Jiří Hrouda in a large interview about the CREDITAS Group

Pavel Hubáček's CREDITAS Group belongs to the Czech business wave that is not afraid to expand abroad. Last year, the Group bought banks in Western Europe and an energy firm in Poland, our northern neighbour, operating a dominant business. In line with the owner's plan, the head of CREDITAS Group, Jiří Hrouda, has the task of doubling the size of the Group in the next three years. "In the energy sector, for example, we actually have a target return of over 20 per cent a year, and sometimes even 25 per cent. So far, we have been succeeding," Hrouda says in his interview for SZ Byznys.

How did the CREDITAS Group fare last year?
The year was full of expansion and acquisitions in all divisions of our business. We have entered the Slovak and Polish markets with our energy business, thus strengthening our position in Central Europe. We have also completed the merger of Banka CREDITAS with Max banka. In our banking division, we have a consolidated net profit of over CZK 770 million. After the integration of Max banka, we have a balance sheet of nearly 200 billion and 260 thousand clients. The entire Group has a preliminary net profit of around CZK 3.9 billion. We are trying to grow organically, also through acquisitions.

You agreed last year to buy the Maltese bank MeDirect, which, apart from Malta itself, operates banks in Belgium and the Netherlands. If the regulators approve, when will you merge it with the Czech bank Banka CREDITAS?
We're working very hard on the transaction. We are now waiting for national regulators in the respective states to give their approval. It is coming along nicely. Together, the banks have a balance sheet of six billion euros (CZK 150 billion, ed.), so they are almost as big as Banka CREDITAS. Of course, they are not the biggest ones in the markets where they operate. But say in Belgium they are number seven and in Malta they are number three. To us, MeDirect is an opportunity, and it could be an interesting platform for us to grow further in Western Europe.

What's your plan?
We have been considering expansion into Western Europe for a long time but doing it as a greenfield investment is difficult. Banking is a complex industry and if you don't have the scale, it's quite hard to grow, so we were thinking more along the line of acquisitions. We wanted something of a solid size that made sense for us, and we wanted a bank that was very technologically strong. MeDirect is a little Revolut in terms of technology. They started with bank payments and now they have a comprehensive offer. They're quite fundamentally focused on investments, meaning you can buy thousands of different stocks, funds, etc. through them, and we like that a lot. Banka CREDITAS is very active in investments, and today we are strong mainly in our branches and through private bankers, so you can come to our bankers and buy interesting investment instruments. Of course, our clients can also invest via an app. But at MeDirect, everything is done through a mobile phone app. We were very impressed with that.

So, you want to make money from investment management. To win clients in the Czech Republic and Western Europe and profit from fees and commissions?
Yes. The bank is relatively classic, meaning deposits plus mortgages plus normal everyday banking. But we rely primarily on an advanced technology platform where clients can manage and buy investments. At MeDirect, they are able to push their clients towards investing, and the outcome is that 30% to 50% of their clients invest with them. The average for the Czech market is about 12%. That means actually having six billion in deposits and knowing that 30% to 50% of your clients are investing. We want to bring the platform to the Czech Republic. We see synergies and interesting opportunities there. Even the Belgian market itself looks interesting and, by the way, it is one of the richest economies in Europe. For example, the median net financial assets (savings plus financial assets minus debts) per capita is over EUR 230,000. That's a huge number. In the Netherlands and Italy, it is not even half. So, clients are quite wealthy, they are used to investing, they want to invest and with MeDirect, they now have the opportunity to do it simply and online.

Is the bank profitable?
It's somewhere close to zero because they had major problems during covid. In 2021 and 2022, they made large provisions because they had relatively large exposure to commercial real estate and other sectors of the economy which were affected by covid. They lost a lot of capital then. The existing shareholder was at the end of its investment horizon and decided to sell the bank. We came across them by chance, there were about three tenderers in the tender, and we won. The plan is to continue working with the banks, to reorganise their structure, and it will be a work of many years.

CREDITAS focuses mainly on real estate financing. Are you going to keep it up?
We have a lot of real estate projects, but we also finance energy and other sectors. We have been saying for a long time now that real estate is part of our DNA. One entire segment of our Group is real estate, mainly residential development. CREDITAS Real Estate has over 5,500 residential units in its portfolio and thousands more are in the pipeline. On the real estate financing side, of course, it should be mentioned that the regulatory rules are quite favourable towards real estate, which means that every bank has an incentive to focus on real estate.

Would you say that the market in the Czech Republic is simple, since it is still growing?
That's right. And by the way, Malta is the same. For example, commercial real estate and logistics have experienced fluctuations. But we are now seeing the market rebound. For example, we had an interesting warehouse transaction on highway D1 on the table. The asset was eventually bought by someone else for a ridiculously high price. We don't get it at all, we would never buy it for so much money, but the logistics complexes on a key transport arterial road obviously make sense to investors.

What is the biggest drag on this energy and real estate sector?
Last year was quite balanced. The energy sector already accounts for about 60 per cent of the Group's non-banking business. It's quite large. Historically, we have focused exclusively on distribution systems, i.e. energy infrastructure. Today we are very complex, that is, we have energy sources, battery storage of the cogeneration system, electricity trader, we have now LNG distribution. What makes the energy industry interesting is that you get the most out of it if you can link things together effectively, that is, use the knowledge of distribution in trade, then trade in electricity. Of course, we also invested a lot of money in IT. In development, we expect a large boom this year, since we have, in different stages of completion, 12 projects with almost one thousand flats.

Your boss and owner of the CREDITAS Group, Pavel Hubáček, said that he would like to double the value of Creditas within three years. Can you do it for him?
Today, we're around the billion-dollar mark in real estate, but we're trying to do those things that are relatively high value-added. In the energy sector, for example, we actually have a target return of over 20% a year, sometimes 25%. So far, we have been succeeding. As we grow in size, we can do transactions that we could not have done before. So, if you make a 25% return on 200 million euros, the outcome is different than on 200 million crowns. If we hold this line for the next three years, the value of the Group could actually increase significantly.

How much debt do you have?
In the industrial branch of the Group, we are today at about 20% of equity, which means the ratio of one to four, which I would say is not unusual given the significant presence of real estate assets.

In Poland, in February you bought Duon, a company that mainly distributes and sells natural gas to industrial companies. Before that, you bought a distribution company in Slovakia from the same company. Can you describe the transactions?
In Slovakia, it was basically the local version of our energy division UCED, with GGE being more focused on heat distribution and generation than electricity. Similarly, the heating and power plants have an energy trader, so it made a lot of sense to us.

And the Polish company Duon, which is involved in the distribution of liquefied and gaseous natural gas, was just a little added bonus. You should know that in Poland it works a little differently. In most developed economies, gas is transported almost exclusively through pipelines, in Poland a relatively large percentage of gas is still transported by vehicles, i.e. railways and trucks via tankers. This company dominates the Polish market with its fleet of LNG and CNG tankers. We believe that LNG can still be thriving for at least the next 15 to 20 years.

Given the interruption of gas supplies from Russia, for sure.
LNG imports to Europe, whether from Qatar, America or other countries, are growing quite substantially, and new LNG terminals are being built. Poland is quite well positioned in terms of future distribution to the rest of Europe.

It was not a very large acquisition; the company earns EUR 12 million a year (CZK 300 million) but it allows us to put our foot in the door of the Polish market. It is a good entry ticket to the Polish market.

Where do you want to place your biggest investments now? Maybe the steam power plant in Chomutov?
If you look at the CREDITAS Group as a whole, it is probably balanced between the banking and non-banking sectors. As for the non-banking part, it is absolutely dominated by the energy sector. We are not making any significant real estate investments at the moment, we are focusing on the real estate projects we already have in our portfolio.

Aren't you also interested in ČEZ shares, which are currently being bought by Tykač and his associates?
We are not actively trading on the stock exchange at the moment. We don't have a competitive advantage in this. It might be interesting to see what the state will do with ČEZ, though. Of course, someone can count on what will happen after the elections. But for us, in a way, that's a good thing. We are one of the smaller players, and if the big player ČEZ is not fully concentrated, it can open up new opportunities for us. Maybe some part of the big player will come up for sale. It might be an interesting opportunity, but we are not actively pursuing it.

Do you still cooperate with Tykač even after you bought the energy resources from him and his Chinese partners and sold them only to Tykač exactly one year later?
The Czech market is relatively small, we have some kind of relationship or cooperation with practically every larger group, whether financial or non-financial.



The interview was published on Seznam Zprávy. Author: Jiří Zatloukal.