Best in Central and Eastern Europe

Raiffeisen Centrobank

Raiffeisen Centrobank (RCB) has a very long track record in Central and Eastern Europe (CEE), and thanks to its excellent name recognition it has been able to capitalise on the aftermath of the financial crisis as private banking clients take a ‘safety first' stance with their money.

Its local presence also puts the bank in a strong position to generate payouts based on domestic stocks in countries such as Poland, Czech Republic and Hungary, where investors prefer underlying names that they know well and have a view on.

CEE has not yet developed into a mass retail market, so most RCB products are sold via private banks to high-net-worth individuals. However, the bank's extensive branch network across the region helps give RCB visibility and adds to the strength of the brand name.

The Austrian parent company, Raiffeisen Zentralbank (RZB), went through a corporate reorganisation in October and transferred all of its commercial banking activities and most of its liabilities into the newly named Raiffeisen Bank International (RBI), the stock-quoted holding company for the group's international activities in CEE and the Commonwealth of Independent States. However, underneath the holding company, the Raiffeisen Centrobank name will remain the same, giving continuity to the brand.

Since 2006, RCB has carried out pioneering work in terms of listing certificates in CEE, and was one of the first to market with listings on the Polish, Czech and Hungarian stock exchanges. This year it added Romania to the programme. It now has 66 structured products listed on the Warsaw Stock Exchange, 32 on the Prague Stock Exchange, eight on the Budapest Stock Exchange and nine on the Bucharest Stock Exchange.

In an era when investors are very concerned about secondary market liquidity, RCB assumes the function of market maker and guarantees continuous bid offer spreads on its products.

"We have seen good volume growth in 2010 once again, particularly on yield enhancement products such as bonus certificates," says Heike Arbter, deputy head of department, equities and derivatives at RCB in Vienna. "At the same time, there are still private banking clients looking for risk, and we have seen good turnover on delta one products with oil and gold underlyings."

Bonus certificates, which allow investors to generate returns in almost all market situations, have been especially popular. RCB offers a comprehensive bonus certificate range of about 150 products on selected underlyings - mainly indexes - shares or commodities.

"One of the results of the global financial crisis is that investors feel more confident buying products based on local stocks they know well," says Arbter.

As a result, local stock underlyings are most favoured in each market, particularly since the products are denominated in local currencies such as the zloty or Czech crown, which is attractive for investors who wish to avoid currency risk.

For those wishing to put on foreign exposure, however, there is also a Eurostoxx Bonus & Safety Certificate. Investors obtain a 41% bonus at the end of the term as long as the Eurostoxx 50 does not drop by 65% during the observation period, which runs to September 2015.

RCB has also had good investor take-up on Bonus Certificates based on single stocks in the CEE region. Back in February, it listed a one-year product on the Prague Stock Exchange designed to generate a 15% yield based on the performance of Czech electricity utility CEZ.

As long as CEZ shares do not fall by 20% during the observation period, investors gets their 15%. If, however, the stock price does dip more than 20% then the bonus certificates will be treated like CEZ shares. These certificates are aimed at investors who wish to generate high yields in moderately rising and sidewards moving markets, and those who seek to be protected against potential losses.

For more sophisticated investors, a series of Short Commodity Trackers allow them to benefit from price fluctuations on silver, gold, corn, oil and natural gas. Short Trackers do not have a knock-out barrier, so rising prices will not result in the termination of the certificate prior to the maturity date. RCB Short Commodity Trackers are open ended and listed on the Bucharest, Prague and Warsaw stock exchanges.

In order to develop the market for structured products across the region, RCB has conducted a series of roadshows in order to teach investors about the risks and rewards of products, with presentations by product specialists at RCB. All the marketing materials for the bank's structured products are produced in the relevant local languages.

"It has mostly been guaranteed certificates and safer products that have been sold this year," says a distributor in Slovakia. "And investors are very concerned about the name of the provider of the product that they are buying." RBI, the RCB parent company, has a Single A rating.