Our CEO Mark Watson spoke to The Sunday Times about the bank's beginnings, rapid evolution and what lies ahead.
Mediterranean Bank has been operating under its present ownership since 2009. How would you describe the Bank’s experience?
Overall we have enjoyed a very positive experience. We began by launching our signature long term, high interest savings accounts which happened to be the right product at the right time. Our next strategic move was acquiring a controlling interest in Charts Investment Management Service which had a strong reputation for raising bond financing, which we thought would be helpful in raising financing for the bank and developing our customer base.
We spotted a niche market for savings products running into wealth management and we have built our business around that.
When we bought Mediterranean Bank we realised that Malta provided a well-educated English speaking workforce with a good work ethic. Together with a good legal framework this gave us a strong operating base at a competitive price point from which we could build an attractive business.
The Bank specialises in savings and investment products. Who is your typical client and do you compete with independent stockbrokers and the large domestic banks?
Because of our strategy and the products we offer, we attract the mass affluent; people with savings of around €20,000 + up to €1 million (internationally). Our customer base is generally people over 50 years and considering their financial situation as they approach retirement. Our customers cover a broad swathe of the community from doctors and dentists to the self-employed businessman and beyond.
Acquiring Charts, enabled us to broaden our customer base and attract both corporate customers seeking to raise money and wealthier individuals who invested through Charts. We realised that by developing an online execution platform, offering the capability to trade stocks, bonds, funds and ETFs, we could offer our savings customers a new service, enhance the services offered to Charts’ customers and build stronger, long term relationships with all customers.
Early on, we understood that the consumer here is generally well-served by the local banks but that we would be able to compete in niche sectors where we perceived an opportunity. In order to build a broader long-term business we needed to export our products and we realised that the eWealth platform could be the core driver of an international customer base.
Where did you expand to and how did you select the jurisdiction?
We launched MeDirect as an online bank in Belgium in 2013, initially as a branch of the Maltese bank but subsequently as a Belgian bank with its own capital, board and governance underneath the umbrella of the MeDirect group. Belgium was ideal because although it’s a relatively small country with just 10 million people, it has the largest financial asset per household in Europe, a deep deposit market and, unlike Malta, people were already accustomed to online banking, so all those factors combined to make Belgium a very attractive market place for us.
What prompted you to adopt a new name for the Belgian operation?
We needed a new brand for Belgium because, at that time, the Mediterranean Bank brand wouldn’t have been well-received in northern Europe due to the financial crisis in southern Europe. MeDirect represents our business perfectly. We give the individual (Me) the tools at their fingertips to look after their own investments and savings (Direct). Also, the first three letters, Med, are a play on the parent name.
We developed the online execution platform into a longer term investment platform to supplement people’s retirement situations and the brand rapidly gained traction in Belgium and is recognised as a market innovator.
In 2014 Mediterranean Bank bought Volksbank Malta. How has this acquisition contributed to MedBank’s performance?
Seeking diversification, we had entered the syndicated loan business and began lending internationally and had developed our own corporate credit expertise. Simultaneously, our Maltese operation was growing substantially with our balance sheet putting us on par with APS and Lombard Bank and we were looking to increase our presence in the local market. Purchasing Volksbank enabled us to improve our local lending portfolio and it’s been an attractive investment which has supplemented our international lending business.
Mediterranean Bank is now Malta’s third largest bank. What has this meant for you?
Now that we are under the direct supervision of the European Central Bank, we’re held to the highest standards within European, or even global, banking regulations which is quite unusual for a bank of this size. However, although meeting all the regulatory requirements has been challenging, we’ve met those challenges head on and have used this regulatory environment to progress our business.
Over the last few months we’ve been involved in raising new equity capital for the bank from the international community and we will shortly be able to announce a successful outcome. This will be a strong vote of confidence in the progress that the bank has made over these last years, given the interest we have found from a very diverse set of investors.
Can you provide some figures such as your annual turnover, profit and assets?
Between Malta and Belgium we currently have approximately 50,000 retail customers and a balance sheet of around €2.5 billion. In terms of wealth management products, we’re gathering assets at a rate of around €1 million daily and we will soon have north of a billion euros in assets under custody.
What is your strategy going forward?
At the moment we’re looking at broadening our asset base abroad to diversify both our risk and our income. It’s not the easiest thing to do given that we’re an internet led bank without an in-country presence but we will enter new asset classes and new jurisdictions in thoughtful and well planned ways building on our track record of both organic and inorganic growth.
Whilst it is necessary to have a branch network locally, we want to bring the benefits of our direct offering more to the fore in Malta because it’s more efficient for everybody; for ourselves but also more importantly for our customers. Delivering our services more efficiently enables us to keep our costs down and pass those benefits on to our customers, either in terms of higher interest rates or lower commission on products we offer.We are very pleased with the business that we have built here and the deep foundations we have put into the local community with over 250 local employees. With more hard work and determination, I’m sure we will continue to progress and innovate, for the benefit of all our stakeholders.