The Lower Austrian Raiffeisen banks

The Lower Austrian Raiffeisen banks
On the road to service-driven banking:
face-to-face customer advice from
Josef Schaunig at Raiffeisenkasse
Ebreichsdorf’s Pottendorf branch.
2000 was an excellent year for the Lower Austrian Raiffeisen
banks, which returned an operating profit of ATS 1.88 bn
(1999: ATS 1.38 bn). This was equal to 1.4 percent of total
assets (1999: 1.1 percent ). Profit on ordinary activities almost
doubled, rising from ATS 583 m to ATS 1.05 bn (0.77 percent
of total assets).
As of the end of 2000 the total assets of the Lower Austrian
Raiffeisen banks stood at ATS 143 bn – a five percent increase
on 1999.
Money under management
Primary deposits grew by
three percent to ATS 121.6 bn;
at the Lower Austrian
Raiffeisen banks
ATS m, as of 31 Dec.
savings deposits accounted
for ATS 101bn of the total.
The volume of savings de-
1996
141,971 posits was 0.6 percent up on
19 97
147,680
1999.
1998
153,470
The growth in the volume of
money under management
1999
162,620 (primary and home loan
2000
174,024
saving deposits, security
deposit accounts and the
surrender value of whole life
assurance policies sold by the Lower Austrian Raiffeisen
banks) accelerated to 7 percent, for a total of ATS 174 bn.
This rapid growth was driven by securities business.
Custody account balances climbed by 23 percent to
ATS 29.2 bn. The volume of Raiffeisen securities based
investment fund units under management was particularly
gratifying, growing by 24 percent compared with
only 16 percent for the Austrian retail fund market as a
whole.
Home loan saving business also made good progress,
rising by 5.1 percent, from ATS 14.5 bn in the previous
year to ATS 15.3 bn in 2000.
The Lower Austrian Raiffeisen banks
A record year
Boom in
securities business
17

18
E-banking
gaining ground
Raiffeisen banks
online
Customer deposit
guarantee scheme
launched
At year end the Tier 1 capital
of the Lower Austrian
Raiffeisen banks was up
by 5 percent to ATS 8.6 bn.
Total eligible capital resources
also increased
by 5 percent, to reach
ATS 10.8 bn. These figures
yield a Tier 1 capital ratio
of 10.7 percent and a total
risk asset ratio of 13.4 percent.
Capital resources
ATS m, as of 31 Dec.
1996
19 97
1998
1999
2000
8,895
(12.93%)*
9,393
(13.09%)*
9,861
(13.26%)*
10,292
(13.31%)*
10,773
(13.39 %)*
* Risk asset ratio
In 2000 a total of 3,171 persons were employed at 102 Lower
Austrian Raiffeisen banks, which had 598 branches.
The electronic processing of banking transactions continues
to gain ground. The number of e-banking enabled accounts
almost doubled in the course of the year. By the end of 2000
nearly 63,000 (11.5 percent) of the 547,000 current accounts
were already equipped with e-banking functionality.
With active assistance from RLB, two pilot projects, in
Guntramsdorf and Marchfeld–Mitte, created regional virtual
marketplaces. These give companies easy access to
local e-business opportunities. The concept is to be implemented
throughout Lower Austria.
All the Lower Austrian Raiffeisen banks now have their own
websites, accessible via the www.direkt.at portal.
In autumn 2000 the Lower Austrian Customer Deposit Guarantee
Association became operational as part of the nationwide
Raiffeisen scheme. These arrangements help provide formal
confirmation of the creditworthiness of the Raiffeisen Banking
Group as a whole, and add a legally binding agreement to the
informal solidarity already practised by the Group’s banks.
The Lower Austrian Raiffeisen banks
Mutual liability applies to all forms of customer deposits, includ-
ing savings, sight and time deposits, as well as to issues of
securities and, in the case of RLB, the deposits of other banks.
RLB assisted the Lower Austrian Raiffeisen banks by running an
information campaign, launched on 1 November 2000, on the
abolition of anonymous savings books. To familiarize the banks’
employees with the legal changes, between the start of August
and the end of September RLB and Modal co-organized
training courses for 500 staff members.
In its role as lead bank, RLB assisted its owners by launching a
number of joint projects aimed at optimizing their organization
and market development activities.
A benchmarking study conducted by an independent consultant
compared the market shares, earnings and productivity of the
Lower Austrian Raiffeisen banks with those of Raiffeisen banks
in other provinces, and of other comparable Austrian banks.
As a result the banks now have adequate, nationwide yardsticks
for measuring their performance.
The Raiffeisen banks need to reposition themselves to
adjust to a changed business environment. This is the
purpose of the “ERFOLG” (Success) projects being implemented
in conjunction with RLB, which are aimed at a
strategic realignment that will take members towards the
goal of “service driven banking”. Such projects have already
led to the professionalization and reorganization along
customer led lines of one-third of the business of the Lower
Austrian Raiffeisen banks.
An ever-increasing number of Raiffeisen banks are also
benefiting from the modern MER management performance
assessment formula. This permits profit oriented
bank controlling, from individual customers through to
product costing. MER is already being used to cost and
analyse almost 40 percent of all customer business in
Lower Austria.
The Lower Austrian Raiffeisen banks
End of the road
for anonymous
savings books
Benchmarking for
Raiffeisen banks
On the road
to service driven
banking
19

20
New governing
bodies and career
paths
Managing interest
rate risk
Assisted
self-service
spreading fast
The same goal of advancing towards service driven banking
is behind the reorganization of banks’ governing bodies, with
a view to promotíng the use of professional market development
methods. The new management structure entered
force in March 2001. Responsibilities have been redefined
and working methods adapted to new market requirements,
in line with the strategic focus on retail, private and corporate
banking business.
New career paths for employees, and a major effort to advise
banks on distribution are also helping the Group to progress
along this path.
The professional active and passive risk management
methods (gap analysis) used by most of the Lower Austrian
Raiffeisen banks were further refined.
The new Raiffeisen bank nostro account service for securities
has shown its worth. RLB has developed special umbrella
funds for own investments in securities which give all the
Lower Austrian Raiffeisen banks a simple means of managing
their interest rate risk.
Another side of the reshaping of the whole organization to
meet new customer requirements is the modernization of
many bank branches along “assisted self-service” lines.
Every second staff member is now working at a branch
that has been upgraded in the past three years.
The Lower Austrian Raiffeisen banks
With the launch of the MARKEting network, RLB created a new
information and communication platform for the entire Lower
Austrian Raiffeisen banking group. The network is used not
just to bring relevant marketing news to the Raiffeisen banks,
but also for reverse information flows. Current issues and
needs at the sales front are surveyed and responded to by
our marketing planning.
“MARKEting” training seminars have also been introduced,
and have already been incorporated in the nationwide
executive training programme.
The Lower Austrian Raiffeisen banks
MARKEting
network
21

Corporate Banking
Quality advice for business customers:
CEO Gabriele Lederleitner discusses her plans
with RLB customer relationship manager
Bernhard Krischke at her garden centre.
Net lending volume
ATS m, as of 31 Dec.
19 97
1998
1999
2000
In the year just ended RLB
recorded an 18.7 percent
rise in lending to corporate
customers. This was mainly
due to increased lending to
the federal and provincial
governments and associates,
and to the expansion
of syndicate business in conjunction
with RZB.
The restructuring of services for corporate customers,
initiated in 1999, brought a noticeable improvement in customer
satisfaction in 2000. A survey carried out by opinion
research company Fessel-GfK found that 88 percent
of key accounts were satisfied with our performance, and
50 percent were very satis-
Borrowers
fied. Half of all our corporate
ATS m,
as of 31 Dec. 2000
39,766.6
Corporate customers
customers said that they
spoke to their relationship
managers several times a
week. Among the main features
of the Bank’s service
quality respondents cited were
4,848.6
Banks
5,422.8
Central & local
goverment
5,792.7
Retail
customers
2,458.5
Self-employed
1,309.2
Agriculture
& forestry
friendly, competent staff, a
flexible approach to meeting
customer requirements, errorfree
transaction processing
Total: 59,598.4
and good availability of relationship
managers.
In order to open the way for further expansion of syndicated
lending business, RLB and the Lower Austrian Raiffeisen
banks introduced a new cooperation system aimed at
quicker, simpler and smoother decision-making on syndicated
loans. In the year under review RLB handled 179 corporate
accounts and a total lending volume of ATS 4.5 bn
in conjunction with the Lower Austrian Raiffeisen banks.
Corporate Banking
48,361.3
48,491.7
50,209.8
59,598.4
Increased lending
volume
Delivering
superior
customer service
Streamlining
Lower Austrian
syndicate
business
23

24
KREBEG established
to manage
problem loans
Local authorities
Foreign business
growing fast
A new subsidiary, KREBEG, was established to assist the
Lower Austrian Raiffeisen banks with the management
of problem loans. KREBEG cooperates with the affected
banks whilst also looking after coordination with specialist
departments at RLB and with external experts. In 2000
KREBEG assumed responsibility for the collection of nonperforming
loans for 40 clients.
A new expert consultancy product, the “Raiffeisen local
government report”, was added to our range of services for
provincial governments and local authorities. These reports
put local government budgets under the microscope. By
calculating and analysing indicators, and benchmarking
them against average levels, conclusions can be drawn
about authorities’ financial situation. The staff at the new
Municipal Services & Infrastructure Department also assess
the potential for outsourcing, privatization, project finance
and new approaches to running public services (PPP,
contracting, etc.) and make recommendations to councils.
RLB plans to point the way forward towards innovative local
government finance by offering new products in the field of
operating models and energy contracting.
With the Austrian economy
fast becoming internationalized
and europeanized, RLB’s
foreign business recorded
robust growth. In 2000 the
number of foreign transfers
rose by 16 percent, passing
the 300,000 mark. The Bank’s
foreign lending also grew
strongly. In 2000 the volume
of RLB’s syndicated foreign
lending was ATS 1.2 bn.
Growth of
foreign payments
Number, as of 31 Dec.
1996
19 97
1998
1999
2000
182,000
202,000
240,000
264,000
304,881
Corporate Banking
Project finance operations, which have expanded in re-
cent years, registered further growth in 2000. RLB financed
154 projects worth a total of ATS 6.4 bn, and financing
volume was up by 16 percent.
RLB has long traditions as an important partner for the
agricultural purchasing and selling, and processing cooperatives
in the Raiffeisen sector. Our profound understanding
of these businesses and their markets enables us
to provide highly specialized services to the cooperative
societies for which we are the principal bank. In the past
financial year RLB had 250 agricultural customers and provided
a total of ATS 4.5 bn in credit.
Corporate Banking
Project finance
powering ahead
Assisting
agriculture
25

Retail banking in Vienna
From transaction to service driven banking: RLB is introducing
“assisted self-service” at remodelled branches like
this one in Vienna’s Heiligenstadt district. Pictured here,
Martin Dirnberger, teamleader at the branch.
RLB has more retail customers than ever before. In the year
just ended the Bank had 120,000 personal account holders
in Vienna – 12,000 more than in 1999. In order to provide a
rapidly growing number of customers with still better and
more efficient services, we continued our branch modernization
programme. Another 15 outlets were converted into
modern, advice centred facilities with large self-service foyers.
By March 2002 all RLB’s high-street branches in Vienna will
have been given a completely new look.
Since 2000 all the Vienna branches have had opening hours
from 8 am to 5.30 pm, and customer relationship managers
have been available to give advice throughout the working
day. Twelve outlets normally stay open at lunchtime.
In order to strengthen the profitability of our retail banking
business we have significantly expanded our range of services.
By 2000 the Bank was already generating a third of its earnings
from services. For instance, investment fund sales rose by
17 percent, outperforming the market as a whole.
Money under management:
personal and small business
customers
ATS m, as of 31 Dec.
1996
19 97
1998
1999
2000
Money under management,
i.e. funds invested by personal
and small business customers
in Vienna, increased
by 13.6 percent or ATS 5 bn
in financial 2000, to stand at
some ATS 42 bn.
“Property instead of renting” was the theme of the “Home
Ownership Saturdays” held in March. In response to the
wish of 85 percent of all Viennese to own their homes, the
Bank invited customers to find out about a variety of
financing models. The Raiffeisen advisers stressed that
home ownership increases residents’ creditworthiness,
Retail banking in Vienna
31,218
32,691
34,467
37,026
42,068
New services
bringing increased
earnings
Money under
management
Retirement and
home loan saving
27

28
Self-service
winning favour
Banking
on the Web
Credit and cash
cards growing in
popularity
and is no dearer than renting at current interest rates.
Ten Vienna branches opened on the four “Home Ownership
Saturdays” to provide customer advice.
Meanwhile, demand for retirement saving products is growing
rapidly. In November our personal banking staff and 40 Vienna
tax advisers staged an information drive on tax-efficient investments,
held on four “Pension Saving Saturdays”. This focused
on mixed funds and unit-linked life assurance policies.
In July 2000 a Raiffeisen account holder made the 100,000th
electronic transfer at an RLB terminal. Self-service is increasingly
winning favour with customers. The number of transfers
made via account maintenance terminals rose from 4,989 in
January 2000 to 20,732 in December. By the end of 2000 all our
Vienna branches will have these money transfer terminals,
which can also provide information on account balances and
movements, as well as standing orders.
RLB customers are increasingly making use of the opportunities
for electronic access to their accounts. The number
of e-banking accounts registered a year-on-year increase of
67.6 percent. By year end almost 33,000 of the 97,000 current
accounts were already equipped with e-banking functions.
In March 2000 Raiffeisen.direkt account holders became the
first bank customers in Austria to be able to carry out their
banking transactions by mobile phone, using WAP technology.
The EC and the Maestro cards, which can be used in Austria
and abroad for both cashless payments and cash withdrawals,
are enjoying ever-increasing popularity. During the year under
review the number of cards issued by RLB rose by 11.3 percent
to 43,836.
Credit card sales were also up in 2000; there was a 10 percent
year-on-year increase in the number of card holders to 24,000.
These customers use their Visa and Master cards both as a
means of payment and as a way of obtaining attractive additional
benefits such as travel insurance.
Retail banking in Vienna
In cooperation with the Vienna Chamber of Lawyers the Vienna
banks have created an electronic register of trusts. RLB is sup-
porting the new system, thereby enabling lawyers to administer
trusts under the new provisions of Section 9 of the regulations
for the professional training of lawyers.
In line with the Bank’s efforts to offer customers timely safeguards
against potential financial difficulties, RLB introduced
new “Money & More” loans which come with unemployment
and invalidity insurance. In the event that the borrower
loses his/her job, after three months of unemployment the insurance
pays the instalments on the loan and continues to do
so for up to 12 months; in case of invalidity the policy may cover
the entire remaining repayment period.
RLB reacted to the introduction of university fees in Austria by
introducing a special type of student loan, extended on extremely
attractive terms. We are also the first bank to offer to
reimburse all graduates’ university fees for the entire duration
of their studies when they get a job. The offer applies to all fields
of study, and is open to students after six months of banking
with RLB. It covers the fees for the average length of study in a
given discipline.
In financial 2000 RLB’s advertising on billboards and lamp
posts, and at underground stations, tram and bus stops was a
prominent part of the Vienna cityscape. In the 1999 –2000
period, increased exposure, promotion of advice days and
customer events, and a significantly expanded press relations
effort increased awareness of RLB among the local population
by one-third, to about 50 percent .
Retail banking in Vienna
Electronic register
of trusts administered
by lawyers
Money&More – the
first personal loans
with unemployment
insurance
Student loans
Catching up fast
in terms of
awareness and
approval
29

30
High media profile
Highlighting our
service role through
the Golden Partner
programme
Students and
schoolchildren
During the year under review RLB and its high-profile activities
received increasingly frequent coverage in the Austrian media.
The daily papers reported extensively on our Pension Saving
Saturdays, Home Ownership Weeks, Money & More loans, and
free Internet service offer. The Bank also attracted attention
with its PR campaigns on investment topics, such as detailed
press kits on tax-efficient investments after the abolition of
anonymous savings books. The number of press reports rose
by about one-third from 1999 levels, playing a major part in
increasing awareness of RLB and enhancing its image.
The Vienna Raiffeisen network is pushing ahead along the road
from transaction to service driven banking. In line with this
approach RLB launched the “Golden Partner Programme”,
aimed at achieving a sustained improvement in customer
loyalty. Using a large customer database, RLB identified its key
regular customers. Centrally planned activities carried out on
the ground by individual relationship managers were targeted
at these customers, as were gifts and special promotions
designed to strengthen Golden Partners’ ties with the Bank.
In 2000, the “Yellow Café”, set up during the enrolment period,
the sponsorship and co-organization of numerous university
events such as the DocLX-Uni-Fest and Tuesday4Club, and
special offers aimed at students (e.g. a securities based fund
with an opportunity to win a ATS 300,000 prize), met with a
strong response and brought us new customers.
During the year RLB worked closely with 18 Vienna schools.
RLB sponsored school sports days, matriculation parties
and a basketball trophy, and frequently set up information
stands at the schools. A mail shot with tips on life after
leaving school, sent out to sixth formers, was particularly
well received.
Retail banking in Vienna
Since 2000 all RLB account holders have been entitled to a
free Netway Internet connection. This campaign has been
promoted by distributing 10,000 CD-ROMs in Vienna. Young
people are not the only target group; the special “Netway
Aktiv” offer is tailored to Raiffeisen customers aged between
55 and 65. Parallel to the introduction of free Internet
access, RLB also promoted “Raiffeisen.direkt loans” and
“free Internet and phoning” offers.
RLB has a long record of cooperation with 13 Vienna guilds.
The Bank assists Vienna businesses by offering subsidized
loans and balance sheet check-ups, and by sponsoring
events. Cooperation with the guilds includes organizing guild
masters’ round tables, lectures and trade group meetings.
Another example was financial support for an advertising
campaign run by the Vienna bakers’ guild.
RLB lent a total of ATS 661.4 m to Viennese retailers and
small businesses in 2000.
RLB won the cooperative bank category of the Award for
Premium Banking Quality, held for the second time in 2000.
The awards, run by the Vienna University of Economics
and Business Administration Institute for Banking Studies
in conjunction with the Die Presse daily paper, is aimed
at promoting quality consciousness in the Austrian banking
industry.
RLB won top marks for customer and employee satisfaction,
and quality conscious management in the cooperative
bank, savings bank and banker’s banker class.
Retail banking in Vienna
Free Internet
access
Working with
Vienna’s retailers
and small
businesses
Banking quality
“Oscar”
31

Treasury & Investment Products
Tailor-made pension plans: customer
relationship manager Monika Mahr-Reck
helping a customer to look at the
financial future at the Looshaus branch.
During the year under review RLB took an innovative
approach to its securities business. At the start of the year
we issued a “Millennium Bond” with certificates designed
and hand signed by the well-known painter Karl Korab. We
structured three other own issues as index-linked guaranteed
certificates.
Own issues by RLB
True to our pioneering role
with regard to the issuance
ATS m, as of 31. Dec.
of so-called “cash-or-share”
bonds with redemption
1996
2,540
modalities tied to the per-
19 97
3,260
formance of given shares,
we issued 18 high-yield equity
1998
3,316
bonds.
1999
6,232
The total volume of our
2000
6,500
42 offerings during the year
under review was ATS 6.5 bn
– 4.3 percent or ATS 268 m
more than in 1999. The total nominal value of outstanding
own issues as at 31 December 2000 was ATS 21.9 bn.
In 2000 RLB’s drive to expand our investment fund business
– particularly fund-based retirement saving plans –
again brought significant growth in securities under management.
At balance sheet date the Lower Austria and
Vienna Raiffeisen Banking
Market value of securities
issued by the Group
Group had ATS 132.3 bn
in security custody accounts
ATS m, as of 31. Dec.
under management on
behalf of personal and
1996
90,171
corporate customers, and
19 97
95,689
Lower Austrian Raiffeisen
1998
100,721
banks. This represented an
increase of 18.7 percent on
1999
111,474 the ATS 111.5 bn under management
as of the end of
2000
132,265
1999.
Treasury & Investment Products
Securities
33

34
Savings market
Since April 2000 RLB has been acting as depository for
eight investment funds administered by Raiffeisen KAG,
with a total volume of ATS 5.6 bn. These form part of an
umbrella fund set up as a vehicle for own investment by the
Lower Austrian Raiffeisen banks, and are used by them for
standard active and passive risk management operations.
The main development in the savings deposit business
in 2000 was the abolition of anonymous savings books.
The relevant amendment to the law entered into force on
1 November 2000, requiring RLB to ascertain the identity of
the holders of about 1.4 million savings books. Since this
time it has not been possible to open a savings book without
presenting an official identity document.
Due to the continuing trend towards investment in securities,
savings deposits were almost unchanged at about
ATS 117 bn. The Raiffeisen Investment Card put in a good
showing, with deposits rising by 69 percent to some
ATS 2.3 bn.
Home loan savings deposits rose by 5.6 percent to
ATS 17.6 bn despite the fact that the market was heavily
saturated.
Treasury & Investment Products
Insurance business in general, and whole life assurance
sales in particular boomed. There was increased demand
for the unit-linked life assurance products, offered in cooperation
with MLP and the Raiffeisen securities based
funds. Sales leapt by over 400 percent.
Since 1996 the surrender
Surrender value of whole life value of the whole life poli-
policies sold by the Group cies – the measure of the
ATS m, as of 31Dec.
amount of capital invested in
such products – has almost
1996
5,090
doubled, from ATS 5.1 bn to
19 97
5,343
ATS 9.6 bn (as of the end of
2000).
1998
6,438
RLB assumes responsibility for
1999
7,736 the insurance products sold
2000
9,573 via its wholly owned subsidiary
Raiffeisen-Versicherungs-
Maklerdienst GesmbH (RVD).
Raiffeisen-Versicherungsagentur GesmbH (RVB) was founded
on 1 January 2000 to handle the insurance business of the
Raiffeisen banks in Lower Austria and Vienna. The agency and
broking firm together employ a total of 31 people.
In financial 2000 money under management by RLB, i.e.
total security deposit accounts, primary and home loan
saving deposits, and whole life assurance policies (surrender
value) grew by 7.5 per-
Money under management
by the Group
cent or ATS 18.9 bn to some
ATS 270 bn. This amount
excludes the deposits and
ATS m, as of 31. Dec.
security deposit account bal-
1996
219,583 ances of the Lower Austrian
Raiffeisen banks and other
19 97
233,450
customers of RLB formally
1998
237,436 ascribable to its interbank
business.
1999
250,952
2000
Treasury & Investment Products
269,830
Soaring
insurance sales
35

36
Treasur y
In the year just ended Treasury was reorganized, and its
operations strategically realigned. The restructured Treasury
Department comprises the Asset /Liability Management &
Money Market, Foreign Exchange Trading & Sales, Securities
Trading & Sales, and Treasury Support sections. At the end
of 2000 the Bank established a new organizational unit
called “Asset /Liability Management for Raiffeisen Banks”.
6,5
6,0
5,5
5,0
4,5
4,0
3,5
3,0
Interest rates in 2000
Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
Euribor 3M 5Yr Swap 10Yr Swap
The reorganization is intended to strengthen the department’s
focus on trading for customers’ accounts, and on
Asset and Liability Risk Management for RLB. Centralizing
order flows will play a key role in raising the Bank’s profile in
the money, foreign exchange and capital markets. Greater
attention is accordingly being given to product development,
structured finance and investment.
Equity trading on own account was terminated in February
2000. During the year under review RLB adopted the voluntary
code of practice on “minimum requirements for the
conduct of trading operations”. Compliance necessitated
additional reporting and risk management activities.
Treasury & Investment Products
Financial 2000 was a difficult year on the capital markets.
The rise in money market interest rates in the Eurozone led
to a flattening in the yield curve. RLB’s own portfolio was
largely unaffected by the turbulence on international stock
markets. Meanwhile the weakening of the Euro against the
main currencies brought gains on our long-term foreign
exchange positions.
Despite the adverse market environment Treasury succeeded
in increasing the volume of its customer business
by developing new investment and financing products.
RLB is now one of the main issuers on the Austrian money
market.
Management of interest rate risk is playing an increasingly
important part in modern banking, and RLB and the Lower
Austrian Raiffeisen banks are no exception. During the year
under review we developed appropriate control systems
and tailor-made products.
In addition, RLB’s range of services was enhanced by
the creation of the Active and Passive Management for
Raiffeisen Banks section, which will help the Bank to continue
to upgrade its risk management systems in coming
years.
Treasury & Investment Products
Operations on
capital markets
37