• Acquisition boosts local Raiffeisen customer-base to almost 300,000.
• Retail operations will significantly gain momentum.
• Purchase price of 130 million euros reflects Price to Book-value multiple of 3.1.
• Merger planned by 2008.

Raiffeisen International Bank-Holding AG, the CEE-operations of the RZB Group, has closed the acquisition of eBanka, a.s. in the Czech Republic yesterday. All necessary approvals from the Czech National Bank as well as other relevant authorities in the Czech Republic and in Austria have been obtained. The purchase price for 100 per cent of eBanka's equity amounts to 130 million euros. The book value of eBanka of 42 million euros reflects a Price to Book-value multiple of 3.1.

eBanka started operations in 1998 and is predominantly focused on retail banking. It was sold by Ceska pojistovna, the largest Czech insurance company. Ceska pojistovna is a member of the PPF Group, a leading diversified financial group in the Czech Republic and CEE region with managed assets exceeding USD 10 billion as of year-end 2005. eBanka’s total assets amounted to 630 million euros and the bank employed a staff of 925 at the end of June 2006. At the same time, the assets of Raiffeisenbank a.s. amounted to 2.79 billion euros, the bank had 50 branches and employed a staff of 1,173. Raiffeisenbank has been operating as a universal bank in the Czech Republic since 1993.

With this acquisition, Raiffeisen International boosts its retail customer base by over 70 per cent to almost 300,000 clients in the Czech Republic. The combined market share in terms of total assets (based on 2005 figures) is 3.3 per cent. Together, both banks rank sixth on the local market.

Acquisition supports growth strategy in robust Czech banking market

"With eBanka, our retail banking operations will gain significant momentum in the Czech Republic. It is our aim to extend our customer base to 400,000 by the end of 2009 and reach 10 per cent market share in selected product segments," said Herbert Stepic, CEO of Raiffeisen International, at a press conference in Prague. "This deal is also a sign that the Central European region is of great importance to us and we are willing to invest significantly also in this region of Emerging Europe,” he added.

The Czech banking market is in a robust condition with an asset growth of 15.9 per cent in 2005. With an increase of 40.7 per cent in 2005, loans to private individuals were one of the main growth drivers. Still, the overall level of credits to households accounted for only 12.7 per cent of the Czech GDP. The average of the new EU-member states is 14.4 per cent.

"We still see significant long-term growth potential especially on the lending side. Together with eBanka, we will be in a much better position to grow stronger than the market," Stepic added. According to Raiffeisen Research, credits to households are expected to grow by 19 per cent per year on average until 2010.

"With around 300,000 customers, we now have reached a critical mass in our customer base that will allow us to develop and introduce new products and services even more efficiently and exploit economies of scale using all available distribution channels," Stepic said.

eBanka and Raiffeisenbank are the Top 2 internet banks in the Czech Republic according to a recent client survey published this month by fincentrum.cz. Both banks also enjoy very high customer satisfaction rates. According to a survey conducted by market researcher TNS Aisa, 90 per cent of eBanka customers and 84 per cent of Raiffeisenbank customers are extremely or well satisfied with their service.

Merger planned by 2008

"We expect to complete the legal and operational merger of both banks by 2008," Stepic said. In the meantime, the focus will be on achieving quick wins for the customers of both banks such as cross-offering of products, free access to the both ATM networks and cash services at branches. Furthermore, it is planned to quickly integrate the risk management functions and treasury management of both banks applying Raiffeisen group standards.

Raiffeisen International is the majority-owner of Raiffeisenbank with a 51 per cent stake. The remaining 49 per cent is owned by Raiffeisenlandesbank Oberösterreich (25 per cent) and Raiffeisenlandesbank Niederösterreich-Wien (24 per cent). This ownership structure is set to remain in place also after the planned merger of the two banks.