Rauno Klettenberg: the goal is to provide business loans


Rauno Klettenberg, the new head of Holm Bank, said in an interview with Lääne Elu that the immediate goal is to grow the corporate loan portfolio and provide high-quality services to existing clients.

Rauno Klettenberg, you have been the head of Holm Bank for a month. Why were you hired?

Because of my previous banking experience – I managed the Handelsbanken branch here and have been in the financial sector for a long time.

What did the owner of the bank task you with?

My task is to be responsible for the bank’s activity and the implementation of its strategy, while also looking to the future.

What was your first emotion when you got to work?

I was familiar with the bank’s background, because Liisi had been on the market for a long time as a creditor. The aims of obtaining a banking licence were also known to me. I was not a stranger to Holm Bank. The bank has its roots in Haapsalu, this is where we come from. Now we have to look beyond Haapsalu and Tallinn, and focus on the whole of Estonia.

Liisi has already taken over Estonia.

We have 350,000 clients.

How is the bank’s office divided between Haapsalu and Tallinn?

Banking is no longer confined to the office. Nowadays, it is important to be close to the client and we have access to them with our one thousand hire-purchase partners all over Estonia. Currently, the bank’s organisation is growing, with a quarter of its office staff in Tallinn and three-fourths in Haapsalu.

How often do you have to visit Haapsalu yourself?

We communicate every day and I go to Haapsalu as needed. Being a single company, we need to communicate with people face to face from time to time.

Estonia has been conquered, where in the European Union will you go next?

There is still a lot to do as a bank in Estonia. We have a large number of hire-purchase clients, but we are currently moving into the business sector with our loans. We also take deposits. We can certainly grow with these services in Estonia.

What does it mean that you are moving into the business sector?

We offer business loans to small businesses. The difference between a large and a small business is relative. In Estonia, there are small and medium-sized enterprises; only one per cent of the companies are large on the global scale. We have focused on clients who want to develop their business with smaller loans. We offer loans for investments and for financing working capital. Often, entrepreneurs do not get the kind of service and attention from elsewhere as they do from us.

Why should an entrepreneur choose Holm Bank?

There have been many changes in the banking market. The large Scandinavian banks have lost their market share as some banks have left the market and become less active. This has given room for new banks, including Holm Bank, to fill the gap. We offer the entrepreneur a personalised approach that they may not receive in a large bank.

What will Holm Bank look like in five years?

With services and products, we have become an important partner for our current clients, we have more business clients, and we are likely to have operations abroad. It is too early to talk about it, but we are quite likely to move across the border.

Will you take the Liisi brand abroad?

It depends on which services we will provide.

Why should a Finn take a hire-purchase from an Estonian company?

The reason depends on the market situation. There are many companies in Scandinavia that take out loans across the border. The same applies to deposits.
Banking products are not nationalised today. The best part of financial services is that borders are open and it is possible to enter a new market.

Is the only competitive advantage the size of the interest and service charge?

In principle, conditions are naturally a competitive advantage.

How has the involvement of deposits gone?

It has gone well – the set goals have been met. We raised our initial target of 10 million euros at the expected pace and decided to continue the offer. The future of taking deposits depends on the growth of our loan portfolio – as it grows, new volumes will also need to be added.

How big a loan portfolio do you want to achieve by the end of this year?

We have not set such a goal because in addition to obtaining a banking licence, we aim for organic growth. We will set specific numbers in the coming year.

What could be the market share of Holm Bank by the end of the year?

As a creditor, our portfolio represented three per cent of the market. But as a bank, it is less than a per cent. I am not going to predict how big we will be in five years. Our growth depends on the state of the economy and the needs of businesses. Organic growth means that we can grow as much as the needs of businesses and individuals grow.

Economic growth is 3–4 and the growth of wages of individuals is 7–8 per cent per year.

Because the base is low, our growth is even faster, but I am not going to specify the percentage. In addition to the existing products, growth has also been supported by new products, such as small loans and the hire-purchase card.

What does it mean for a small loan business if wages are rising very fast?

Above all, that it is possible for people to consume a little more and faster. A small loan allows people to buy things a little more conveniently. Estonia has gone through a couple of financial crises and people have seen what such an unjustified loan growth could bring. I do not see any major signs of overheating right now.

Who do you consider your main competitor in Estonia?

I do not see us taking over the market share from anyone because many banks have left Estonia and there are quite a few people who are looking for a new financier and new deposit options. People have a choice, including from among banks based on domestic capital. All banks have enough market share.

All bankers say that competition is fierce, but according to the Bank of Estonia, average interest rates keep on rising.

If you provide a good service, the client will be loyal. Competition in the Estonian banking industry decreased for a while as some banks left, giving new banks an opportunity. It is now possible to choose more favourable loan terms than a few years ago.

New banks are growing organically and have room to take clients from large banks. Organic growth means that no one is taken over, but growth is based on equity and capital.

What kind of a bank does the Estonian market need?

The Estonian market needs a flexible bank that can provide service to clients of different sizes and needs. Banking must operate in a way that it remains unnoticed.

Do you, like the owner of Bigbank, welcome the idea that people finally get the money from the second pillar?

When a lot of money enters the market at once, like before the financial crisis of 2007–2008, it has one downside – money tends to go up in price. Prices begin to rise rapidly as consumption or real estate purchases increase in the very short term. This is not good for neither the consumer nor those who will benefit from it in the short term. I do not think it is a positive thing to allow such a mass of money to the market at once.

The pension must be viewed prospectively and over the long term, it cannot be changed by a single political breeze. It is very important that pension assets remain and grow steadily. The consequences of rapid change are difficult to assess.

When you read the arguments of the pension pillar reformers, what do you say about them?

Too much emotion, too much hastiness, and too little analysis of what the changes to the second pillar pension system will bring. It would be important to analyse the consequences. There is no ideal system, but one should think about how to supplement the current pension system to make it better than it is today.