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Financial industry fuels growth in Central and Eastern Europe.

Growth potential remains high, especially in retail banking.South-East-Europe and CIS are regional growth drivers. Raiffeisen showsstrongest growth and improves market position.

According to the annual CEE banking study published by Vienna-basedRaiffeisen ZentralbankÖsterreich AG (RZB) and Raiffeisen Centrobank AG,the banking market in Central and Eastern Europe (CEE) continues to growrapidly. After a 10.1 per cent increase in 2003, the combined bankingassets grew by 15 per cent to€ 658 billion (2003: € 572 billion) in 2004. The strongest growth was reported in Romania (+53.5 per cent), Ukraine (+30.2 per cent) and in Russia, the biggest banking market in the region (+28.5 per cent).

Personal lending has stronger growth potential than corporate lending

CEE remains to be highly attractive for banks. While economic growthremains high– for 2005, 4.8 per cent are projected, compared to only 1.5 per cent for the Euro zone – the growth potential for the banking industry is multiple. In the past two years, banks grew about three times as fast as the overall economy and this trend is likely to continue. Main driver it still the rapidly expanding corporate business, but the retail business takes a more and more significant role. South-Eastern-Europe (SEE) and the Commonwealth of Independent States (CIS) show disproportionate growth. For example, in 2004 lending to corporate customers grew by 15 per cent in Central Europe (CE) while soaring 32 per cent in SEE and 28 per cent in CIS. In the Euro zone growth was comparably low at just 5.4 per cent.

Lending to private customers shows even higher rates of expansion. Theoverall growth potential in this segment becomes obvious when comparedwith the Euro zone, where lending to private customers is at about 50per cent of GDP on average. In CE the overall volume is 12.4 per cent ofGDP, in SEE 11.9 per cent and in CIS only 3.5 per cent.“This growth potential reflects the late start of the retail banking business in the entire region”, as Herbert Stepic Deputy CEO of RZB and CEO of Raiffeisen International Bank-Holding AG (Raiffeisen International) emphasized."We have also started with serving corporate customers.Since 1999, we have systematically increased our efforts and regionalcoverage. Today we already serve more than 5.2 million customers in theregion", Stepic added.

New products in Retail banking

With a growing middle class and rising incomes new products areestablished in retail banking."We observe growing demand from retailclients in general. But demand is especially strong in mortgage loans,investment funds and credit cards. The relevance of these products risesquickly with rising wealth. In some countries assets under management ininvestment funds have nearly doubled last year", Martin Grüll, CFO ofRaiffeisen International, pointed out.

International banks continue to lead the way

In the development of the banking market in CEE international banks takea decisive role. Their market entry is not only a major stimulus forsubsequent direct investments of other companies; they also pave the wayfor know-how transfer and stiffer competition. International bankscontrol about 45 per cent of the total banking assets in the region.They were also a significant driver in the further development of thebanking system in CEE. In this way foreign banks contributesignificantly to higher stability, new products and service standards aswell as lower prices for customers.

Raiffeisen, Creditanstalt, Citigroup and ING were the first to move intoCEE, with KBC, UniCredit, Société Générale, Erste Bank und Intesa BCIfollowing through the acquisition of major formerly state-owned banks,quickly grasping market shares. Inversely, OTP, which initially was onlypresent in Hungary, has developed into an international player with agrowing CEE network.

Raiffeisen improves market position

With consolidated total assets of€ 28.9 billion, Raiffeisen has improved its market position from No. five in 2003 to fourth place in 2004 behind HVB Group with € 35.5 billion, Erste Bank with € 33.4 billion and Belgian KBC with total assets of € 31.9 billion. UniCredit with € 27.3 billion ranks fifth. While the top-5 banks have stayed the same as last year, their rankings have shifted: As of year-end 2003, KBC lead the table, followed by Erste Bank, UniCredit, HVB and Raiffeisen. By proportionate total assets (i.e. the effectively attributable investment in CEE), Raiffeisen ranks even third with € 28.6 billion behind Erste Bank (€ 31.7 billion) and KBC (€ 29.8 billion).

Austrian banks are strongly represented in the region. Among the 16largest banking groups there are four Austrian banks (Erste Bank,Raiffeisen,ÖVAG and Hypo-Alpe Adria) and Bank Austria-Creditanstalt isprimarily in charge for steering this business segment within HVB.

Raiffeisen with strongest growth momentum

International banks grow significantly faster than the overall market.Regarding total assets Raiffeisen International displays the strongestgrowth momentum with a compound annual growth rate of 33.4 per cent intotal assets over the past four years. This is more than double thegrowth rates of Erste Bank (15.2 per cent) and HVB Group (12.4 per cent).

As of year-end 2004, Erste Bank disposed of 1,313 banking outlets.Runner-up was UniCredit with 1,201 outlets, followed by HVB Group(1,073), OTP (930) and Raiffeisen (916).

Raiffeisen and HVB Group have the widest geographical reach beingpresent with subsidiary banks in 15 markets of the region. ING,Citigroup andÖVAG cover eight markets each. Raiffeisen and HVB Groupare the only banking groups among the region''s top-5 with a subsidiaryin the CIS.

"We have built the largest part of our network by organic growth andhave benefited from the advantage of the early mover", Stepic said,commenting on Raiffeisen''s position, which had opened its firstsubsidiary bank in Hungary in 1987 and has since then time and againproven its pioneer role.

Raiffeisen International is the steering unit for the subsidiaries ofRaiffeisen ZentralbankÖsterreich AG (RZB) in Central and Eastern Europe(CEE). Its shares are traded on the Vienna Stock Exchange. RZB owns 70per cent, the balance is free-float. Raiffeisen International operatesthe leading banking network in CEE with 15 Network Banks and 14 leasingcompanies in 16 markets. More than 5.2 million customers are served viaapproximately 950 business outlets.


Central Europe: Poland, Hungary, Czech Republic, Slovakia, Slovenia,Estonia, Latvia, Lithuania

South Eastern Europe: Romania, Bulgaria, Croatia, Serbia and Montenegro,Bosnia and Herzegovina, Albania, Moldova, Macedonia

CIS: Belarus, Russia, Ukraine

For further information please contact Michael Palzer (+43-1/71707-1504, or Lars D. Hofer (+43-1/71 707-1930,,,

International banks in CEE - Top Five Rankings

1HVB Group35.5
2Erste Bank33.4
4Raiffeisen International28.9
Total assets in€ billion

Annual growth rate*
1Raiffeisen International33.4%
2Erste Bank15.2%
3HVB Group12.4%
* of total assets 2001 - 2004

CEE-share of total assets
1Raiffeisen InternationalPure play
1OTPPure play
3Hypo Alpe-Adria38,2%
4Erste Bank36,5%

Market presence
1Raiffeisen International15
2HVB Group15
Only majority shares, excluding representative offices

1Erste Bank1.313
3HVB Group1.073
5Raiffeisen International916

As of year-end 2004, ownership structure as of 30 June 2005


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