SRP reviewed the issuance figures and H1 2024 earnings of two of the largest structured product providers in Central and Eastern Europe.
Raiffeisen Bank International (RBI)
The Austrian certificates provider has been active in the DACH region and Central and Eastern Europe (CEE) for over 25-years.
RBI issued 72 primary market products in the first half of 2024 – stable compared to the prior year period (H1 2023: 78 products). A further 330 flow products were issued on the secondary market in the period (H1 2024: 353), according to SRP data.
We can be satisfied with the development of the consolidated profit. In line with the ECB's requirements, we accelerate the reduction of the business volume in Russia - Johann Strobl, CEO
Apart from its domestic market Austria where RBI issued 45 certificates on the primary market – often also available to German investors – the bank was also active in the Czech Republic (eight products), Poland (seven), Slovakia (two), Hungary (one).
RBI’s offering in Austria, Czech Republic, Slovakia, and Hungary was available via its Raiffeisen Certificates brand while in Poland the bank’s certificates were distributed via local players PKO Bank Polski and Ipopema Securities, respectively.
Products that stood out during the quarter included Dividendenaktien Winner, a six-year structure on the Stoxx Global Select Dividend 100 targeted at investors in Austria that returns at least 118% of the nominal investment at maturity and Garant Amerika, another capital protection product, which offers Czech investors access to a basket comprising iShares 20+ Year Treasury Bond ETF and MSCI North America Top ESG Select 4.5% Decrement Index.
RBI’s secondary market products were (barrier) reverse convertibles and bonus certificates, mostly linked to single shares such as Strabag (19), Wienerberger, Voestalpine (17 each), and Lenzing (14).
Raiffeisen Bank International – structured products issuance
Source: SRP
RBI generated a consolidated profit of €1.3 billion in H1 2024, up seven percent year-on-year (YoY).
Core revenues (net interest income and net fee and commission income) decreased by four percent to €4.3 billion. The decline in net fee and commission income by €307m or 18% was primarily due to the active restriction of activities in Russia (down €331m).
Net interest income increased by five percent to €2.9 billion, above all as a result of growth in Southeastern Europe.
Business operations in Russia are being heavily scaled back. The loan business has been reduced by nearly 60% since the war began while RBI has also considerably reduced its clearing, settlement and payment services business. Apart from Raiffeisenbank in Russia, all correspondent bank relationships with Russian banks have been ended.
RBI has also announced that it is in advanced negotiations on the disposal of its 87.74% stake in Priorbank JSC and its subsidiaries, with Soven 1 Holding Limited, an investor from the United Arab Emirates, resulting in a potential exit of RBI from the Belarusian market.
‘We can be satisfied with the development of the consolidated profit. In line with the ECB's requirements, we accelerate the reduction of the business volume in Russia. At the same time, we continue to work on the sale of Raiffeisenbank Russia,’ stated RBI CEO Johann Strobl (pictured).
In February, RBI issued a senior non-preferred bond with a €500m benchmark, representing RBI’s second issue in this format within six months and order books peaked at €3.8 billion. The issue has a 5.5-year term offers a yearly coupon of 4.625%. In May, RBI issued its first €500m benchmark senior preferred bond of the year for which market demand was also high with a five-times oversubscribed order book of over €2.5 billion. The issuance has a tenor of six-years (non-callable for five-years) and a coupon of 4.5% payable annually.
The group’s funding structure is highly focused on retail business in Central and Eastern Europe. In addition, the group also benefits from funding through the Raiffeisen Landesbanken. Different funding sources are utilised in accordance with the principle of diversification. These include the issue of international bonds by RBI AG, the issue of local bonds by the subsidiary banks and the use of third-party financing loans.
At the end of the first half of the year, total assets had reached €209.9 billion, up 5.9% YoY. RBI's common equity tier 1 (CET1) ratio, including the result for the period, amounted to 17.8%.
The Austrian financial service provider serves more than 16 million clients in seven CEE countries.
Erste Group Bank issued 12 products on the primary market as well as 233 flow products in H1 2024, compared to 52 and 166, respectively, in the prior year period.
Six of the bank’s primary market offering were capital protection products on the Austrian Traded Index (ATX) targeted at investors in its home market as well as Germany. The remaining six products, aimed at investors in the Czech Republic, also offered 100% capital protection. They were distributed via Česká Spořitelna and linked to the Stoxx Global 1800 Index (five) and the Prague Interbank Offered Rate (Pribor), respectively.
The bank’s secondary market products were bonus certificates linked to single stocks, including Lenzing (20), Erste Group Bank, Verbund, RBI, and Bawag (17 each).
Erste Group Bank – structured products issuance
Source: SRP
Erste Group posted a net profit of €1.6 billion in the first half-year of 2024, up 9.3% YoY.
Net interest income increased to €3.7 billion (H1 2023: €3.6 billion), in all core markets except Austria, on the back of higher market interest rates in the euro zone and larger loan volume. Net fee and commission income rose to €1.4 billion (+11.6% YoY).
Growth was registered across all seven core markets (Austria, Czech Republic, Slovakia, Romania, Hungary, Croatia and Serbia), most notably in asset management and payment services.
Due to valuation effects resulting from interest rate developments in the securities and derivatives business, net trading result declined to €137m (H1 2023: €270m) despite a strong foreign exchange business. Gains/losses from financial instruments measured at fair value through profit or loss trended in the opposite direction and improved to €111 million (H1 2023: €-64m), primarily due to gains from the valuation of debt securities in issue at fair value.
Erste Group already covered a major portion of its funding needs for 2024 in the first half of the year. In early January, a €1 billion seven-year mortgage covered bond opened up the covered bonds segment for European issuers. The prospect of longer tenors than in previous quarters led to the decision to issue another €1billion mortgage covered bond (9.75-year tenor) in March.
After the release of first quarter results 2024 results, Erste Group placed a €750m AT1 instrument, linked, as in the previous year, with a buyback offer, this time for the outstanding 5.125% perpNC2025 AT1 instrument. The remaining issuing activity will be focused on the senior preferred segment.
Total assets increased by 2.1% to €344.1 billion. As of 30 June 2024, The CET1 ratio stood at 15.5% (end-December 2023: 15.7%).
Click the link to read the Erste Group half-year 2024 results, presentation and financial report, and the Raiffeisen Bank International semi-annual financial report as of 30 June 2024.
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