Central and eastern Europe house of the year: Raiffeisen Centrobank

An improving macroeconomic environment in eastern Europe and Russia was reflected in a standout year for Raiffeisen Centrobank’s (RCB) structured products team, whose flexible approach enabled it to cater to a range of risk appetites mainly focused on international equities.

Strong investment flows, tight labour markets and a more positive economic picture in the eurozone helped central and eastern European economies grow 4.2% in the second quarter, compared with 4% in the first quarter, putting the regional economy on track for its best year since 2007. Amid rising consumer confidence, RCB took the opportunity to expand its activity among retail investors.

“Over the past year, we had a big focus on Slovakia, and we opened our first branch in Bratislava in April, underlying our strong focus on retail clients in the region,” says Stefan Neubauer, head of central and eastern Europe structured product sales at RCB. “Just two months later we had placed our first guarantee product to the affluent segment in Tatra Banka.” 

The bank has a strategy of offering mainly fully capital-protected products in new retail distribution channels, Neubauer says. Its Slovakian expansion reflected positive momentum across the structured products business, with volumes rising close to 60% and open interest rising 14% in the year to the end of June. Over the 12-month period, RCB issued 66 tailor-made retail products for distribution in eight CEE countries and seven currencies. 

One product that struck a chord in 2017 was the bank’s Europe Best Entry Express note, which allowed investors to obtain the lowest daily closing price on the Euro Stoxx 50 as the starting level over a pre-defined period. The note contained a barrier set at 50% of the starting level, and that level was also agreed to be the termination level, which boosted the chances of profiting from early redemption.

“If the barrier was hit, the product would expose the client to market risk. But the best-entry feature meant barriers were set at very low levels and in many cases the index would have needed to fall to around the level it was just after Lehman Brothers went bust,” says Neubauer. “The reality is that investors have been able to get attractive yield without having to take direct exposure to the underlying.”

Investors have been able to get attractive yield without having to take direct exposure to the underlying  

Stefan Neubauer, Raiffeisen Centrobank

The product performed particularly well around the beginning of the year, when there was a mini-correction in stock markets following a strong rise in December.

The persistently low interest rate environment in Europe presented challenges in offering clients full capital protection alongside yield pickup. RCB’s solution came in the form of partially capital-protected certificates, which gave some comfort to those concerned about high valuations, geopolitical tensions and significant levels of corporate debt. One product that saw rising demand was the bank’s “bonus and safety” series, which is made up of non-capital-protected notes that reference diversified equity indexes and come with a low barrier. The bank has issued more than 60 of these notes, and the series saw a record average performance of more than 11% in 12 months – almost in line with Euro Stoxx 50. 

Alongside its product expertise, RCB went out of its way during the past year to add value for clients through an increased focus on education and online appearance. Investors can now access the bank’s website in five languages, and watch video clips that explain the structures of some products. 

“One of the reasons we have seen a big increase in volumes this year is the work we have done over many years to develop strong partnerships and educate our clients and explain the products in great detail, through the website and numerous seminars,” says Neubauer. “We have combined that with very clear-cut payout profiles, transparent pricing and a strong secondary market offering, and that has made us the hub for structured products in CEE.”