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Erste Bank in CEE Introduction By the end of the late 1990s, the financial service markets were characterised by a race for European cross-border mergers due to
Submitted by fulip on June 6, 2008
Category: Business
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Introduction
By the end of the late 1990s, the financial service markets were characterised by a race for European cross-border mergers due to a high consolidation pressure. The Austrian Retail Banking Sector was considered to be the “lousiest“ banking market in Europe. The only way for Erste Bank to stay independent seemed to be to embark on a growth process. Therefore, in 1997 Erste Bank launched the biggest IPO in Austrian history with a volume of 508 Mio. Euro and merged with Girocredit. Back then Erste Bank had total assets of €49 billion, a market capitalization of €2 billion, a customer base of 0.6 million and employed 9,300 people.
At that time most other European banks decided to focus on further developing the more profitable investment banking business at the expense of their retail operations.
In contrast to that, Erste Bank invested heavily in exploiting the retail banking business, thus making it its core business. Under the leadership of Andreas Treichl, the Chairman of the Managing Board since July 1997, Erste Bank launched an aggressive expansion strategy into the Central Eastern European markets. Although this strategy was often predicted to fail, Erste Bank managed to successfully enter Czech Republic, Croatia, Slovakia and Hungary. This success affected the company’s balance sheet positively; total assets of €139.7 billion, a market capitalization of €10 billion, a customer base of over 12 million and a workforce of over 35,000 employees.
Today, Erste Bank is further searching for potential growth areas to keep up with the track of success.
Problem statement
The highly successful acquisitions of several banks in CEE countries resulted in a complex organisational structure due to numerous individual markets and brands. In addition, the structure of the decision-making process could not keep pace with the bank’s expansion. First efforts of consolidation of...
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