Raiffeisen Centrobank (RCB) has been a pilot partner for two local exchanges in Central and Eastern Europe (CEE), listing structured products in Prague as well as Warsaw, and is now working on a listing on the Budapest stock exchange, says Heike Arbter, head of structured products and a deputy director at RCB, a 100% subsidiary of Raiffeisen Zentralbank (RZB). The initiatives tally with a target market for the bank that incorporates the Czech Republic, Poland, Hungary, Slovenia, Slovakia, Russia and Croatia. RZB was the first to list products on the Prague and Warsaw exchanges, says Arbter.
Claiming a place as the largest foreign bank in these countries, Arbter emphasises the role the bank has played in the creation of marketing materials and also in providing educational assistance for all concerned.
As well as offering several Eastern European indexes, shares and structured products, Arbter says its products range from high risk - such as leveraged certificates - to index trackers on local indexes as well as those developed on the Austrian exchange. The CECE benchmark index for the region was developed on the Austrian exchange in early 1996, and RZB is a member of the committee that governs its operations.
"Volumes for us in CEE are in the triple digits of euros," says Arbter, who notes that the bank has 10 years' experience of doing structured products, and started its Czech business in 2006 and Warsaw in September 2007. "We started with private banking, strongly focused on deposit guarantee products." Developments are such that the bank offers index trackers and leveraged products, especially short products in Prague, "where you can now short the market for the first time," says Arbter.
RCB's certificates have been tradable on the Prague Stock Exchange since October 2006, when the bank listed two index certificates - one on the CECExt, the comprehensive benchmark for Eastern Europe, and the other on the Czech country index CTX. Both products are quoted in Czech crowns and were issued by RCB, with Raiffeisenbank Prague taking the role of market maker.
RCB announced the listing of its structured products on the Warsaw Stock Exchange (WSE) on September 13, 2007. The bank listed eight index certificates traded in Polish zloty offering investors the chance to invest in international markets on the local exchange. Again, RCB assumes the role of market maker. In 2005, RCB was the first Austrian investment bank to be admitted into the ranks of foreign members of the WSE.
"These markets are at a starting point, which is why we embarked on a huge roadshow in Warsaw at the end of October," says Arbter. Competitors offer mainly capital-guaranteed products, especially into funds rather than certificates - and especially in Hungary. And Arbter says these competitors do not offer the permanent market making on the Warsaw and Prague exchanges that RZB does. Otherwise, typically, the local banks distribute, and the international banks do the hedging.
"We see ourselves as pioneers in the CEE market," says Arbter. RZB was the first to issue certificates on Eastern European indexes - available after 2000, and was followed only in 2006 by Erste Bank.
Building its business in the region has involved acquisitions, and the bank is still hungry for more. The next frontier is Russia, a country in which RZB already claims a stake in the structured products business. "We service private banking only with structured products," says Arbter. The bank's business in Russia means that it can offer brokerage for local shares and GDRs through RZB Moscow.
In the Czech Republic, the bank offers a lot of capital-guaranteed product for private banking. In Slovakia, again, capital guarantees are the order of the day, with a preference for international themes and indexes, such as Bric and dividend strategies based on Eurostoxx. In Poland, the market has been taking a lot of specific corporate guarantee products based on share baskets that are research based, says Arbter. Russian investors have favoured index products, while in Slovenia index trackers on the local exchange are popular, as are capital guarantees based on the CECE index. Slovenia also offers baskets of shares chosen by clients.
For products, RZB is particularly proud of the East Basket Next Generation, which caters for Croatia and Serbia and succeeds because not all banks are able to trade local shares. Further catering to the desire for exposure to emerging markets, it also has the East Basket Ukraine Kazakhstan, the first basket to use local shares from these two countries. "The products were sold within a couple of days, each offering up to EUR100 million," says Arbter. The certificates are open-ended and contain the most liquid shares. "They are market access products, allowing retail to invest in Serbia and Ukraine," says Arbter. "They are not complicated."
The week on Risk.net, December 9–15 2017Receive this by email