Where Raiffesen Goes, Others Need Not Follow, Forbes Magazine Writes

LONDON, Aug 8 – As Austrian bank Raiffeisen benefits from robust growth in Central and Eastern Europe, it can also sleep easy knowing that its early entrance into the market may have kept it safe from new Western competitors.
Raiffeisen beat market expectations with a 49.0% rise in second-quarter net profit, to 311 million Euros ($483 million), on Thursday, and said it had “defied the global financial market crisis,” thanks to its strong presence in Russia and Eastern Europe.
But analysts warned that not everyone in banking should read that as a sign to rush into the region. “The boom in the Eastern European banking is completely overrated,” said Ronny Rehn from Morgan Stanley. “Property prices have spiraled, resulting in poor asset quality. This boom has already run its course.”
Raiffeisen got to the region first, Rehn said. “They bought banks cheaply, quickly got comfortable with their customs and knew when to pull the trigger.”
Raiffeisen has long recognized the opportunities in Central and Eastern Europe. It entered Hungary in 1986 and acquired banks in Kosova, Belarus, Albania, the Czech Republic (eBanka) and Ukraine (Bank Aval), between 2002 and 2006. It currently has more than 3,000 branches in Eastern Europe and is the biggest foreign bank in Russia.
Chief Executive Herbert Stepic said there was still room for expansion. “Central and Eastern Europe still shows real economic growth rates which are two to three times higher than in the euro zone,” he said in a press release.
Raiffeisen International Bank-Holding’s customer base had grown by almost 700,000 in the first six months of 2008, the bank said. Andrezej Nowaczek, an analyst with ING Financial Markets, believes the retail banking sector in Central and Eastern Europe is “booming”.
“Raiffeisen were the pioneers in these regions, and I can only praise them for this.”
With banks like Barclays, HSBC and Societe Generale posting falling profits in the last two quarters, there may be a temptation to follow Raiffeisen into an area seemingly less vulnerable to the economic slowdown in Western Europe.
But Rehn warns against this. “A ton of banks are looking to enter these regions, but that card has already been played. There are no more bargains to be had, and they will end up paying highly-inflated prices for assets.”
There are also cultural factors that make Eastern Europe and the CIS a difficult region to judge. “People in these countries have never really known credit,” said Rehn. “We do not know how they will handle credit as they have never had a full credit cycle. This is a huge unknown quantity.”