In the race among western European banks to expand in the promising new market of central and eastern Europe (CEE), Austria’s banks are out in front of the competitors.
Erste Bank, Bank Austria-Creditanstalt (BA-CA) and Raiffeisen are among the fastest growing banks in the region. BA-CA’s strong position in CEE was a major reason why Italian bank UniCredit – itself a big player there – last month decided to acquire HypoVereinsbank, BA-CA’s parent.
But there is another Austrian universal bank that, while far less known internationally than the likes of BA-CA, has been equally successful in expanding in CEE: Hypo Alpe-Adria-Bank (HAAB). Though a mouthful to pronounce, the bank’s name indicates exactly where it is doing business, namely in the Alpine region (Austria, southern Germany, Liechtenstein and Italy) and since 1993, in the Adriatic region (Slovenia, Croatia, Bosnia-Herzegovina and Serbia-Montenegro).
HAAB’s push into south-eastern Europe 12 years ago was a master stroke. Prior to the move, it was a small state-controlled bank trying to hold its own against larger competitors in a mature Alpine market. Today, it is one of Austria’s most profitable banks with good prospects due to the robust growth in the Adriatic region. There, the bank offers a full range of banking services, including retail products, corporate lending, as well as asset management and payment services. Growth in HAAB’s Adriatic business drove 56% of its €259m in pre-tax profit in 2004. The growth also helped the bank to raise its balance sheet assets by 40% to €17.8bn.
Wolfgang Kulterer, chief executive of HAAB, says he believes that the bank’s strong performance last year was just the tip of the iceberg. “In the Alpine and Adriatic region, there are 65 million people, 750,000 of whom are our customers,” he says. “In view of these figures, it’s clear that our future strategy is primarily focussed on deepening our activities and exhausting the potential of this market.”
As a result of this strategy, Mr Kulterer expects to almost double the bank’s profit from ordinary activities to €300m (€171m in 2004) and its assets to €30bn by 2008. In making such a bold prediction, he has put himself under a lot of pressure. Three years from now, HAAB plans to list on Vienna’s stock exchange in a move that will halve the state of Carinthia’s stake in the bank from 52% to 25%. The holder of the other 48%, an Austrian insurer, also plans to cut its stake to 42% as part of the listing.
If Mr Kulterer fails to meet his own expectations, investors may not be all that convinced by HAAB’s success story, boding ill for the bank’s 2008 listing.
JW
