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Are Baltic Banks Client-Friendly?

—a look at the "Baltic Banking 2009" report by EPSI Baltic

By Oleg K. Temple, November 2009.

Since 2004 EPSI Baltic has been monitoring the pulse of the consumer trends in the Baltic region, analysing numerous public polls and studies in the financial, telecommunication, general insurance and other fields. The latest EPSI study focuses on the banking sector of the three Baltic States: Estonia, Latvia and Lithuania. No one is shocked that during this time of global economic downturn the satisfaction rating of clients takes a dive, on the contrary, what raises eyebrows is the reaction, or rather lack thereof of the Norwegian and Estonian consumer.


AB Wild Card | EPSI Baltic Banking | Happy families | Do banks care?

The banking results of the EPSI study are based on over 50,000 telephone interviews with current customers of different banks in each respective country. Bank executives would do well to heed the voices of their customers, approach EPSI for a detailed breakdown of the report and fix the glaring problems in their customer relations. EPSI likewise intends for its report to help entrepreneurs identify the markets that hold the best perspectives by providing them with up-to-date information/data regarding banking, with disaggregated data for each major bank an option for subscribers.

EPSI (Extended Performance Satisfaction Index) Rating is the pan-European measurement tool for analysing non-financial value creation in commercial entities and organisations. Customer loyalty is strongly driven by customer satisfaction and gives a general picture of the bank positioning on the market. Being a long-tem leading indicator capturing crucial information about future trends and market development, EPSI gives a perspective for business development. There is also a strong positive relationship between Satisfaction - driving Loyalty - towards Profitability. Thus, EPSI can be used as an effective approved tool for performance improvement.


The AB Wild Card — Ace of Banks?

Things aren't always what they seem to be in the murky realm of big business; semi-transparent deals take place behind closed doors, away from the prying eyes of the media and it is often hard to discern fact from fiction. Latvian laymen and experts of economics alike were more than a little surprised when they learned that on September 16th 2009, Global Finance magazine announced that the best bank in Latvia is Aizkraukles Banka.

In Spring 2008 this bank was forced to amputate over 70% of its branches to survive, shrinking down to just 3 offices and it has been the epicentre of several sizable scandals in Latvian media. Clients venting their frustration through blogs such as Stop Aizkraukles Banka! are evidence that not all is well with AB's PR. After all that, it is the best bank in Latvia? Well, the Global Finance' website explains:

"Global Finance—a monthly magazine founded in 1987—has a long tradition in recognizing the best financial institutions in the world and its awards have become a recognized and trusted standard of excellence in finance. ...

In selecting this year's winners, Global Finance's editorial team considered objective and subjective factors. Objective criteria included growth in assets, profitability, geographic reach, strategic relationships, new business development and product innovation. Subjective criteria included the opinions of equity and credit-rating analysts, banking consultants and others in the industry, as well as corporate financial executives. The winners are not always the biggest banks but, rather, the best banks - those with the qualities that corporations should look for when choosing a bank."


I contacted Global Finance asking the editor in charge to explain how a bank that features in numerous scandals in the local media (latest one was last month, when AB slandered Parex Banka in spam they sent to Parex clients) came to be at the top of their list. I was well impressed with the prompt and logical reply:

"Dear Oleg, Thank you for your interest in the Global Finance best banks article. Here is our write-up that explains our choice for best bank in Latvia. I hope this clarifies the issue.

Latvia: The economic boom that followed Latvia's entry into the EU in 2004 came to an abrupt halt in 2008, with the economy contracting 10.5% in the fourth quarter-the worst performance of any of the 27 countries in the EU. In November the government was forced to take over one of its largest banks, Parex Banka. Then in February the government was felled by the economic crisis, Latvia's credit rating was cut to junk by Standard & Poor's, and the country was forced to turn to the IMF for a $9.6 billion bailout.

A significant beneficiary of the uncertainty created by these traumatic events has been Aizkraukles Banka. At the end of January 2009 Aizkraukles Banka became the largest bank in Latvia in terms of corporate deposits after total deposits at the previous market leader, Parex Banka, fell 43% year-on-year. Deposits at Swedbank, which remains the market leader in terms of individual deposits, fell 10.5% over the year while those at SEB fell 9.2 %. Kind regards, Dan Keeler / Editor / Global Finance"

Incidentally, the Global Finance Magazine has announced the winners of the tenth World's Best Internet Banks Award in Central and Eastern Europe. Ibanka by SEB banka was named as Latvia's best private internet bank.

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A word to the Consumer: EPSI Baltic Banking — 2009*

Conclusions First

  • The recent financial turmoil has had large negative effects on the overall customer satisfaction with banking in Latvia and Lithuania and less affected customers in Estonia.
  • The satisfaction has gone down dramatically in Lithuania, bringing it back to historical minimum 2005 level, despite this regression Lithuania is still the fore-runner of private consumer satisfaction on the Baltic arena. Lithuania continues to lead with a score of 78.2 out of 100.
  • Ranking in Loyalty-2009 looks as follows: the most loyal customers to their respectivebanks live in Estonia, less loyal ones live in Latvia and Lithuanian customers are leastloyal customers in Baltics. This is a real break in comparison with previous five years, when Lithuania was a leader in most of cases.
  • Banking for corporate clients (B2B) is suffering deeper from the financial turmoil than banking for private customers (B2C) in respect to the Customer Satisfaction.
  • Among the major Nordic and North European banking groups, Handelsbanken has the most satisfied customers. They are also on top in loyalty based on the EPSI survey results and the distance to the second contender is now increased. On the Baltic stage, Swedbank is leading in Satisfaction in Lithuania, competing with SEB and other banks in Estonia and Latvia, while Nordea is lagging in Estonia and Latvia. EPSI dynamics for last year show that all banks dropped down significantly in terms of client satisfaction, with the biggest losses exhibited by Nordea and Parex Banka. Meanwhile, SEB has remained solid, suffering the least total losses in satisfaction in Baltic market.

The study has been conducted as an integral part of the Pan European Performance Satisfaction Initiative (EPSI Rating). This is the sixth annual study in the Baltic States. It is done in order to support the development of customer oriented and driven services throughout Europe. The data collection company Runway conducted it through telephone interviews. EPSI Baltic does all analysis using the same approach and model as in other countries that are part of the initiative.

Main results for final consumers (B2C)

The recent financial crisis has resulted in severe negative effects across the board on customer satisfaction with banks in Latvia and Lithuania, the morale of Estonian customers was affected on a less significant scale. Customers in all three Baltic states assess their satisfaction with banks performance at rather high levels, which range from 75 to 78 scores out of 100, that is higher than European average in banking sector (which is 72 scores)** . It should be noted, that in a long run all three countries demonstrate a positive tendency in satisfaction in banking. Meanwhile, consumer's behavior profiles differ from country to country.

Baltic countries demonstrate satisfaction changes in different ways:

  • Lithuania is still leading among other Baltic countries in satisfaction with 78.2 scores out of 100, that is far from Lithuania's historical maximum 2004 level (84.4);
  • Estonia, traditionally performing without too big ups and downs, shares the second place with Latvia (75.4) this year. Estonian customers practically did not react in terms of satisfaction to the financial turmoil that is rather unique situation not only for Baltic, but also for other European countries, observed by EPSI in 2009. Only Norwegians can be compared to Estonians in their quiet reaction towards dramatic changes in banking sector;
  • Latvia dropped significantly in satisfaction during the last year from 78.1 to 75.2 scores from 100.

** Improvement at 2 points is a recognized change. The satisfaction index is reported on the scale 0 - 100. The higher score corresponds to more satisfied customers. Averages usually fall in the region of 60 - 75 points. Any company receiving a score above 75 has a strong position among its customers, while those below 60 face risks of losing the customer base. The statistical precision is good for the overall results, and a difference of 1 unit or more for the country average is significant.

Besides external benchmarking, banks should follow up the situation and trends in their own EPSI /Loyalty. This monitoring gives useful additional background information for tactics and decision-making when it comes to company value assessment and regional marketing strategies. One of examples is given at the picture below. It shows positioning of main banks operating in the Baltic Region from the point of view of final customers.

It also reflects a level of competition in respective countries. Nordea example proves that one company performance can be perceived in different ways, depending on its branches location. Nordea matched its historical low level of 70.5 score in Latvia. It also has got poor satisfaction assessment score in Estonia, lagging far behind competitors. At the same time, Nordea has better position in Lithuania, being just slightly below industry average.
In the group "other banks" a number of brands are reported together as according to their market shares mainly.  EPSI dynamics for banks in Baltic countries during the last year are presented on the left. It is shown, that all banks dropped down significantly in their clients' satisfaction scale, with biggest losses for Nordea and Parex. SEB has the least total losses in satisfaction in Baltic countries.


Customer Satisfaction is a strong driver of loyalty towards your current bank. During the last years, the level of loyalty dropped on industry level in each of three Baltic countries with biggest negative change in Lithuania, as shown in graph on the right.

Lithuania is the most affected by the financial turmoil amongst the Baltic countries, when it comes to customer loyalty in banking sector. We may conclude, that majority of observed banks should concentrate on re-establishing of trustful relationships with their customers in Lithuania. In Latvia, only SEB and Nordea managed to gain some ground in terms of consumer loyalty, whileParex, suffers from the biggest loyalty drop with more than 14 points, this is the record for the entire industry for the last five years.

EPSI Rating — European Banking trends

The banking sector has been measured in the majority of Nordic and north European countries since year 1999 via annual studies conducted by EPSI Ranking. During a couple of years, the Norwegian consumers have given their banks the lowest satisfaction scores, and the Finnish consumers – the highest to their banks.

The first results for 2009 (with interviews in August - September) are now ready. In the diagram on the right, the private consumers in the respective country give the scores to their banks.

The recent financial turmoil has not had too dramatic effects on the overall customer satisfaction in B2C sector as it is also seen from the table below. However, the crisis has affected final consumers differently in different countries, and the satisfaction has flagged more in some countries (like Denmark, Baltic States, Russia) than in others.

In terms of loyalty, the picture is rather mixed, but the general trend is towards lower levels. Low ever, at the same time a few banks have achieved improved loyalty as they are seen as especially trustworthy during the times of turmoil.

During the last few years also the corporate banking markethas been studied in the Nordic and Baltic countries (except Iceland). The following scores are now obtained in that segment.

EPSI in scope

The regular measurement started in Sweden in 1989, and was extended to a number of other European countries in 1999, based on a EU Commission study. The basic results may also be compared with similar studies in USA and a number of countries in the Far East EPSI operates in around 20 European countries through national (sub-regional) entities, located in Czech Republic, Denmark, Estonia, Finland, Greece, Latvia, Lithuania, Norway, Russia, Sweden (also R&D office) and Ukraine. EPSI produces indexes for the majority of economic sectors in the national economics (focus is on sectors with high penetration by final consumers). At present at least 14 industries are covered in the various EPSI countries. In the nations with the highest coverage about 75 - 80 percent of all value added (measured by GDP) is covered. All main companies are studied in a covered industry (mostly those with at least 8 - 10 percent market share). EPSI Baltic has been dealing with 4 industries mainly: banking, general insurance, Telecom(mobile and broadband) and retailsupermarkets). It also is active with social survey (health care, police, education and public transport). The EPSI database system contains more than 70,000 indices from over 2 Million interviews.

*This is an abridged version of the Report 2009. The full report and more details about the Baltic results may be found on the EPSI Baltics web-site:

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"Happy families are all alike; every unhappy family is unhappy in its own way." —Lev Tolstoy

Indeed, the situation in the three Baltic countries today manifests patterns as intricate and unique as finger prints, each country has become an individual State in charge of its own destiny. However, as I mentioned in the article about Latvia's Economic Recovery, they make an interesting collective study precisely because they are now so diverse, yet were conceived with the same purpose and DNA ("Dawn of the Non-Soviet Age"). Of course, all three Baltic Sisters boast long, full and variegated histories prior to the Soviet era, but knowing people know that after half a century under the oppressive, one-size-fits-all system development was stunted and culture suppressed. Hence, after independence, atrophied limbs had to be revived and in some cases re-grown; the economic and judicial systems had to be torn down and rebuilt from the foundations up to meet European Union modern standards in less than two decades. Like it or not, these life-long neighbours will more often than not be graded together, as it makes much more sense to compare the situation in Latvia with that in Lithuania, which has about the same size, location, population, etc. than it would with, say, Brazil, Germany or Canada—countries with very different economic needs, histories and agendas.

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Do the banks care?

Several questions arose as I perused the EPSI report and I asked Mr. Gunnar Ljungdahl, CEO of EPSI Baltic to illuminate the most pressing issues for us:

  • How significant are the fluctuations cited in the EPSI report? Are the banks at all perturbed with this "B+" grade rating or will they be shooting for an "A" in the near future? After all, it could be a lot worse in the face of the global economic meltdown – in Latvia, for instance, (despite the serial credit defaults reported by the media) the EPSI rating (of private clients' satisfaction) difference between the high times of 2006 and today's abyss is just -0.1%; Estonians seem to be more satisfied with their banks today! Do the banks intend to just wait out the storm and expect things to bounce back to normal on their own or are they actively looking for ways to improve service and fall back into grace with clients?

The results are significant and the banks are certainly paying attention to the level of satisfaction shown by their customers. In my view the banks are very anxious to work it out with their clients and there is a clear link between satisfaction and client's loyalty.

  • What are the factors that affect clients' perception of the bank service quality most acutely? Ideally, how could banks restore confidence, incite loyalty and generally return to their winning ways?

This varies from bank to bank and each bank will have to go through the material to improve their perception.

  • Realistically, how agile are the banks, i.e. how quickly can policies be adjusted to meet the real-world needs of the consumer and does the fact that most banks operating in the Baltic countries are arms of larger, predominantly Nordic, corporations affect their priorities in terms of the Baltic client – both corporate and private? Is it not in the bank corporate offices' agenda to expend resources and effort on catering for more densely populated countries? Is it economically viable for the banks to fuss over the needs of the relatively small population of the Baltic countries (Denmark has about the same population as Latvia and Lithuania combined and it is 3 times smaller in terms of area. The summed population of Latvia, Estonia and Lithuania is dwarfed by the population of Belgium, although the little country in terms of landmass could fit into the Baltic States nearly six times.). How significant is the Baltic sector to the multi-national banks?

For the leading foreign banks active in the Baltic countries, those markets constitute part of the home market and the clients there will therefore be treated as clients in Sweden, Finland, Denmark or Norway.

  • What are consumers most unhappy with? Are they perhaps dissatisfied because in good times their needs are fewer, thus, fewer extension, loan, over-draft and special favour requests are put to the banks, hence - fewer refusals? For example, if the banks on average, in stable times grant 5 out of 10 loans and 2 out of 10 in times of crises, there would be a huge difference as requests for leniency and special treatment polarize in the opposite direction. Even if the 50% acceptance rate remained unchanged, the soaring demand for liquidity among consumers would still surely play a major role in consolidating the negative sentiment as more people would be turned down?

Interestingly enough, the borrowing clients are a clear minority of at least the Swedish banks' clients. That might be the reason for banks in the Baltic countries create a higher level of satisfaction with their clients than do the banks in Sweden.


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