we have expert teams of specialists fully focused on cybersecurity. We will be happy to share our experience.
David Formánek was interviewed by Jana Jenšíková
Photo credits: KB
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