Raiffeisen Bank in Hungary celebrates its 20-Year Anniversary

Sixth-largest bank in Hungary with 430,000 customers. First chapter of the Raiffeisen success story in Central and Eastern Europe. Ten banks set up in the region, another ten acquisitions. Thanks to above-average growth, 20,000 jobs have been created in the region. Raiffeisen very well-positioned on growth markets.

Raiffeisen Bank Zrt. is celebrating its twentieth anniversary today with a major event in Budapest. Unicbank, as it was called then, of which Raiffeisen Zentralbank österreich AG (RZB) was a co-founder, commenced business activities at the beginning of 1987.The foundation of the bank marked the beginning of Raiffeisen's successful expansion in Central and Eastern Europe (CEE). Some 10,000 visitors are expected to attend today's celebrations at the Budapest Sports Arena. The show program will feature, among others, the group Earth, Wind & Fire.

"The Raiffeisen Bank in Hungary is the nucleus of our network in CEE. At that time, we were the pioneers who moved into Hungary long before the change of system in Eastern Europe became noticeable. In spite of our long experience in doing business in the region, founding the bank was like jumping into cold water; yet, from the first year on, we earned money," said Herbert Stepic, CEO of Raiffeisen International Bank-Holding AG.

Success story in Hungary

At the beginning of 1987, the Hungarian government converted the local banking system from a mono-bank system (with the National Bank acting both as a central bank and a commercial bank) into a multi-bank system. This made it possible to set up private banks. In the course of preparing this transition, in 1986 the Hungarian National Bank invited RZB, together with Deutsche Genossenschaftsbank and the International Finance Corporation (IFC), a World Bank subsidiary, and 6 other co-founders, to establish a subsidiary bank.

During the early years, Unicbank focused entirely on doing business with medium-sized and large Hungarian corporate customers, as well as with subsidiaries of international corporations. The bank developed very rapidly, and the first branch office outside of Budapest was opened in Szeged as early as 1992. In 1994, Unicbank began to provide services also to public administrations and municipal corporations. In 1995, when the bank launched electronic payments transactions in Hungary, it already had more than 300 staff members and seven branch offices. The first Raiffeisen cash-dispensing card was issued in Hungary in 1996. In the same year, the bank started its Private Banking segment. As the Raiffeisen banking group had acquired the majority in the bank in the meantime, it was re-branded as Raiffeisen Bank in 1999. Parallel to the re-branding, business activities with private customers and small and medium-sized enterprises (Retail Banking) were expanded. Beginning in that year, these operations were rolled out into the entire region. In the following year the staff, which had grown to comprise 900 employees, moved into the new head office in Akademia Street, where the Raiffeisen Art Gallery was also accommodated in 2000. The bank recorded a milestone event in 2003, when the 100,000th bank card was issued to a customer.

Raiffeisen Bank continues to be the largest bank in Raiffeisen International's network. At the end of September 2006, the bank had a balance-sheet total of 5.75 billion euros ranking sixth on the Hungarian banking market. More than 2,500 staff members provide services to about 430,000 customers in 112 business outlets. In the meantime, the bank has issued more than 250,000 bank cards to customers.

Ten bank foundations and ten bank acquisitions in CEE

When the political system changed throughout the region in 1989/90, RZB embarked on its further expansion covering the entire region of Central Europe. It subsequently pursued a strategy of entering the markets throughout the CEE area. "We accompanied the development from a mono-bank system to the modern market systems that have become established today, and in many cases we actually added to the momentum," said Stepic.

In 1991, Raiffeisen Bank Polska and Tatra banka in Slovakia were founded. By 1998, further banks had been set up in the Czech Republic, Bulgaria, Croatia, Russia and Romania. The tenth bank - and the last one to date - was established in Serbia in 2001. "In many countries we were the first foreign bank on the market. This helped us tremendously in terms of brand perception and when recruiting competent staff. Today, Raiffeisen is a leading bank brand name in CEE", added Stepic.

As of the year 2000, when the region gradually came to play a role in the strategic plans of other banks, selected acquisitions were added to the banks established by Raiffeisen. The first acquisition was Market banka in Bosnia and Herzegovina in July 2000. Banca Agricola in Romania, Hravtska Postanska Banka in Bosnia and Herzegovina, Krekova banka in Slovenia, American Bank of Kosovo, Priorbank in Belarus, as well as Banka e Kursimeve e Shqipërisë in Albania followed in the years 2001 through 2004.

The biggest acquisition by far to date came in 2005, when 93.5 per cent of Bank Aval, the largest retail bank in the Ukraine, was purchased at a price of 850 million euros. With the take-over of Impexbank at the beginning of last year, Raiffeisen International became the largest western bank in Russia and the CIS. Moreover, the group's market position in the Czech Republic was clearly strengthened with the acquisition of eBanka.

Altogether, Raiffeisen International acquired ten banks within less than six years, which were all successfully integrated into the group. In this connection, a net amount of about 2 billion euros was invested (not considering follow-up investments).

Approximately 40 per cent annual growth creates more than 20,000 jobs

Today, Raiffeisen International, which has a balance-sheet total of more than 50 billion euros, is one of the biggest international banking groups in the region and among the fastest-growing in the world. "We can look back on a gigantic development. In the last ten years, we grew by about 40 per cent per year in terms of balance-sheet total, operating profit and profit before taxes. This is the result of our pioneering role in one of the fastest-growing economic areas in the world," Stepic noted with satisfaction.

At present, Raiffeisen International has more than 52,000 staff members. "We have created more than 20,000 jobs on balance since we began our expansion in Eastern Europe," said Stepic.

Well-positioned for the future

Today, Raiffeisen International is represented on 16 markets of the region with subsidiary banks and leasing companies. On eight markets, the respective Network Bank is among the three largest in the country. Representative offices in Lithuania and Moldova supplement the group's presence in the region. All subsidiary banks operate as universal banks on the local markets. More than 11.7 million customers receive banking services in more than 2,775 business outlets. The network of branch offices reaches from Prague to Vladivostok on the Pacific Ocean and spans 11 time zones. Raiffeisen International thus has the biggest geographical coverage among all international banks in CEE. "Our large distribution network, encompassing the entire area, is of great importance especially for retail banking which is a promising sector continuously gaining in importance. This is the key to our success in the future," said Stepic.

After China and India, CEE is the economic region with the most vigorous growth worldwide. The catch-up demand, which continues to be considerable, relates to the financial services sector in the first place. Although immense growth dynamics became noticeable in recent years, current research results show that a major growth potential continues to prevail for the full range of banking products. Raiffeisen Research analysts therefore predict an average annual growth rate of the banking markets between 14 and 22 per cent until the year 2014. "It was and is our goal to grow faster than the markets. The further we move to the east, the less developed banking markets are. To this very day, the large majority of the people living in the Ukraine or Russia do not have any bank connection at all. These are our future markets, on which we are well positioned today, like no other western bank," explained Stepic.

Outlook

Raiffeisen International's management expects annual growth of the balance-sheet total by at least 20 per cent annually in the period to 2008. The largest increases are anticipated in the CIS, partly because of the acquisitions made there.

The company forecasts an ROE before tax of more than 25 per cent for the year 2009. The cost/income ratio is expected to be below 58 per cent. The management has set the target for the risk/earnings ratio at about 15 per cent.

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