Lasting traditions ... a reply to new challenges
General Banking and Trust Co. Limited
Last year one of the oldest and most respected commercial banks in Hungary, the General Banking and Trust Company Limited (GBT), marked its 75th anniversary. Throughout the decades it has managed to preserve Hungarian banking traditions, and continued to provide quality services to its clientele.
The country's return to a market economy has enabled the banking community to start afresh, while at the same time, providing unique opportunities for development. Thus, in August 1996, GBT's entire equity was acquired by Gazprom, one of the largest industrial corporate groups in the world, through its financial arm Gazprombank. As the Bank's new owners, Gazprombank and Gazprom opened a new chapter in the history of the financial institution.
As a consequence of the close relationship with its owners, GBT is increasingly specialising in providing banking services to the energy industry in Hungary and neighbouring countries. Furthermore, it is financing trade between Russia and Hungary, especially Russian gas supplies, in return for competitive Hungarian products. Therefore, the Bank's clients include a growing number of leading power companies, while small and medium-sized Hungarian enterprises and joint-venture firms, which constitute its traditional customer base, are continuing to receive considerable attention.
Following the purchase, the Gazprom Group, which is Europe's largest gas supplier, has used the Bank to provide most of the financial services related to gas exports to Central and Eastern Europe. By fulfilling its function as a regional clearing centre for Gazprom, GBT is assured a special place in the financial life of Hungary. The country will be supplied with billions of United States (US) dollars worth of gas, up until the year 2015, and GBT has already undertaken financial arrangements for these supplies.
The Bank also implemented one of the most important tasks assigned to it by its owners - to establish GBT as the regional clearing centre for Gazprom. Totalling some US$200 million each month in 1997, all receipts for income arising from the gas deliveries to Austria, Slovakia, Slovenia, Romania, Croatia and the Czech Republic are passing through the Bank.
GBT's success in carrying out this task bears great significance for the Hungarian economy as a whole, since it positively impacts on the nation's balance of payments and helps stabilise its currency.
By gradually initiating investment projects, the new owner is providing the Bank with a new profile. GBT is now highly active in arranging syndicated loans for oil and gas deliveries to Hungary and neighbouring countries. The Bank plans to exploit the great potential in both Hungary's energy sector and infrastructure projects through structured financing. Accordingly, GBT is actively involved in arranging the financing for the construction of a gas pipeline leading from Russia through Belarus and Poland to Western Europe. In addition there will be a gas transmission system routed through Hungary, including the related major projects (sub-surface storage facilities and compressor stations) that would make it possible to supply Russian gas to the central and southern regions of Europe.
The Bank is also interested in financing trade between Hungary and the other countries of Central and Eastern Europe, similar to those Hungarian exports destined for Russia, which most notably financed a shipment of Ikarus buses in 1997 (to a total amount of some $20 million).
The new, greater tasks and extensive plans require corresponding equity. Therefore, the paid-up capital of the Bank was increased to HUF five billion from HUF one billion back in September 1996. This was followed by a further rise to approximately HUF ten billion in March 1997. At their recent general meeting, the shareholders have resolved an additional increase of HUF10.2 billion with closed issue, which would boost the Bank's paid-up capital to HUF20 billion in 1998. Thus in terms of share capital, GBT would be ranked sixth or seventh in the Hungarian banking community.
The Bank's growing stature is due to increasing profits, as well as the Bank's equity. In this line, the recent shareholders' meeting has resolved to place into retained earnings the entire after-tax profits for the year 1997. As a result, GBT's equity has already reached HUF14.6 billion, while its adjusted capital amounts to HUF24.1 billion owing to a sizeable subordinated loan. As the Bank grows bigger it will be able to provide bigger and better credit packages.
The results of the revamped operations have already materialised in the form of profits. The dynamic growth of the GBT in 1997 is also reflected in its financial indices. Based on international accounting standards, total assets grew 77 per cent, reaching HUF127 billion with after-tax profits of HUF 3.7 billion, compared with HUF237 million for 1996. Dynamic development is also reflected in certain key figures:
Financial highlights
| US$ '000 | 1997 | 1996 | Per cent change |
| Total assets | 624,459 | 433,487 | 44,05 |
| After-tax profits | 18,394 | 1,439 | 1,178,25 |
| Shareholders' equity at year-end | 67,474 | 31,310 | 115,50 |
| Net interest income | 14,368 | 3,812 | 276,92 |
| Return on assets (ROA) | 2,95% | 0,33% | 788,55 |
| Return on equity (ROE) | 27,26% | 4,59% | 493,97 |
GBT's local and international business activities and contacts are increasing daily. The Bank has acquired new partners that reinforce its presence in Hungarian and international finance. Those Hungarian and foreign banks that had the right vision of GBT's potential, retaining and even expanding their ties to the Bank, contributed to the performance of the recent period. Syndicating large loans has become a core activity within the Bank's lending line. Thus, GBT has acted as the lead manager, facility agent and joint lender in syndicating a $50 million facility for Panrusgaz, a major gas importer in Hungary, along with a $160 million facility for Gazprom. In the course of last year the Bank, among others, completed arrangements for a $160 million syndicated loan for a major gas pipeline for Stroytransgaz, a Russian construction company for gas facilities. It also arranged a $60 million syndicated loan to facilitate gas imports to Hungary on behalf of Panrusgaz. For the purpose of financing oil shipments into Hungary, it arranged another syndicated loan to the amount of $70 million for Yukos, a Russian oil company. In addition, it has begun to arrange a $300 syndicated facility for Gazprom itself.
Among last year's major business successes, mention should be made of the $50 million issue of US commercial papers. This was the first time in the history of the US securities market that this type of securities issue has been arranged on behalf of an East-Central European financial institution. Further proof of GBT's recognition in the international money markets is a syndicated Euroloan facility of $40 million, granted to the Bank in early 1998, at favourable interest terms, by a group of international banks lead managed by Citibank and Deutsche Bank.
Although institutional investors are a vital part of GBT's client base, the Bank also feels it imperative to nurture its retail customers, many of whom have been with GBT for decades, to further its interests as a universal bank. History is not just a word in itself. It is something which is of value to GBT. GBT has a firm commitment to those clients who have been related to it historically. At the same time, the Bank is developing traditional banking products. For example, card services are being expanded with the introduction of Eurocard/Mastercard, to supplement the American Express and Visa cards that are currently available and which function as credit cards. Meanwhile, most other banks in Hungary merely offer debit cards. On the occasion of its 75th anniversary, GBT launched the Jubilee deposit and the Jubilee Plus current account, offering attractive terms to customers. This year's novelty is a trio of 'depo$its' which yield highly competitive interest on savings placed in US dollars or Deutschmark, not just in Hungarian forints. They are available at various maturities for private and corporate customers alike.
The Bank opened two new branches in 1997 and several branch offices were refurbished. The intensive extension of GBT's branch network continues this year, with special emphasis on country towns. Dedicated branch offices have been fitted with the latest in banking equipment, allowing GBT to serve its customers seven days a week, 24 hours a day.
All things considered, the greatest achievement of 1997 was the creation of the solid foundation for the Bank's future dynamic development. The goals set out in GBT's business plan for 1998 reflect the belief that by the end of the year, GBT's assets will total approximately HUF200 billion, its capital will be HUF40 billion, while pre-tax profits will exceed HUF eight billion.
As Central and Eastern Europe become more fully integrated into the global economy, the future for innovative trade financing services necessary for the huge Central and Eastern Europe market is practically limitless. By virtue of its results achieved to date, and on the basis of a business policy which relies on a stable footing, the GBT has a unique opportunity to secure its position in the Central European banking sector.
