In 1975, Creditanstalt, one of the NO. 1 IN CEE. New perspectives with the change of political regime at the end of the 1980s

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1 NO. 1 IN CEE No. 1 in Central and Eastern Europe PIONEERING ACHIEVEMENTS. Development of the BA-CA Group into No. 1 in Central and Eastern Eu in Budapest in 1975 to our current position as the premiere network bank in the region In 1975, Creditanstalt, one of the predecessors of BA-CA Group, was the first Western bank to open its doors in Central and Eastern Europe, paving the way for the development of a successful banking group in this region. As the details on page 9 indicate, this move was not the opening of a new market: it was a return to a market where we once were present. After all, CA was actively involving in the banking business in Hungary shortly after being founded in When the Iron Curtain divided Europe in 1947 some 400 employees were working at this branch, which was one of CA s most important. After the end of the Cold War and the transition to a free market economy, new perspectives and opportunities opened up in the formerly communist countries in Central and Eastern Europe. And once again, CA and Länderbank were among the pioneers in bringing modern banking back to the East. Foreign activities with a strong emphasis on Eastern Europe Following the conclusion of the New perspectives with the change of political regime at the end of the 1980s State Treaty establishing Austria s independence and neutrality, both banks established themselves as the largest Austrian commercial banks with a strong presence abroad, focussed on the one hand on exports from the nationalised industries and on the industrial groups financed by CA and Länderbank on the other hand. In the 1970s, Länderbank and CA joined the newly established banking clubs: CA became a member of the European Business Information Center (EBIC), while Länderbank was linked with Associated Banks of Europe (ABECOR). Financial activities involving trade with the Warsaw Pact countries (Albania, Bulgaria, Poland, Romania, Czechoslovakia, Hungary, the Soviet Union and East Germany) comprised an important element of their foreign business. The year 1975 finally marked the first true milestone in the BA- CA s success story in CEE: CA was the first bank from the OECD countries to open a representative office in a CEE country. This was truly a ground-breaking achievement, under the prevailing conditions dictated by the totally different economic systems. Hungary, which at that time was Austria s 10 th most important trading partner overall, was Austria s premiere trading partner among the members of COME- CON (Council for Mutual Economic Assistance). Concentrating on financing issues In addition to advising Austrian and Hungarian businesspeople in foreign trade financing, the main points of CA s representative office in Hungary included active support in looking for business partners and helping to intensify relations to the Hungarian credit organization. The office played a key role in the conclusion of a factoring agreement, the first of its kind between a country with statecontrolled foreign trade and a Western country. In the mid-1980s further moves were made to ex- After 1955 Following the conclusion of the State Treaty, CA and Länderbank both experienced rapid growth: Länderbank and CA, and the other large commercial banks led the market in foreign business in the 1970s. This business was determined strongly by exports by the nationalised industries, but also by the industrial groups linked to CA and Länderbank CA is the first Western bank to open a representative office in Budapest a pioneering achievement considering the completely different economic systems of that day and age Zentralsparkasse, founded in 1905, is renamed as Zentralsparkasse und Kommerzialbank Opening of CA representative offices in Prague and Moscow The first Länderbank representative office is opened in East Berlin (GDR). 10

2 30 YEARS OF SUCCESS ope: from the opening of the first representative office pand in the region, with offices opened in what is now the Czech Republic and Russia. 1987: Prague and Moscow mark the way At the opening of the CA representative office in Prague in May 1987, the Managing Board stressed that Czechoslovakia was interested in boosting investment in industrial sectors, so that it would not lose touch with economic developments in the West. Expansion of the infrastructure for tourism was also a consideration. CA s representative office was operated jointly with its subsidiary AWT International Trade and Finance plc. and Austrian Leasing Ltd. and, as was stated at the opening ceremonies, served boost the foreign trade of both countries. CA also opened a representative office in Moscow that very same year. This office was responsible for strengthening ties with the Soviet authorities and business partners in the field of finance and supporting Austrian companies in their export activities with the Opening of the CA office in Moscow USSR. At the opening of its representative office in East Berlin in March 1988, Länderbank opened its move into the East bloc as the first Austrian bank to establish a branch in the German Democratic Republic (GDR). As the Board emphasised at that time, the move to open a representative office reflected the increasing volume of foreign trade between Austria and the GDR. Austrian exports to the GDR amounted to six billion Austrian schillings in 1987, with imports from the GDR totalling 3.9 billion schillings. In 1989, together with Bayerische Vereinsbank, three Soviet banks and three Western banks, CA founded International Moscow Bank. In 1990, Creditanstalt opened a representative office in the capital of Slovenia, Ljubljana, to reinforce business ties between Austrian and Slovenian companies, as well as to public offices such as ministries, chambers, etc. Länderbank opened its representative office in Moscow just as the Soviet government was presenting its package of reform measures designed to pave the way for the transition to a regulated market economy. The volume of business carried out in the Soviet Union by the Länderbank Group already amounted to four billion Austrian schillings. Expansion in CEE: the top strategic priority On 27 June 1989, Austrian Foreign Minister Alois Mock and Hungarian Foreign Minister Gyula Horn joined hands to symbolically cut through the barbed wire on the Austrian-Hungarian border. This picture has come to stand for the fall of the Iron Cur Together with Bayerische Vereinsbank, three Soviet banks and three Western banks, CA founds International Moscow Bank CA establishes a representative office in Ljubljana Länderbank opens a representative office in Moscow Creditanstalt Rt. is founded in Hungary. Zentralsparkasse also opens its first operational office in Hungary through Europai Kereskedelmi Bank (EKB) Länderbank and Zentralsparkasse und Kommerzialbank are merged to form Bank Austria. Establishment of Creditanstalt a.s. in Prague, Creditanstalt S.A. in Warsaw (first foreign bank in Poland) and Länderbank Ljubljana d.d. (first foreign bank in the former Republic of Yugoslavia) CA acquires a majority interest in the Slovenian institution Nova banka. 11

3 30 YEARS OF SUCCESS CA branch at Szervita Tér in the centre of Budapest, opened on 14 June 1993 tain. Just a few months later, in April 1990, CA founded a subsidiary bank in Budapest, opening a new chapter in the successful development of the banking group in Central and Eastern Europe. Involvement by Bank Austria (created from the fusion of Zentralsparkasse and Länderbank in 1991) and CA in the CEE countries was a prime strategic goal in the early 1990s. Depending on the economic and legal options available, both banks made moves in the individual countries. Now, Bank Austria Creditanstalt which began with just a handful of employees in Budapest, has grown and expanded to become the top international bank with the broadest network coverage in the region. When Creditanstalt founded Creditanstalt Rt. in Hungary in 1990 with share capital of HUF 1.4 billion together with Budapest Bank, it held a majority ownership share of 75% in the company. The bank s business was focussed on commercial transactions, in particular short-term credits, whereby funds were provided both in foreign exchange and in Hungarian forint. International customers were provided with a comprehensive range of know-how and expertise, especially when it came to the ins and outs of setting up a joint venture in Hungary. CA Budapest started off with about 20 employees and had already doubled its staff to 40 by the end of : No. 1 foreign bank in the Czech Republic 1991 marked CA s first step back to the market in what was then still Czechoslovakia: in April, a 100 percent subsidiary bank was founded in Prague, Creditanstalt a.s., with share capital of roughly 300 million Austrian shillings. By 1993 the bank was the No. 1 among the ten foreign banks that had opened offices in the Czech Republic. In 1993 and 1994, branches were opened in Zlín, Novy Bor und Hradec Králové and in 1995 the representative offices in Pilzn, České Budějovice, Ostrava and Brno were transformed into branch offices. Reaction to the division of Czechoslovakia into the Czech Republic and Slovakia was prompt: at the end of 1994, Creditanstalt Bratislava opened its doors. Slovakian private enterprises, multi-national companies and Austrian- Slovakian joint ventures were the new bank s primary target groups. In October 1991, CA founded a subsidiary bank in Warsaw, Bank 1993 The first BA branch office is opened in Moscow Creditanstalt a.s. is founded in Bratislava. CA s investment banking subsidiary, CA IB, boosts its capacities considerably and expands vigorously, mainly in the Czech Republic, Slovakia, Hungary and Poland. Leasing business is pushed firmly in CEE: CA is present in the former East bloc countries with leasing companies in the Czech Republic, Hungary, Poland, Slovenia and Slovakia Creditanstalt is founded in Slovakia (1995: Bank Austria) Bank Austria acquires the state s ownership interest in CA. An interest is acquired in the third largest Polish bank PBK (Powszechny Bank Kredytowy SA) and Bank Austria Croatia is founded. 12

4 30 YEARS OF SUCCESS Headquarter of HVB Bank Hungary for many years. This grand building was erected at the height of the Austro-Hungarian Empire in based on the plans of the Austrian architect Alfred Foltz Creditanstalt s.a. in yet another step to position CA as the leading bank in Central Europe. Upon opening a staff of roughly 40 was employed at the Warsaw bank. All of these banks were focussed on business customers, in particular selective short-term operating credits for first-rate local customers, investment financing for foreign companies and payment transactions. Nevertheless, as a universal bank the institutes have also always offered a comprehensive range of services for private customers as well. South-eastern Europe: the success story continues In 1992, CA acquired a majority interest in the Slovenian institution Nova banka in Ljubljana (Creditanstalt nova banka d.d.), a universal bank which had five branches at the time and offered a comprehensive range of services for business and private customers. This bank was not only active in commercial banking, but also had a strong background in investment banking. The focus of the banks founded in the early 1990s was mainly on business customers, with particular emphasis on selective shortterm operating credits CA s investment banking subsidiary, CA IB, boosted its capacities considerably and began vigorous expansion, mainly in the Czech Republic, Slovakia, Hungary and Poland. The emphasis was on Mergers & Acquisitions (e.g. one of the most important transactions was the privatisation of the Polish baby food manufacturer Alima, in which the American baby food producer Gerber acquired a majority share) and privatisation as well as securities and fund business. The bank s leasing activities in the newly democratic countries were also supplemented by the foundation of leasing companies in the Czech Republic, Hungary, Poland and Slovakia. Bank Austria founds the first foreign banks in Slovenia and Moscow At the beginning of the 1990s, Bank Austria which was CA s largest Austrian competitor at that time also started to penetrate the Eastern European markets. In 1991 it was the first foreign bank to open a subsidiary in the former Yugoslavia. In addition to the main offices in the capital of Ljubljana, a branch was also opened in Koper, which is an important sea port for Austria. Along with a range of services for business customers, Bank Austria Laibach also offered certain businesses for private customers, in line with the legal framework prevailing in Slovenia at the time. Similar to CA, Zentralsparkasse also got off to an early start in CEE, opening its first operative subsidiary in Hungary, Europai Kereskedelmi Bank (EKB), in The activities of this bank and Bank Austria A.S. in Prague were both focussed primarily on business customers. Bank Austria Creditanstalt Romania S.A. is founded. Bank Creditanstalt Ukraine is founded. End of 1997 The Central and Eastern European activities of CA and BA are combined into a Central and Eastern European holding company, as a steering and management unit, which is eventually merged into the newly created institution Bank Austria Creditanstalt International (BA/CA-I) All of the foreign branch offices (with the exception of the subsidiary bank in Russia), all of the ownership interests in foreign banks and CA IB are brought together in BA/CA-I. From the very beginning, in terms of its balance sheet total BA/CA-I is the largest foreign bank with full-scale coverage in Central and Eastern Europe. Bank Austria acquires the remaining shares in CA. 13

5 Branch office of Bank Austria in Prague, founded in 1991 BA and CA also engage in local transactions as opportunities arise Bank Austria was also the first foreign bank to open an office in the Russian capital in 1990, followed by a branch in Moscow in This branch primarily served foreign companies and selected local enterprises, as well as correspondent banking in the former Soviet Union. Well-known Russian corporate groups such as Gazprom and Lukoil were among the customers of BA in Moscow right from the beginning. The success enjoyed by Bank Austria and Creditanstalt in CEE and their advantages over the competition from Western European counterparts in the first half of the 1990s was due first and foremost to the long-standing experience that both of these banks and their predecessors had in the region prior to the political changes. Their scope of activities was not restricted to merely assisting companies from Austria, as they also engaged in local transactions when suitable opportunities arose. Their contributions to developing the financial infrastructure for economic transition and their assistance in reintegrating these countries into the free market economy system are well known and respected. 1997: Creditanstalt and Bank Austria join forces In 1997, Bank Austria acquired the state s ownership interests in Creditanstalt. One of the first steps taken was to combine the Eastern European activities of the two institutions. The objective: to create a banking group of truly European stature to meet the growing challenges in Central and Eastern Europe. In the course of integrating the foreign activities of the two banks, the decision was made to found BA-CA Central and Eastern European Holding, as a steering and management unit, which began operations on 1 October Expansion in Ukraine and into Romania The next move forward in expansion came in November 1997, when the BA-CA Group received a full banking license for Ukraine, and began its business operations shortly thereafter in the first half of The bank focussed on multi-national customers in Ukraine, in particular in the field of domestic and international payment transactions, financing and treasury activities. The Group also received a license for the subsidiary in Romania. Banka Creditanstalt S.A., Bucharest was founded with share capital of 70 billion lei (approximately 120 million Austrian schillings or 8.5 million euro), and also commenced operations in Business potential in Romania was seen as extremely promising, especially as the process of privatisation was underway, in which CA Investment Bank had played a major role. 1998: Creation of BA/CA-I The BA-CA Eastern European holding company was finally transformed into the newly created Bank Austria Creditanstalt International (BA/CA-I) in This organization comprised all of the foreign branches (with the excep Integration of the BA-CA units at the foreign locations is completed. A new uniform image is created under the brand Bank Austria Creditanstalt for all foreign operations. The interest in the Polish bank PBK (Powszechny Bank Kredytowy SA) is increased from 27.5 percent to 43 percent BA-CA joins forces with the German banking group HypoVereinsbank, and becomes the competence centre for Austria and Central and Eastern Europe. Acquisition of a majority interest in the Polish institution PBK The HVB institutions in Central and Eastern Europe (Poland, the Czech Republic, Hungary, Slovakia, Bulgaria and Croatia) come under the management of BA-CA: the balance sheet total in CEE is doubled at once, with BA-CA now operating the leading network in the region. 14

6 NO. 1 IN CEE tion of the subsidiary bank in Russia), all interests in foreign banks and CA IB Investmentbank (a total of 67 fully consolidated credit institutions and six valued at equity). From the very beginning, in terms of its balance sheet total BA/CA-I was the largest foreign bank with full-scale coverage in Central and Eastern Europe. The integration of the BA-CA units abroad was finished by 1999, with BA/CA-I reporting a balance sheet total of over 85 billion Austrian schillings. The aforementioned Hungarian subsidiary of Länderbank, EKB, was disposed of in accordance with the strategic approach, as it was not a majority interest also saw BA/CA-I boost its ownership interest in the third largest Polish bank at that time, Bank PBK (Powszechny Bank Kredytowy SA), to 43 percent, and then finally acquire a majority interest in July Shortly thereafter, PBK was successfully merged with BA/CA Poland a key milestone on the road to reinforcing the excellent position on the Polish market. The BA-CA branch in Dubrovnik, opened in the city s former tobacco station in 1998 Moving forward into the 21 st century Another milestone on the way to becoming the No. 1 network bank in Central and Eastern Europe was the strategic merger of Bank Austria Creditanstalt with the German group HypoVereinsbank (HVB) in The existing subsidiaries of HypoVereinsbank in Central and Eastern Europe were placed under the management of Bank Austria Creditanstalt, while HypoVereinsbank is responsible for Germany and the rest of the world. Since then, outfitted with an even stronger capital base, Bank Austria Creditanstalt has been able to pursue a sharply focussed strategy of expansion in Europe s top growth region. BA-CA s goal remains the same: to improve our market position in all of the individual countries in the region, but not at any cost. According to Erich Hampel, CEO of BA-CA: In locations where it makes good business sense, of course we ve tried to participate in the bank privatisation projects. But when the price for us was too high in relation the gains that could be expected, we ve focussed on organic growth. One needs only review our current business figures to see that this approach has been extremely successful. In Poland, for example, which is undoubtedly the largest and most important economic area in Foundation of HVB Banka Jugoslavija a.d The banking group is transformed into a single bank. On 12 June BA and CA merge to create BA-CA. Bank BPH commences operations in Poland. Acquisition of Splitska banka in Croatia and Biochim in Bulgaria. Foundation of HVB Bank in Bosnia-Herzegovina The BA-CA share is listed on the Vienna Stock Exchange (9 July) and from 14 October with a second listing on the Warsaw Exchange, as the first foreign firm. Takeover of the remaining interest of the HVB Group in the Polish bank BPH, giving BA-CA a stake of roughly 71 percent in the third largest bank in Poland. A representative office is opened in Macedonia. Central Profit Banka, the third largest Bosnia bank, is acquired. 15

7 NO. 1 IN CEE ARCH AND WAVE The brand image of subsidiary banks in CEE The brand logos of Bank Austria Creditanstalt s subsidiary banks in Central and Eastern Europe combine the key elements of the logos from Bank Austria Creditanstalt and HypoVereinsbank (HVB): The blue font used in the bank name is the same blue used by HVB, the red wave comes from the Bank Austria Creditanstalt logo and links the parts HVB and Bank. The blue arch is an element from HVB and rounds off the logo of the subsidiary bank. Central and Eastern Europe, Bank Austria Creditanstalt has enjoyed excellent success with its subsidiary BPH, Poland s third largest bank. In South-eastern Europe, the region which has boasted the strongest economic growth in recent years, Bank Austria Creditanstalt has founded or acquired no less than eight new banks since This gives BA-CA a formidable position not only in the new EU Member States, but also in the candidate countries and their neighbours. Some of the key steps forward in the process of expanding to become the leading network bank in recent years included the establishment of HVB Bank Serbia & Montenegro, acquisition of Splitska banka in Croatia, the purchase of Bank Biochim in Bulgaria, the foundation of HVB Bank in Bosnia and Herzegovina and the acquisition of the Bosnian institution Central Profit Banka. Last year saw yet another round of intense activity and achievement for BA-CA: the Bulgarian institution Hebros Bank was acquired despite fierce competition, the new Bosnian subsidiary formed from the merger of Central Profit Banka and HVB Bank began its operations and the Serbian institution Eksimbanka passed into the ownership of BA-CA. To summarise the results of the last five years, Bank Austria Creditanstalt has asserted itself with great success in a key market for future growth. In some countries, long-standing market positions were further reinforced, while in others a solid basis for future achievement was laid with targeted acquisitions, allowing BA-CA to now offer top notch banking services in all of the countries in the region through its network of subsidiaries. BA-CA s subsidiary in Romania: on the market since 1997 Merger of Splitska banka and HVB Croatia into the third largest Croatian bank. Acquisition of CAC Leasing in the Czech Republic and Slovakia. BA-CA advances to be market leader in the leasing business in both these countries Following the integration of BPH and PBK, BA-CA s Polish subsidiary is renamed Bank BPH. Integration of the two Bosnian subsidiaries, HVB Bank and Central Profit Banka, the new institution HVB Central Profit Banka commences operations BA-CA successfully completes the purchase of the Bulgarian credit institution Hebros Bank. Together with HVB Bank Biochim, which already represents BA-CA in Bulgaria, BA-CA has an excellent position on the Bulgarian banking market. BA-CA completes acquisition of the Serbian institution Eksimbanka. 16