Regional Awards for Excellence 2011: Central and Eastern Europe
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Regional Awards for Excellence 2011: Central and Eastern Europe

Awards for Excellence 2011
CEE Country Awards
All regions and countries


Best bank Raiffeisen Bank International
Best investment bank Deutsche Bank
Best debt house Deutsche Bank
Best risk management house Deutsche Bank
Best equity house Goldman Sachs
Best M&A house Morgan Stanley
Best project finance house Unicredit
Best flow house HSBC
Best cash management house Citi

Best bank

Few dispute the view that developing countries are the world’s growth markets, but performance varies from region to region. While Asia’s growth has recovered to pre-crisis levels, according to RBS, and Latin America’s is about half a percentage point off, emerging Europe is a laggard. Its growth is at least two percentage points behind its pre-2008 levels, says the UK bank.

The European Bank for Reconstruction and Development reckons that, although the region’s prospects have improved, worries are growing about the possible fallout from the eurozone’s sovereign debt problems, while inflationary pressures are also becoming a cause for concern. The multilateral says the region will see growth of 4.6% this year and 4.4% in 2012. But if the eurozone’s crisis disrupts financial markets more broadly, recovery in central and eastern Europe would stall.

Given this fragile economic background, it is not surprising that the region’s leading banks are less than cocksure. Many are still rebuilding capital reserves and adjusting their strategies because liquidity is not as abundant as before.

The good news is that non-performing loans are peaking in several countries, allowing banks to cut their provisioning levels. On the other hand, credit growth remains constrained, with domestic demand yet to return to pre-crisis levels.

Perhaps the bank that has best mirrored emerging Europe’s rollercoaster ride of the past three years is Raiffeisen. The Austrian lender, like its regional rivals, was struck hard by the financial crisis. At one time, rumours were circulating that the bank would have to pull out of some markets or even sell its central and eastern European business – stories that its management has always denied.

Instead, last year the bank reinforced its commitment to the region by merging Raiffeisen International (the CEE network) with the Austrian and corporate business of its parent, RZB. The most important aspect of the merger is that the new bank, Raiffeisen Bank International, has full access to the capital markets. As Raiffeisen International was a holding company, it did not have a banking licence, so it couldn’t raise debt. It could only do so via RZB, which did have a banking licence. During the crisis, therefore, Raiffeisen International was especially vulnerable when liquidity dried up.

Raiffeisen Zentralbank Austria (RZB) chairman Walter Rothensteiner (l) and RBI CEO Herbert Stepic. RBI is the best bank in the region for generating strong profits while restructuring

Raiffeisen Zentralbank Austria (RZB) chairman Walter Rothensteiner (l) and RBI CEO Herbert Stepic. RBI is the best bank in the region for generating strong profits while restructuring

Despite all the problems a merger entails, Raiffeisen Bank International (which was retroactively founded on January 1 2010, although it officially commenced business in October), has made an impressive start. It grew: it acquired a 70% stake in Polbank EFG in Poland, while Zuno Bank, the direct bank of RBI, launched its operations in Slovakia in December.

RBI’s financial figures have also been strong. Last year, consolidated profit rose 141.5% year on year to €1.087 billion. Net interest income increased by 9% to €3.578 billion, while net provisioning for impairment losses fell 46.5% to €1.194 billion.

The first quarter of 2011 has proven tougher, with net profit falling 19.1% to €270 million after a hit from taxes. However, profit before tax increased by 3% compared with the same period last year, with provisions for bad loans falling by more than a third. Overall, the bank beat market expectations.

RBI’s main rivals, such as UniCredit, Erste and Société Générale, are all enjoying a turnaround in business too, with the French bank in particular having a comparatively strong 2010. Its CEE business’s net profit grew 114.5% last year, with gross operating income up 118%.

The award for best regional bank, therefore, was a close call. But for its ability to generate strong profits growth while restructuring, together with the fact that more of its individual country banks have performed better, Raiffeisen Bank International takes the award. The bank still has vulnerabilities, not least a core tier 1 ratio of only 8.9%. It will need to raise capital either in the markets or through a strategic investor. At least now it should be in a better position to do so than before.

Best investment bank

The best investment bank award was also a tight call, with no one bank dominating across all products. Competition has never been greater. Last year’s winner, Credit Suisse, had an average year, lacking enough knockout deals to justify retaining the award. The Swiss firm doesn’t rank in the top five in either the debt or equity league tables, and while it does for M&A, it is well behind the top three in terms of volumes, according to Dealogic. That left three other banks in the running: Deutsche Bank, Goldman Sachs and Morgan Stanley.

Although some rivals still have doubts about Goldman’s commitment to risky markets when times are tough – a legacy from its in-out strategy in Russia in the past – the bank’s management stresses that this view is wrong. Emerging markets, they say, are one of the firm’s priorities. The appointment in January of one of Goldman’s most senior bankers, Mike Evans, as global head of growth markets, is the most visible sign of how seriously the bank is targeting these countries.

In central and eastern Europe, Goldman worked on some of the most important transactions, including VimpelCom’s $22 billion merger with Wind Telecom – the largest-ever Russian M&A transaction – and the $1 billion initial public offering, which was the first public listing of a social networking site.

In both the equity and M&A league tables, Goldman ranks second for the period under consideration. What stops Goldman winning the investment bank award is its debt capital markets business. While the firm is making progress, it is still a way behind the region’s heavyweights, such as Deutsche, Barclays Capital and JPMorgan. However, it has scooped some notable mandates in the past year, including a $500 million bond for Georgia, its first since the South Ossetia war with Russia in August 2008.

Alexander Izosimov, VimpelCom

Alexander Izosimov, VimpelCom: All three contenders for Euromoney’s best investment bank worked on the $22 billion merger with Wind, Russia’s biggest-ever M&A transaction

Morgan Stanley is also strong in equity and M&A, ranking fifth and first respectively in the period under consideration (April 1 2010 to March 31 2011). Like Goldman, it was involved in the VimpelCom/Wind and transactions (albeit as a bookrunner rather than global coordinator). Other impressive deals include Polish insurer PZU’s $2.7 billion IPO, the largest debut offering ever out of central Europe, and BBVA’s acquisition of a 24.9% stake in Turkey’s Garanti Bank for $4.2 billion. However, again like Goldman, Morgan Stanley’s debt business is the weak link, ranking outside the top 10 in the league tables.

That leaves Deutsche Bank. The German firm’s regional strength lies primarily in its markets business. In debt, it is the leading arranger of international bonds (excluding self-led deals) in the region over the 12 months. It also led bonds for a wider range of issuers than any other firm, from 12 different countries, including inaugural transactions for Albania and Montenegro.

Its deals include a $3.75 billion financing in March for Hungary, the sovereign’s first offering in the international capital markets in more than a year and the biggest-ever dollar bond out of the region.

The dual-tranche bond, split between $3 billion 10-year and $750 million 30-year notes, raised nearly all of the €4 billion Hungary needed for the year, attracted $14 billion of demand, priced 15 basis points inside guidance and rose on the break. The 30-year tranche was subsequently increased by another $500 million, pricing 60bp inside the original notes, just 10 days later.

Deutsche was also one of the bookrunners on Hungary’s €1 billion, seven-year bond in May, its first transaction in euros since July 2009.

That Hungary was able to raise such large amounts of money and shrug off market worries about Greece, Ireland and Portugal was impressive enough. But what was even more remarkable is that it is only three years since Hungary was forced to turn to the IMF, World Bank and EU for a standby facility worth $25 billion after it became one of the biggest casualties of the global financial crisis.

The other deal that stood out was Russia’s R40 billion ($1.4 billion), seven-year bond, which was the sovereign’s first international rouble bond. It was two times covered and was two years longer than its longest outstanding domestic rouble bond.

In the equities markets Deutsche also ranks first in the league tables. It was one of the leads on the PZU deal and on VTB’s $3.3 billion follow-on offering – the transaction that kickstarted Russia’s $60 billion privatization programme. The Russian government sold 10% of its 86% stake in VTB via an ordinary share listing on the ­Russian Trading System and Micex and a global depositary receipt listing on the London Stock Exchange. The transaction was launched in February amid testing market conditions: three other Russian deals – for Nord Gold, Chelpipe and Koks – were pulled at the time.

In M&A, Deutsche is less prominent, ranking only seventh. But it was an adviser on the VimpelCom/Wind transaction, as it was on Raiffeisen/Polbank EFG, and on Central European Media’s $400 million acquisition of the Bulgarian TV station bTV from News Corporation.

Throw in the German firm’s success in flow products and risk advisory and Deutsche Bank wins this year’s best investment bank award for central and eastern Europe.

Best debt house

Deutsche Bank also takes the best debt house award. Barclays Capital was one of the other main contenders. The UK bank was especially impressive in Russia, where it led transactions for the sovereign, Sberbank, Gazprombank, Vnesheconombank, MDM, VimpelCom, TMK, Evraz, Severstal and Russian Railways. That last transaction was in the sterling market, a great achievement for a borrower rated only triple-B.

JPMorgan too had an impressive portfolio of mandates, including landmark deals for Isbank and Garanti in Turkey, Georgian Railways, Albania, Ukraine, Croatia, Development Bank of Kazakhstan and Poland, among others.

But region-wide, Deutsche is more dominant. The main story in 2010/11, for example, has been supply out of the sovereign sector. Deutsche arranged half of all the deals to come out of the region, including the Hungarian and Russian transactions.

The German bank has also done well in the corporate and financial institutions group sectors. For example, Ukreximbank’s three-year bond in January was the first-ever international hyrvna deal by a Ukrainian bank and attracted five times as many orders as the sovereign’s deal done earlier in the year.

Deutsche too is the bank with the most regional momentum, comfortably ahead of rivals in the league tables for the 2011 part of the period under review. It is the firm that all other debt houses must seek to beat next year.

Best risk management house

Deutsche Bank also wins the best risk management house award. The biggest challenge facing eastern European organizations over the past 12 months was the high cost of capital, with many firms paying more than 15% for bond financing and over 6% for loans.

Deutsche helped clients overcome these problems by providing more than $5 billion of bespoke financings and funding cheapeners to corporates, banks and governments. It did this in three main ways: via repos, collateralized loans and swaps linked to trading strategies.

While many other banks were put off by potential sharp declines in the value of the underlying collateral, Deutsche developed margining mechanisms that met clients’ needs and distributed the risk to third parties, such as hedge funds, that wanted the exposure.

Best equity house

Deutsche was also a contender for the best equity house award but UniCredit’s and Goldman Sachs’ greater number of deals meant that the final decision lay between those two. UniCredit worked on many important deals, including a €1 billion secondary offering for electricity group PGE, which was the largest-ever accelerated bookbuild in Poland; betting company Fortuna’s €78 million IPO, the first out of the Czech Republic in two years; and real-estate investment trust Emlak Konut’s TL1.1 billion ($690 million) IPO, which resurrected the Turkish equity capital market. But UniCredit has one big hole in its equity business: Russia. Given that Russia and Poland have been the most important equity markets in emerging Europe over the past year, that’s a considerable weakness.

Goldman Sachs, on the other hand, won mandates in both Poland and Russia, as well as in Turkey. It was one of the lead managers on PZU’s record-breaking IPO; the Warsaw Stock Exchange’s $420 million IPO; the IPO; a $420 million IPO for Russian retailer O’Key; and a $211 million secondary offering for Turkish miner Koza Gold.

The standout of those deals was’s offering. The transaction, launched in November 2010, was the largest Russian IPO on the London Stock Exchange in three years. The order book was about 20 times oversubscribed and covered throughout the range from day one. The deal was priced at the top of its range and still jumped 40% after the first day. The company’s shareholders included, among others, Russian billionaire Alisher Usmanov, South African media group Naspers Ltd and Goldman itself. owns a 2.4% stake in Facebook.

The deal paved the way for the IPO of another Russian technology company, Yandex; the internet search engine raised $1.3 billion in May. Goldman was a lead manager on that transaction too. Goldman Sachs, then, takes the best equity house award.

Best M&A house

Goldman Sachs was also in the running for best M&A house with its involvement in some of the region’s most notable deals – VimpelCom/Wind, Uralkali’s merger with Silvinit to create one of the world’s biggest potash producers, and telecoms provider MTS’s merger with Comstar.

But one bank stands out to win the best M&A house award – Morgan Stanley. No other firm can match the breadth of its business or its ability to be involved in the most important transactions. These include: Allied Irish Banks’ disposal of its Polish subsidiary, Bank Zachodni, to Santander; BBVA’s investment in Garanti Bank; VimpelCom/Wind; PepsiCo’s acquisition of Russian drinks company Wimm-Bill-Dann; and the restructuring of Hungarian chemicals company BorsodChem, over which Chinese company Wanhua subsequently gained control.

Each of these deals was transformational. The AIB sale, for example, re-started large-scale banking-sector M&A in the region after the financial crisis. Moreover, as AIB’s adviser, Morgan Stanley helped achieve a price for Zachodni that represented a 16% premium.

The BBVA/Garanti transaction is the largest Turkish non-privatization M&A ever, while at $22 billion VimpelCom/Wind was the biggest Russian M&A deal ever. PepsiCo’s acquisition of a 66% stake in Wimm-Bill-Dann makes the US company the largest food and beverage business in Russia.

The BorsodChem restructuring was arguably the most interesting transaction of all. After a breach of its financial covenants in the first quarter of 2009, the company entered into debt restructuring negotiations with its lenders. Shortly after, Chinese company Wanhua bought a majority of BorsodChem’s mezzanine loans with the aim of gaining ownership of the Hungarian chemicals producer.

The acquisition was far from straightforward, with Wanhua having to overcome resistance from UK buyout fund Permira, which had acquired BorsodChem in 2006. The Chinese company had to buy the Hungarian firm in piecemeal fashion before it could take full control.

Without Wanhua’s money, BorsodChem’s future looked bleak. Now, the company’s debts are sustainable and it is seeking to grow following a €140 million investment for a new chemicals plant. Wanhua plans to make BorsodChem responsible for its operations in Europe, the Middle East and Africa.

Best project finance house

In project finance, the award was a contest between UniCredit and the French banks BNP Paribas and Société Générale. While BNPP and SG had a number of successes, UniCredit takes the award for the regional breadth of its projects. The French banks were mostly concentrated on Russia, although that is the region’s most important market.

UniCredit financed and advised on key projects in other countries such as Turkey and Ukraine, as well as Russia, and ranked first in the regional league tables for the period under review, according to Dealogic.

The Italian bank was mandated lead arranger on a €1.2 billion financing of Pulkovo airport in St Petersburg. This is a benchmark transaction for the Russian infrastructure market, the country’s first international infrastructure concession.

UniCredit was also a financial adviser to both phases of the Nord Stream pipeline project (the first closed in early 2010, the second this March), which will facilitate energy supply between eastern and western Europe. The bank advised in connection with the German government’s united loan guarantee programme.

The Italian bank was also a key financier of Sedas, the first electri­city distribution privatization project in Turkey, with long-term financing through the international market. The deal involved multilateral agencies and international banks, the first time such an approach has been adopted in the Turkish electricity sector.

In Ukraine, UniCredit was a mandated lead arranger and bookrunner on a $260 million pre-export facility for Kernel, an agri-business.

Best flow house

The best flow house award was a close call between Deutsche Bank and HSBC. As ever, Deutsche had a strong case, making markets in a range of products against a volatile background. But this year the award goes to HSBC, the bank that had the most momentum.

For example, although Deutsche ranks first in Euromoney’s FX survey 2011 for eastern European currencies, marginally ahead of HSBC, it is the latter that made the greatest strides. It rose to second place from seventh the previous year – an impressive achievement. It also ranked first for emerging-market options and emerging-market trading in both spot and forward.

In central and eastern Europe, HSBC’s local businesses are predominantly focused on flow rates and FX; around 90% of the onshore revenue and 50% of the offshore revenue is driven by these two asset classes. Marrying local service with regional allows the bank to stand out not only in these two asset classes but in others too, such as credit, equities and precious metals.

HSBC’s deals executed last year include the first seven-year FX forward trade in Russia, a flexible interest-rate swap for a project finance deal done in Turkey and the largest FX forward traded in Armenia.

Best cash management house

The best cash management award goes to Citi. The lender is one of the biggest US dollar-clearing and continuous-linked-settlement banks in the region, providing clients with cash management, trade finance and trade services.

Last year, Citi’s cash-management business’s revenue grew 8%, reaching $561 million, and net income, which hit $241 million, was up 3%. Whether it is in global treasury payments, corporate cards, bulk payments or multi-bank direct debits, Citi provided innovative solutions to meet clients’ needs.