Central & eastern Europe


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The Austrian powerhouses continue to make considerable investments in the region. Salomon Smith Barney is the most successful M&A house. Simon Brady, David Shirreff

Best domestic bank: Bulbank

Best foreign bank: Raiffeisenbank Bulgaria

Best domestic securities house: Bulbank

Best foreign securities house: Raiffeisenbank Bulgaria

Best foreign M&A house: CA IB Investmentbank

Bulbank is Bulgaria's largest commercial bank, with a 27% share of the assets of the banking system. It also accounts for around 50% of banking profits. During 1999 the bank continued to expand, achieving a return on assets of 3.2% compared with 2.3% in 1998. Its return on equity improved to 15.6% from 12.4%.

Its BIS capital adequacy ratio is a high 43% but that is mostly because its government-risk assets are weighted at zero and its deposits with international banks at 20%. During the year Bulbank grew its loan portfolio by 76% but this represented an increase of only 10% in its total assets.

The volatility of the bank's portfolio became evident in 1998 when the price of the Zunk bonds fell dramatically during the Russian crisis. In addition, its foreign exchange income fell after the introduction of a currency board, and the sharp fall in inflation and the relative macroeconomic stability resulted in tight interest margins.

Bulbank was established in 1964 as the Bulgarian Bank for Foreign Trade. Under what was called the "Bulbank scheme", set up to rehabilitate Bulgarian banks after the massive withdrawal of deposits in 1996-97, Bulbank received $199 million in Zunk bonds from the Bulgarian National Bank.

Bulbank is still awaiting privatization.

Advising the government on the sale is a consortium of CA IB, CSFB and Arthur Andersen.

The project is financed by the European Union and Bulbank's successful privatization is a condition for continued financial support for Bulgaria from the EU.

According to central bank statistics Raiffeisenbank Bulgaria was among the three fastest-growing banks on the local market in terms of assets, gross loans and primary deposits in the nine months to September 1999, and first among its direct competitors - the foreign banks. It had 33% asset growth, 78% growth in its gross loan portfolio and a 58% growth in deposits. It has a staff of 204 spread over five locations.

RBB has a market share of just over 15% of the primary market for treasury bills and bonds, and a 30% share in the secondary market. In share brokerage it has a 22% share of a very small market that consists mainly of block trades, and a 17% share of the local foreign exchange market.

RBB claims proudly that its number of customer relationships rose by 59% last year, its "live corporate relationships" by 35%, and electronic banking users by 63%.

RBB is a market-maker in Zunk bonds, "although our portfolio is much smaller than it was a year ago, because of falling interest rates as they converge on the euro", says Vassil Kotzev, RBB's chief dealer.

RBB's closest rivals are Société Générale - which bought local bank Express Bank now called SG Expressbank last September - and ING Barings. Citibank is due to open a subsidiary in July. Regent Capital also recently bought Hebros Bank, the third biggest in Bulgaria.

Competition is heating up.

CA IB Investmentbank has been closely involved as a government adviser on Bulgarian privatization. In the past year it advised the government on a Five-year investment in Bulgaria by a consortium led by Austrian energy company öMV, and with Arthur Andersen advised on the $750 million sale of Neftochim to Lukoil of Russia. It is also adviser on two pending deals, the privatization of Bulbank, owned by the Bank Consolidation Company, and the sale of Bulgartabak.

David Shirreff

Best domestic bank: Zagrebacka Banka

Best foreign bank: Raiffeisenbank Austria

Best foreign securities house: Croatian CA IB Securities

Zagrebacka banka, the leading bank in Croatia, would be a fitting rival to OTP in Hungary, were it not dragged down by its country's own risk rating.

Zagrebacka is as much a holding company as a commercial bank and has been refocusing its business. Last July it sold a 51% stake in its insurance subsidiary, Adriatic Osiguranje, to Allianz in Germany. And the sale of Pliva shares gave it a one-off gain of HRK101 million ($12.6 million). The bank's income increased by 19.5% to HRK1.6 billion, reflecting strong growth in net interest income of 14.7% and net fee and commission income of 9.3%. There was a lower contribution from the tourism subsidiaries, which were affected by the Kosovo intervention. The bank had a non-performing loan rate of 13%.

Last year saw the tail end of Croatia's banking crisis, in which Zagrebacka gained from a flight to quality.

Zagrebacka banka dd, was founded in 1914 as the City Savings Bank. The bank was originally set up to help develop the city of Zagreb, providing Financial assistance in developing parts of the city, schools, nurseries, hospitals and cultural institutions.

Zagrebacka banka also assisted in development projects outside Zagreb, including bringing electrical power systems to the city of Bjelovar in 1938. In 1962, the name City Savings Bank was changed as the bank was reorganized into what was then the Zagreb Communal Bank (later, Kreditna Banka-Zagreb).

In 1977, the bank became Zagrebacka banka.

Zagrebacka banka's profit for 1999 before tax increased by 37.2% to HRK373 million. Its profit after taxation increased by 64.4% to HRK292 million.

Raiffeisenbank Austria has been in Zagreb since 1994. Last year there was a 50% growth in its assets to HRK3 billion including a growth of 67% in retail savings deposits. The bank produced an 18% return on equity. Some 64% of its retail credits are car loans. In deference to the automobile, it also opened the first Croatian drive-in banking facility.

It has around a 3% share of the assets of the Croatian banking system, being among the six biggest banks. And it is on the prowl for an acquisition. Having had its name linked (wrongly) with Istarska banka it said in March that it would tender for Varazdinska banka. It plans to open at least four new branches this year.

In the meantime it became an equity investor in the Viktor Lenac shipyard in Rijeka, along with the IFC, DEG of Germany and a Dutch shipbuilder.

Croatian CA IB Securities is mainly involved in corporate finance advisory work, bringing foreign strategic and financial investors into privatization deals. Its biggest deal to date was the sale of a 35% stake in Croatia Telecom to Deutsche Telekom. CA IB advised the government on this $850 million sale. CA IB also advised Mobilkom AG, the mobile telephone operator of Telekom Austria on acquiring the First private GSM licence in Croatia. CA IB is also involved in the Croatian capital market.

It arranged a commercial paper programme for Pliva, the leading pharmaceutical company in central Europe. On the Zagreb stock exchange CA IB has a market share of around 15%.


Czech Republic
Best domestic bank: Not awarded

Best foreign bank: CSOB

Best domestic securities house: Wood&Co

Best foreign securities house: CA IB Securities

Best foreign M&A house: CSFB

The status of CSOB (Ceskoslovenska Obchodni Banka) changed during the year when the Czech government sold its 82.34% stake to KBC of Belgium. From being one of the ailing family of big Czech banks it now has strong parental support that allows it cheaper access to funds and makes it more acceptable as a counterparty for many cross-border transactions. It also provides a "positive solution to the bank's former difficult relations with Slovak government institutions", chairman Pavel Kavánek told shareholders at this year's AGM.

CSOB finds it can now operate more freely in Slovakia as well as the Czech Republic. Other significant shareholders in CSOB include the EBRD, with 7.47% and the IFC with 4.39%.

KBC already holds 32% of Kereskedelmi es Hitelbank in Hungary, 25% of Kredyt Bank PBI in Poland and 82% of CSOB Slovakia. In June CSOB agreed to take over IPB, the country's third biggest bank, after its collapse.

KBC is well on the way to making CSOB the hub of its central and eastern European operations, integrating it with its own systems. That involves an important strategic change from universal banking to specialism in four areas: small and medium-size enterprises, bancassurance, micro business, and retail.

CSOB is the fourth-biggest Czech bank, with a market share of around 9% of deposits and 10% of loans. It probably has the best asset quality of the big, privatized banks in the Czech Republic, but its loan portfolio is not strong and it still has around 17% non-performing loans. However, last year's results show that CSOB's earnings are shifting from interest income to commission and fee business and it has been able to keep its costs stable.

Interbank lending and securities holdings increased while customer-lending fell. It also switched its sources of funding to the securities markets.

Erste Bank of Austria's purchase of Ceska Sporitelna earlier this year turns another big Czech bank into potentially a formidable rival to CSOB. Watch this space.

Wood&Co reckons that it has the biggest market share in Czech equities on the Prague Stock Exchange at around 17% to 18%. Behind it are IPB (although the bank collapsed on June 23), Ceska Sporitelna, Komercni Banka, CA IB, ING Barings and CSFB. On the fixed-income side Conseq is reckoned to have the biggest volume.

ABN Amro is another active player and so is Commerzbank, although it's not a member of the exchange. But volumes have fallen.

"We're no longer seeing the hedge funds," says one market player. He believes that about seven to 10 big fund managers now drive the market. Most of that business goes through international investment banks such as Flemings (now owned by Chase) and ING Barings.

Market player CSFB is also the most active M&A house in the Czech Republic. It advised Ceske Radiokomunicace on the sale of a majority shareholding in Radiomobile (GSM) to Deutsche Telekom. The price tag was $750 million, the biggest in the republic in the past year. This transaction "has a key bearing on the eventual sale of 51% of Ceske Radiokomunicace", says CSFB. Its other big deal was the sale of Hotel Inter-Continental Prague to Strategic Capital for $100 million. CSFB advised the owners, a group of Czech investment funds, achieving the best yield from a hotel sale in central Europe, says CSFB.

CA IB deserves a mention for its role as adviser to KBC on the purchase of 66% of CSOB.


Best domestic bank: OTP

Best foreign bank: Raiffeisen Bank

Best domestic securities house: Concorde Securities

Best foreign securities house: CA IB Securities

Best foreign equity house: Erste Bank

OTP Bank, Hungary's biggest bank, is the best bank in central and eastern Europe that is still domestically owned. OTP itself has 34% of its shares in foreign hands but it has no foreign strategic shareholder. It has a dominant retail franchise in Hungary with around one-third of the total assets.

The bank assesses its market share as 16.4% of overall lending, 46.7% of the retail market, 11.6% of corporate loans, and 72.4% of municipal loans. Its strength lies in the fact that 85% of its funding comes from customer deposits, most of them retail. It owns more than 50% of all the ATMs run by banks in the country.

Last year, according to preliminary figures, it increased net profits by 33% to HUF28 billion ($103 million) recording a return on equity of 31%. Those earnings are shifting from interest income to commissions and fees in line with most banks' endeavours. Non-interest income grew by 44% in 1999. However, some HUF7 billion of that came from revaluation of foreign currency assets and liabilities. In the meantime it cut its staff by 7% and reduced its cost/income ratio marginally from 65.8% to 65.1%. OTP's non-performing loans represent 5.3% of assets, which is low for a Hungarian bank.

OTP was established as the national savings bank in 1949 and reinvented itself in 1989 as a full-service commercial bank. In 1995, 33.4% of the bank's capital was placed in Hungary and abroad. It thus reduced its shareholding to 25%+1 share of the total share capital of the bank. Following the sale, the shares were listed on the Budapest Stock Exchange and the GDRs then issued were listed on the Luxembourg Stock Exchange, and were quoted on Seaq International. In 1997, the state's ownership in the bank decreased to one HUF1,000 face value voting preference (golden) share.

The strategic aim of OTP Bank is to maintain its market leader position in retail. That includes the widespread promotion of cashless payment methods and the development of the bank's electronic sales and distribution channels (TeleBank, TeleBank Centre, and on-line commercial and home banking). It is also acting through its subsidiaries: Merkantil Bank (car Finance) and OTP Building Society (home savings and loans).

Its network includes more than 400 branches and more than 800 ATMs over the whole country.

The bank aims to increase its loans to medium-size companies and play an active role in project financing and syndicated lending.

Analysts' judgement on OTP is that it is one of the few banks in the region to qualify as a blue chip. It has the size to survive a shock, for example, in the car loan market. It has a forward-looking strategy that includes smart cards and e-commerce. It also defies the popular view that these banks in emerging Europe need a strategic western investor.

Raiffeisen Bank in Hungary achieved steady growth during a year that was not an easy one for many banks. Its total assets grew by 30% over the year, from HUF197 billion ($900 million) to HUF260 billion. It increased the number of its staff by 26% from 548 to 688. It now has 33 business locations in Hungary, having opened three more in the past year, with plans to open another eight this year.

Raiffeisenbank says it won 1,100 new corporate accounts in 1999, bringing the total to more than 7,500 corporate customers. At year-end it had HUF150 billion ($595 million) corporate assets and HUF99 billion ($393 million) corporate deposits. It has a 6.5% share of the corporate loan market.

In 1999 Raiffeisen Bank introduced new electronic banking software called Raiffeisen Express, developed in-house. The 32-bit, Windows-based application became a market standard in terms of data security and integrity, flexibility and ease of use. The bank also started a project Finance portfolio last year with asset so far of around $12 million.

In private banking it has about HUF19 billion under management. And its consumer banking operation, launched only last year, has attracted around 16,000 customers.

Its closest foreign rivals in Hungary are Citibank and Bank Austria Creditanstalt. Citi has just bought the Hungarian consumer banking operations of ING Bank.

CA IB Securities was involved in most of the major capital markets transactions in Hungary last year. It was joint global co-ordinator for the $162 million sale of the state's remaining shareholding in OTP Bank in November. In the $348 million sale of shares in Matav, CA IB was joint bookrunner for the domestic tranche and co-lead manager for the international tranche.

It was also mandated joint global co-ordinator and bookrunner for the $53 million IPO of Synergon. CA IB Securities has an estimated 17.8% of Fixed-income turnover on the Budapest Stock Exchange, and manages Hungarian funds totalling around $350 million.

OTP Securities must rate as the most influential Fixed-income dealer in Hungary on market share alone. Otherwise it is a fragmented market, although the top eight brokers account for probably 70% to 80% of the volume. Erste Bank of Austria has the highest volume in equities, according to market sources, followed by ABN Amro and CA IB. On the research side the best are judged to be CA IB, Concorde and Takarek (owned by DG Bank).

Concorde Securities' team published 2,059 pages of analysis in 1999. "We have Five people working 10 hours a day," boasts Concorde's annual report. Concorde is widely respected as a standalone securities house, especially for its research. Its market share in equity trading has declined in recent years although its overall volumes have soared. It still ranks eighth in equity trading. It has the same position in derivatives trading.

Concorde has invested heavily in internet distribution with an ambition to become "Hungary's leading Financial supermarket", says chief Financial officer Zsolt Edelenyi. Concorde co-ordinated Hungary's First two internet-based equity offerings: Synergon and Matav. It was a joint manager in privatization issues for Avonmore Paszto and Lang, and raised private equity Finance for Intercom.


Best domestic bank: Moldova-Agroindbank

Moldova-Agroindbank (MAIB) started operations in 1991 following the merger of the Moldovan branches of the Agroprom Bank of the former Soviet Union. Today MAIB is the largest commercial bank in Moldova in terms of total assets and total equity and is a well-managed and profitable organization.

MAIB maintains the largest domestic branch network, comprising 46 branches and 116 smaller outlets throughout the country, located in every major industrial and rural population centre. MAIB has a total market share of approximately 21% of aggregate banking assets.

MAIB originally specialized in lending to agro-processing businesses but has now been able to implement a strategy to diversify its lending portfolio and business activities. MAIB now competes with a broad spectrum of Moldovan banks for lending opportunities and deposits.

MAIB is one of the elite group involved in the EBRD's small and medium-sized enterprise lending programme. The EBRD has provided MAIB with a US$8 million senior convertible loan "in support of the Moldovan private sector and the consolidation of the banking system". The EBRD has also signed a bank-to-bank loan with a sovereign guarantee. MAIB will make loans to projects in all sectors for a period of up to Five years. The maximum loan size is US$1 million.

The bank's main competitors are Victoria Bank and Moldindconbank. However both are smaller and less well established.


Best domestic bank: BRE

Best foreign bank: Bank Pekao

Best foreign bond house: Bank Handlowy

Best foreign equity house: ING

Best foreign M&A house: Salomon Smith Barney

Best foreign securities house: CA IB Securities

The Polish banking landscape is filling up with foreign-owned banks. A majority stake in Bank Pekao has been bought by Allianz and Unicredito. Bank Handlowy has been bought by Citibank. ING is merging its operations with Bank Slaski, Bank Austria is doing the same with PBK, and HypoVereinsbank with BPH. Allied Irish Banks is consolidating its two Polish banks, WBK and Bank Zachodni. BIG Bank, having escaped the clutches of Deutsche Bank is working things out with strategic investor Banco Comercial Português. Poland is perceived as the most promising market in central Europe in which to buy banking assets.

BRE - this year's best domestic bank award winner is sometimes viewed as much as a venture capital fund as a bank. Analysts worry that some of its more spectacular returns come from punts on the market. On the other hand, since its escape from the jaws of Bank Handlowy, when merger talks broke down, it has the potential to reshape itself into a well-placed investment-cum-commercial bank with promising telephone banking and internet operations. Recently the management team was in London marketing its post-merger strategy.

BRE Bank's coup last year was to sell its 15.8% stake in PTC to Elektrim for $679 million. Now it has invested the proceeds in some of Poland's new technology companies.

BRE put its plans for retail banking on hold while merger talks continued. Now it is reviving them. It wants to extend its strengths in the brokerage and asset management market to a wider market, and to cross-sell products such as leases, mortgages and investment-banking instruments.

BRE has a strategic shareholder in Commerzbank, which owns 48.7%. That has given it the benefit of Commerzbank's expertise in Comdirect, probably Germany's most successful internet bank.

The question for BRE is earnings stability.

Its net interest income fell by 19% in 1999 and its net interest margin was about 2% below the average for the sector.

That is explained to some extent by its focus on corporate banking where margins are low, and the high spread it pays on deposits in a bid to gain market share. Its non-performing loans are around 7% of its gross loan book.

BRE's underlying earnings, ignoring extraordinary gains, fell by 59% last year but a large part of that was due to higher provisioning and taxation.

Bank Pekao has a good brand name and has a sensible strategic investor - UniCredito Italiano - which makes it the most promising bank in Poland. "It's big enough to go into the car loan business, make mistakes, and still survive," says one analyst.

UniCredito has put one Italian board member, chief operating officer Paolo Fiorentino, into Warsaw to show commitment. Analysts praise UniCredito for showing immediate consideration for minority shareholders in its new acquisition, setting out Financial objectives until 2002.

A consortium of UniCredito and Allianz of Germany formally took over 52% of Pekao in August last year. That was the culmination of three years of consolidation since Bank Pekao merged with three other Polish banks. In 1998 the EBRD took a 5.29% stake in the bank. The group represents about 17% of the assets of the Polish banking system and has the second biggest retail network in Poland while dominating the corporate banking market.

CA IB Securities was set up in Warsaw in 1993.

Among the foreign securities houses it has the biggest market share (5.4%) along with ING Barings in equity trading on the Warsaw stock exchange, behind PKO, BRE, Handlowy and BIG Bank Gdanski. It is also active in the capital market. Last year it was co-lead manager on a $547 million offering for oil company Polski Koncern Naftowy. It advised Vattenfall of Sweden on the majority acquisition of Warsaw power utility CHP. CA IB also advised majority shareholders of Softbank on increasing their stake, leading an accompanying IPO. CA IB also runs investment funds in Poland totalling around PL334 million.

Citigroup with its units Bank Handlowy, Salomon Smith Barney and Schroders, will be building in Poland on Handlowy's prowess in the Fixed-income market and Salomon's skills at M&A.

Handlowy has the biggest domestic bond volume on the Warsaw Stock Exchange. SSB last year advised Deutsche Telekom on its $2 billion acquisition of Media One's mobile operations in central Europe and Russia, including Polska Telefonia Cyfrowa. SSB also acted as bidding adviser to Eureko of the 30% privatization of PZU SA.


Best domestic bank: Not awarded

Best foreign bank: Romanian Bank for Development

Best foreign securities house: CA IB Securities

The Romanian Bank for Development (Banca Romana Pentru Dezvoltare) is the second-biggest bank in Romania, with between 13% and 14% of corporate and retail deposits and around 17% to 18% of corporate and retail loans although loans to individuals amount to only 4.4%. Its non-performing loans amount to around $596 million - 4% of total lending. The bank's BIS capital adequacy ratio is 26.6% and its return on equity for 1999 was 7.3%.

Société Générale bought a 51% stake in the bank in March 1999 and the EBRD a 4.99% stake in September. RBD plans to do an IPO later this year.

RBD's strategy is to develop its retail side with banking cards and mutual fund and insurance products. On the corporate side it plans to develop e-banking. Its own SWOT analysis characterizes it as a sound and solid bank which needs to develop skills, IT and its range of banking products in the face of weak domestic competition.

CA IB Securities has a 22% market share on the Bucharest Stock Exchange. It has been a leading force in Romanian privatization, contributing to the Romanian Post-Privatization Fund (capital e44 million) and the Romanian Investment Fund (capital e65 million). It has also been one of the leading corporate Finance advisory firms. It advised CBR/Heidelberger in its takeover of three local cement companies last year.


Best domestic bank: Moscow Business World Bank

Highly commended: Alfa Bank

Best foreign bank: Citibank

Highly commended: RZB

Best domestic securities house: Troika Dialog

Highly commended: Renaissance Capital

Best foreign securities house: Brunswick Warburg

Moscow Business World Bank (Moskovsky Delovoy Mir) is often unfairly described as a one-man show. True, chairman Andrei Melnichencko has been an indispensible marketing tool, but the bank has established impressive senior and middle management.

It began as a trading bank in December 1993 with links to the aluminium industry. It still has ties with the coal and non-ferrous metals industries, but this is reckoned to be more of a strength than a weakness, given the legal uncertainties of lending in Russia. Its major clients are export enterprises in the Kuzbass and Urals regions - the Kuzbassrazrezugol (coal mining) company and the Kachkanarsky mining and enrichment works.

MDM Bank's good fortune was to come relatively unscathed through the crisis of 1998, although it took some hits on its loan book, and then picked up business in the Flight to quality.

Last year MDM Bank radically expanded its strategy by aiming for the retail market, opening small branches throughout Moscow.

The bank is involved in the Financial institution development project (FIDP) of the European Bank for Reconstruction&Development and the World Bank.

At the end of 1999, MDM Bank's assets totalled Rb10.2 billion ($360 million). It had Rb2.6 billion ($91 million) of capital and reserves.

The bank is one of the biggest operators on Russia's currency, interbank and stock markets. It says that an important business is intermediating in the servicing of up to 20% of Russo-Indian debt. According to central bank data, MDM Bank is one of the top 10 commercial banks operating on the precious metals market, and is also one of the top 20 in the corporate securities market.

Alfa Bank comes a close second in terms of its management and strategy, although its loan book its not so strong. Analysts fear that is has a bigger exposure to its parent group, in terms of guarantees, than the 10% that shows up on its balance sheet.

Citibank calculates its market share with multinational companies operating in Russia is 65%. It has also been offering long-tenor rouble loan structures and arranged some of the First pre-export Financing deals with oil and steel companies after the 1998 crisis.

With the added strength of Salomon Smith Barney, which has had an investment-banking group in Moscow since 1995, Citibank offers an unmatched range of services to major corporates operating in Russia.

Raiffeisenbank Austria has 200 staff in Russia and grew its assets 2.4 times in US dollar terms in 1999 to $301 million. It is the top foreign bank in payments; it has a 15% share of the foreign exchange market and around 10% of money market turnover; its loan portfolio is default free and has grown 2.6 times in the past year. The bank also has the largest correspondent banking network of any foreign bank in Russia and is one of few to have successfully penetrated the Russian wholesale market.

Troika Dialog, founded in 1991, is one of the few Russian brokers to come through the 1998 Russia crisis bloodied but unbowed. It has since set up a brokerage office in New York and expanded its operations in Russia to Rostov-on-Don and Yekaterinburg. Troika Dialog says it is the acknowledged leader on the Russian Trading System (RTS) over-the-counter equities market, with around 25% market share.

It says it has 10% to 15% of rouble transactions on the Moscow Interbank Currency Exchange (Micex).

Troika Dialog offers good economic and political-risk research on Russia. It recently hired Oleg Vyugin, former deputy Finance minister, as its chief economist. In investment banking Troika Dialog in the past year underwrote several domestic bond issues - for OAO Mostotrest and Samaraenergo - and advised on several telecom and internet deals.

In February 2000, Switzerland-based Hansa AG, owned by Georg von Opel, bought a 5% stake in Troika Dialog.

Renaissance Capital has rebuilt its business after setbacks during the 1998 crisis. Its research on Russia is excellent.

Brunswick Warburg is the outstanding foreign broker in Moscow. It enjoys a high volume of business from foreign investment institutions.

Some foreign funds stipulate that their business must be done through a broker backed by an investment-grade rating, which works to Brunswick Warburg's advantage.


Slovak Republic
Best domestic bank: Not awarded

Best foreign bank: Tatra Bank

Best foreign securities house: ING Barings

The recent demise of Priemyselna banka, AG Banka and Slovenska Kreditna Banka makes it clear that Slovakia is a harsh environment for the almost 30 domestic banks that currently operate there. With up to a third of the country's companies technically bankrupt, it is no surprise that closures, restructurings and privatization are the dominant themes.

The banking sector as a whole - with a collective capital adequacy ratio of about 0% - made a loss of SKK16.9 billion in 1999, of which 88% was made by Vseobecna Uverova Banka (VUB or The General Credit Bank) and the other two largest state banks, Slovenska Sporitelna (SLSP or The Slovak Savings Bank) and Investicna a rozvojova banka (IRB or The Investment and Development Bank). VUB alone had non-consolidated losses of SKK9.5 billion (e227.84 million) though under international accounting standards the loss was just SKK588 million.

All these banks are in the process of pre-privatization restructuring, with the ministry of Finance injecting new capital and bad loans being transferred to the Consolidation Bank and the Consolidation Agency (Konsolidacna Banka and Slovenska Konsolidacna).

The restructuring is working. For example, VUB made a profit of SKK355 million in the First four months of 2000 - well ahead of earlier forecasts of SKK250 million for the year.

The process of privatizing VUB and SLSP will be completed in the First quarter of 2001 according to VUB vice-president Frantisek Szikhart and the Finance ministry wants SLSP to be privatized before VUB. The two banks share advisers JP Morgan and White&Case. The government is to sell its 68.58% stake in VUB and the national privatization agency FNM will sell its 15.96% stake.

Privatization will intensify pressures in the market. Foreign banks are the most likely buyers - Erste Bank is likely to end up owning SLSP - and their capital and know-how will be a major threat to the remaining domestic players.

Tatra Bank, majority-owned by RZB of Austria, is the third biggest bank in Slovakia with more than 7% of overall assets and around 8% of primary deposits. The total assets of the bank grew in 1999 by 31% to SKK60 billion ($1.4 billion).

Established in 1990 as the First privately owned bank in Slovakia, Tatra Bank in its 10th year of existence maintains its leading position among commercial banks offering high quality wholesale and retail banking services.

The bank is the market leader in real estate Financing, having backed 25 projects for administrative buildings and shopping space.

It is one of the most active participants on the Slovak interbank, foreign exchange, money and treasury bill market and one of seven reference banks for quoting Bribor rates. In 1999 Tatra Bank expanded its network to 50 branches across Slovakia, an increase of 14.

The bank´s net profit after tax amounted to SKK1.5 billion ($37 million) compared with SKK1.3 billion in 1998. The bank´s net worth exceeds SKK5.1 billion ($121 million) compared with SKK3.7 billion in the previous year.

Tatra Bank recorded a 17.7% share in the government bond auction in 1999. Tatra Asset Management, the investment company of Tatra Bank, a member of Tatra Bank Group, recorded 52.14% share of the Slovak mutual funds market in 1999. Tatra Bank was joint lead-manager of a SKK500 million Eurobond issue for Nordic Investment Bank in November 1999.

ING Barings is one of the most active members of the Bratislava Stock Exchange with a 13% market share in equity trading and an 11% share in bonds. Bond volumes have been down this year, however, because of the fall in one-year interest rates from 13% to 8%. The other most active member, also foreign, is CSOB, which is now owned by KBC of Belgium.

Tatra Bank has the biggest volume in bonds, and in the First quarter the most active equity trader was out-of-town broker Multicredit Finance in Zilina.


Best domestic bank: Nova Llubljanska Banka

Best foreign bank: Bank Austria Creditanstalt

Best domestic securities house: Publikum

Best foreign securities house: CA IB Investmentbank

Nova Ljubljanska banka is undisputed market leader in Slovenia with a 25% share of customer deposits, 23% of customer loans, 23% of international payment transactions and 27% of total assets. The NLB group with its five daughter banks has an even bigger market share - 34% of assets, 35% of deposits and 32% of customer loans. It also has strategic partnership and business agreements, signed last year, with Banka Celje and Dolenjska banka.

Last year the bank's return on equity was 17.7%. The NLB group's BIS tier-one capital ratio is 12%, with an overall ratio of 14.8%.

Publikum once again proves to be the leading light on the Ljubljana stock exchange with the third biggest market share last year, combined with growing activity in corporate finance and mergers and acquisitions. It also deals in the over-the-counter market for securities. Board member Janez Klobcar reckons Publikum so far this year is the fourth-biggest broker in terms of volume and perhaps the most active M&A house. Its closest rival on the exchange is Poteza.

This year Publikum concluded a deal advising the Mercator supermarket chain on its $30 million takeover of local rival Emona Merkur.

It also advised Hermes Softlab on the acquisition of Zaslon, a local internet banking operation. It has more acquisitions in the pipeline, including advising a French investor on a local purchase, and local firms on transactions in Croatia.

Bank Austria Creditanstalt was the first foreign bank to set up shop in Slovenia, in 1991, and now has four branches and one representative office in the country. It offers retail and commercial banking and treasury, capital markets and custody services. Total assets at the end of last year were e420 million and revenue was e6.4 million. CA IB, Investmentbank Austria's investment bank, is a founder member of the Ljubljana stock exchange. It is also involved in corporate Finance advisory and is working on the capital increase of communications firm Telemach.


Best domestic bank: Privatbank

Best foreign bank: Raiffeisenbank Ukraine

Best domestic bond house: Pravex Bank

Best foreign securities house: Alfa Bank

Banking in Ukraine is frontier stuff. Bank presidents are held in solitary confinement by the tax authorities; leading institutions sue the central bank - again over tax issues. And it's not as though anyone makes much money.

Privatbank's great advantage in Ukraine has been weak competition - the other big banks are Ukrainian Credit Bank, FUIB and Slaviansky Bank. "They are able to manage their risks well and avoided major losses during and after the 1998 Russia crisis," says one analyst.

From its headquarters in Dnepropretrovsk it runs 286 domestic branches and offices, a branch in Cyprus, has two subsidiary banks in Ukraine, one in Russia, one in Belarus, and rep offices in Moldova and Kazakhstan. Its main businesses are corporate and consumer banking, with 78,000 corporate accounts and 277,000 personal accounts. It had total assets of $570 million at the end of October, and capital and reserves of $55 million. Profits for the year were modest at $3.3 million.

Raiffeisenbank Ukraine wins the award for best foreign bank. It was a latecomer among the six foreign banks operating there but, since its arrival in 1998 has built up the biggest portfolio of corporate loans and is reckoned to be one of those with a real appetite for Ukrainian risk.

With the help of $10 million subordinated debt from the EBRD to boost its capital base it engages in pre-export financing for Ukrainian Firms, mostly in the sunflower, wheat, and steel and chemical products business. It also provides working capital for local Firms, mostly in food-processing and confectionery - "the Ukrainians have a rather sweet tooth," says board member for corporate lending Johann Jonach.

The bank's capital was officially increased to 74 million hryvnas ($14 million) on May 31 this year giving it the most capital of all the foreign banks except Citibank. Although profits have been sluggish since the Russian crisis, Raiffeisenbank's returns have been more consistent than its rivals. Citibank, Société Générale and Crédit Lyonnais saw a big dip in profits at the end of 1998 and again in 1999. Since the end of 1998 Bank Austria Creditanstalt Ukraine and ING Ukraine have lost money almost every quarter.

Total assets of Raiffeisenbank Ukraine grew in 1999 by 419% to $46 million. By the end of the First quarter this year it was the biggest bank in terms of assets among all foreign-owned banks in Ukraine. Its operating profit amounted to $600,000 representing an increase of 38%, and its workforce grew last year by 31% to total 71. RBU says its client base increased three-fold in 1999, offering them electronic banking. It is the First foreign-owned bank in Ukraine to provide medium-term lending, thanks to the EBRD's subordinated loan.

Alfa Capital Ukraine is the leading broker on Ukraine's over-the-counter PFTS stock trading system, with a market share of around 8%. Its nearest rivals are Wood&Co, subsidiary of the Prague-based broker, and Prospect Investment. Alfa's parent is Alfa Bank in Russia and the plan is in time to merge Alfa's banking and brokerage operations in Kiev.

It advised foreign investors on the $11 million acquisition of a controlling stake in Kyivsky Cardboard and Paper Mill. It provided financial services to telecoms, Noyyi TV channel, Nashe Radio, and pharmaceutical company Galychfarm OJSC.

Alfa Capital Ukraina employs over 130 people.

The brokerage operations of metals to car-loans to nuclear fuels bank Pravex is the bond market's biggest player by volume.

The bank is a high-profile player in the markets though it has suffered from a management merry-go-round recently. It has extensive links with western payment systems and institutions and is one of the more conservative banks in the Ukraine, relatively speaking.