Raiffeisen Zentralbank Österreich AG
Raiffeisen Zentralbank Österreich AG
Total Assets: EUR 103.2 billion ($125 billion) (2006)
NAIC: 522110 Commercial Banking
Raiffeisen Zentralbank Österreich AG (RZB) is one of the fastest-growing banking groups in the Central and Eastern European (CEE) region. Based, in Austria, RZB functions as the central banking unit for that country's network of Raiffeisen cooperative banks, Austrian Raiffeisen Banking Group. With total assets of more than EUR 103 billion ($125 billion), RZB ranks as Austria's third largest banking group. The bank's early extension into the CEE region has also placed the group in that market's top ranks. The bank operates through 16 subsidiary banks, including in Hungary, Slovakia, Poland, the Czech Republic, Bulgaria, Croatia, Russia, Ukraine, Romania, Bosnia and Herzegovina, and Slovenia. The bank also operates a network of leasing and finance subsidiaries, and representative offices. RZB's network extends beyond Austria and the CEE region to include branches and offices in New York City, Singapore, Hong Kong, London, Lisbon, Beijing, Mumbai, Seoul, Malta, Frankfurt, Paris, and Stockholm, among others. Most of RZB's international operations are conducted through its publicly listed subsidiary, Raiffeisen International Bank Holding. Altogether, the company governs more than 1,000 branches.
AUSTRIAN RAIFFEISEN RESTRUCTURING IN 1927
The Raiffeisen cooperative banking movement had its origins in Germany in the mid-19th century, when Friedrich Wilhelm Raiffeisen developed a new banking concept designed to provide credit for the country's agricultural and crafts sectors. The breakdown of the former feudal and guild systems had left many of the regions exposed to an increasingly competitive economic environment. While wealthier landowners had ready access to credit, ensuring them of a constant supply of seeds and farm implements and machinery, the lower economic position of a majority of farmers and craftsmen left them with little access to credit. At the same time, the credit that was available at the time came at the cost of extremely high interest rates. This led to an increasing number of farmers losing their property.
The poor harvest, and resulting widespread famine, of 1846 exposed the precariousness of the agricultural sector in Central Europe, and ultimately played a role in the upheaval that swept the region in 1848. Raiffeisen, who, as a civil servant, was mayor of several farming villages, recognized the distress of these communities and began developing a new, cooperative banking model. In 1847, Raiffeisen set up his first organization, a "Bread Union," which distributed bread and grain to needy farmers. By 1852, Raiffeisen had established the Heddersdorfer Wohlfahrtsverein, which provided subsidies to farmers, as well as other welfare services.
Raiffeisen initially provided much of the financial backing to his welfare societies. However, he recognized the importance of transforming the welfare movement into a new system of mutual self-help. As part of that process, Raiffeisen saw the need to develop self-financing organizations. Borrowing from the building society movement developing at the same time in the United Kingdom, Raiffeisen founded his credit unions in 1862. These bodies, which operated on a nonprofit basis, did not provide charity but instead provided low-interest loans to farmers to enable them to buy the seeds, machinery, implements, and other goods necessary for them to support themselves. By 1864, Raiffeisen had converted the Heddersdorfer Wohlfahrtsverein to credit union status as well.
The Raiffeisen banking movement, as it came to be called, quickly spread beyond the local level to the regional, national, and finally international levels. By the early 1870s, the need arose for the creation of coordinating bodies to help govern the growing network of Raiffeisen banks. Raiffeisen then created the first regional cooperative credit union in 1872. At the same time, he conceived of a three-tier model, with local cooperatives grouped under regional cooperatives, which in turn were grouped under a single central cooperative operating on a national level.
News of the Raiffeisen movement reached the poor farming villages of the Diet of Lower Austria during the early 1880s. This led to the creation of the first Raiffeisen credit union in Austria, in Müldorf, in 1886. Success followed quickly and in just ten years the number of Raiffeisen banks in Austria had grown to 600. The movement soon developed a network of cooperative warehouses and installations, including milk and cheese federations, and purchasing and retailing operations. By 1894, the Austrian Raiffeisen movement had developed its first regional Raiffeisen bank. Four years later the banks created an entity operating on the federal level, called Österreichischer Raiffeisenverband.
The dismantling of the Austria-Hapsburg Empire following World War II and the subsequent collapse of the Austrian economy during the 1920s brought an end to the initial phase of the country's cooperative banking model. In 1923, however, the Raiffeisen movement had begun reconstructing its network in Austria. By 1927, the movement created a new central clearing bank, Genossenschaftliche Zentralbank (GZB), the original name for the future RZB. The creation of the new body replaced the earlier Raiffeisen network in Austria with a full-fledged three-tiered system operating on a purely national basis.
GZB started off with just nine employees. However, state agricultural reform policies, coupled with the disastrous banking market of the depression era, boosted the importance of the GZB and the Raiffeisen network in general. By the mid-1930s, the GZB had extended its range of products beyond savings and loan facilities to include foreign exchange, deposit-taking, public sector lending, underwriting, and financial investments. The bank also began buying up stakes in other banking cooperatives, as well as acquiring interests in a number of corporations. By the end of the decade, the GZB had expanded its employee base to 85 people.
GROWTH AFTER WORLD WAR II
The annexation of Austria by Germany in 1938 put an end to the GZB's independent existence, however. During the war years, the GZB and the rest of the Austrian Raiffeisen banking movement were placed under control of the Germany-based Raiffeisen organization. As a result, the GZB was renamed as Genossenschaftliche Zentralbank der Ostmark Aktiengesellschaft. Later, in 1942, the body's name was changed again, to Genossenschaftliche Zentralbank Wien Aktiengesellschaft. At the end of the war, the GZB had been reduced to just over 60 people.
Our goal is to be the leading provider of financial solutions for demanding clients in Central and Eastern Europe and in Austria. Achieving this goal will allow us to ensure lasting value for our shareholders and employees.
Immediately following the end of World War II, the Austrian Raiffeisen banking sector was placed under public administration. The bank was then renamed as Genossenschaftliche Zentralbank Aktiengesellschaft. It was not until 1955 that the bank's original shareholders, the Raiffeisen regional banks, regained control of the central banking unit. By then, too, GZB had launched its first international efforts, creating a number of partnerships with other banks throughout the world. The strong growth of the Austrian economy during the 1950s also helped GZB grow, and by the end of the decade, the company employed nearly 200.
GZB entered a new phase of modernization stretching into the 1960s. The group restructured its large network of branch offices, creating a more streamlined organization. Rooted in the rural, agricultural regions of Austria, GZB nonetheless began extending its range of operations to include the country's urban centers as well. At the same time, the bank expanded its product range. In 1961, for example, GZB created a new subsidiary, Raiffeisen Bausparkasse (Raiffeisen Building Society), which began offering long-term and current account loans. By the end of the decade, the company had formed a dedicated finance and leasing unit, creating Raiffeisen Finanzierungsgesellschaft in 1968.
In 1972, GZB, which had increasingly begun to target the commercial and corporate sectors, added foreign trade operations, buying trading house FJ Elsner that year. Founded in 1864 as E. Kanitz & Co., that company had long specialized in commodities and foodstuffs trading. Moreover, it had built up a strong network of trading relationships, particularly between Austria and China. GZB also entered the insurance business during the 1970s, launching Raiffeisen Versicherungs AG in 1975.
- Genossenschaftliche Zentralbank (GZB) is created as part of restructuring of Austrian Raiffeisen banking network.
- GZB is taken over by Germany's Raiffeisen banking group following Austrian annexation by Germany.
- GZB is returned to prewar shareholders and begins first international operations.
- Company begins offering long-term loans through new subsidiary Raiffeisen Bausparkasse (Raiffeisen Building Society).
- Company launches dedicated finance and leasing unit, creating Raiffeisen Finanzierungsgesellschaft.
- Company acquires FJ Elsner trading house.
- Raiffeisen enters insurance market by creating subsidiary Raiffeisen Versicherungs AG; opens branch office in Hong Kong.
- Raiffeisen opens branch office in New York City.
- Company forms Unicbank in Hungary, becoming first Western bank to launch operations in CEE market.
- Company changes name to Raiffeisen Zentralbank Österreich AG (RZB) and forms subsidiary Raiffeisen International to oversee CEE expansion.
- RZB founds Tatra banka a.s., in Bratislava, which becomes third largest bank in Slovakia; launches Raiffeisen Bank Polska, in Warsaw.
- RZB enters Czech Republic.
- RZB forms operations in Bulgaria and Croatia.
- Company enters Russian market with office in Moscow.
- Company launches banking subsidiaries in Ukraine and Romania.
- RZB becomes first foreign bank to receive license in Beijing, China; acquires majority stake in Market Banka in Sarajevo.
- Company establishes bank in Belgrade; acquires Banca Agricola in Romania.
- Company acquires Krekova Bank in Slovenia.
- RZB buys former state-owned Savings Bank of Albania.
- Company gains majority control of Bank Aval in Ukraine; launches Raiffeisen International Holding public offering on Vienna Stock Exchange.
In the meantime, GZB had also begun building up a number of foreign interests. This was accomplished especially through a series of acquisitions made during the 1970s. Acquired banks included Internationale Bank für Aussenhandel AG, BHF-Bank-DG-International, London & Continental Bankers Ltd., and Bank Europäischer Genossenschaftsbanken AG. In addition to these purchases, GZB opened a number of representative offices throughout the world. The company first turned to Hong Kong, opening an office there in 1976. By 1980, GZB had added an office in New York. Other offices followed in the next decade, including one in Singapore in 1984, and in London in 1986.
CEE BANKING LEADER FOR THE NEW CENTURY
By the mid-1980s, however, GZB had already taken early steps to expand into the Central and Eastern European banking sector. The company established its first operation in the region, called Unicbank, in Hungary in 1986. That bank officially launched its operations in 1987, becoming the first modern, Western-styled bank to enter the region. GZB's early entry into the market, coupled with the longstanding ties between Austria and much of the Central and Eastern European region, enabled GZB to expand rapidly after the fall of communism.
In preparation for this expansion, the bank changed its name in 1989 to Raiffeisen Zentralbank Österreich AG (RZB). The bank then established a subsidiary operation, Raiffeisen International, in order to oversee its CEE market expansion. Because private-sector banking was more or less nonexistent in most of the countries in the CEE, RZB at first focused on establishing its own subsidiaries in the various markets. In 1990, for example, the company founded Tatra banka a.s., in Bratislava, which quickly grew into the third largest bank in Slovakia. That year, also, RZB founded Raiffeisen Bank Polska, in Warsaw. By the middle of the next decade, the Polish subsidiary had expanded to a national scale. By 2002, the Warsaw bank had opened a foreign office of its own, in Vilnius, in Lithuania.
Other markets followed quickly. RZB entered the Czech Republic in 1993. The bank then added operations in Bulgaria and Croatia in 1994, becoming the first foreign bank to launch operations in both those markets. RZB also took a chance on the Russia market, still reeling from near-economic collapse during the late 1990s. In 1997, RZB opened subsidiary ZAO Raiffeisenbank in Moscow, later expanding its operations to include the St. Petersburg market as well. The bank also moved into Ukraine and Romania in 1998. By 2001, RZB had also established operations in Yugoslavia, forming a subsidiary in Belgrade. Farther afield, RZB became the first foreign bank to receive a license to open a branch office in Beijing, China, in 2000.
Into the 2000s, RZB adapted its expansion model for the fast-developing CEE market. Instead of focusing on greenfield growth, the company began targeting the newly emerging market for acquisitions as many of the former government-owned banks in the region underwent privatization. In 2000, RZB acquired a majority stake in Market banka in Sarajevo, which was then renamed Raiffeisen Bank dd. Bosna I Hercegovina. The bank subsequently increased its position in that market, taking over Hrvatska Postanska Banka.
Other acquisitions followed, including Banca Agricola in Romania in 2001 and Maribor-based Krekova Bank in Slovenia, in 2002. RZB next targeted Belarus, buying that country's third largest bank, Priorbank, in 2003. By 2004, the bank had gained a leadership position in the Balkans, when it purchased the former state-owned Savings Bank of Albania. RZB then took the leading position in the Ukrainian market with the acquisition of nearly 94 percent of Bank Aval there.
By then, Raiffeisen International had clearly come into its own, acting as the holding company for RZB's growing empire of foreign banking operations, while RZB itself remained focused on its domestic function as the central bank for the Austrian Raiffeisen banking network. In 2005, RZB listed Raiffeisen International Holding on the Vienna Stock Exchange, in recognition of the company's position as one of the most prominent and fastest-growing players in the CEE banking market.
M. L. Cohen
AGRAVIS RAIFFEISEN AG (Germany); Deutsche Raiffeisen Warenzentrale GmbH (Germany); Raiffeisen Bank Polska S.A. (Poland); Raiffeisen Bank Russia; Raiffeisen Bank S.A. (Romania); Raiffeisen Bank Zrt (Hungary); Raiffeisen Centrobank AG (Austria); Raiffeisen Lizing Zrt (Hungary); Raiffeisen Zentralbank Österreich AG; Raiffeisen-Landesbank Tirol AG; Raiffeisen-Versicherung AG; Raiffeisen-Warenzentrale Kurhessen-Thuringen GmbH (Germany); Raiffeisen-Waren-Zentrale Rhein-Main eG (Germany); RWA Raiffeisen Ware Austria AG.
HVB Group; Commerzbank AG; WestLB AG; Erste Bank der Österreichischen Sparkassen AG; Bank Austria Creditanstalt AG; Schweizer Verband der Raiffeisenbanken; BAWAG P.S.K. Group.
"A Banker Looks to the East," European Business Forum, Spring 2004, p. 90.
"Capitalizing on CEE Growth," Trade Finance, June 2004, p. 27.
Frey, Eric, "RZB to Expand in Eastern Europe," Financial Times, June 5, 1998, p. 29.
Hamilton, George, "Austrian Banks Recapture the Empire," European Banker, November 2000, p. 16.
"Raiffeisen International Launches Long-Awaited IPO," Retail Banker International, April 14, 2005, p. 4.
"Raiffeisen Starts Asset Management in Romania," European Banker, July 2006, p. 15.
"RZB Acquires Ukraine's Aval," Trade Finance, September 2005, p. 18.
"RZB Planning to Sell Half Its CEE Business," Retail Banker International, December 20, 2002, p. 9.
"RZB Stakes New Claim with Belarussian Buy," Euroweek, January 10, 2003, p. 7.