Erste sales in Romania increase fourfold as it cashes in on private placements

Banca Comerciala Romana (BCR), a private banking subsidiary of Erste Bank Group, recorded a large increase in structured products issuance in Romania during 2017. The bank has a positive forecast for 2018 as investors continue to invest in new structures with demand at an all-time high, according to Tomas Mlekusch (pictured), a salesman in capital markets, fixed income and certificates at Erste in Vienna.

"The best-selling products in private banking were autocallables on European and American underlyings, with the highest sales volume for a product being about €2.3m," said Mlekusch. "We had 24 products issued only for investors in Romania, of which four were public offers and the rest private placements."

The primary market products marketed by the bank to retail investors in Romania included three capital protected bonds, two of which were linked to the Solactive Market Leaders 25 AR Index, and a capital-at-risk 'worst-of' structure linked to a basket comprising the stocks of Adidas, BMW and Infineon. "The country is economically robust with a strong growth forecast and we experienced an increase in demand for our structured products," said Mlekusch. "We have introduced new product types for private banking investors, like the 'worst of' reverse convertibles and autocallables, which are the main products apart from some capital protected structures."

Erste has quadrupled its sales volume in Romansia over the last year, according to Mlekush. "Erste Private Banking has been active in Romania since the bank was acquired in 2006, and in the past two to three years has offered structured bonds, with the highest demand for structured products coming in 2017," said Mlekusch.

For 2018, Erste Group is looking "to continue to focus on more bespoke products for instance capital protected products, rather than the more known autocallables in private banking", according to Mlekusch. "Furthermore, we are working on increasing the sales volume sustainably," he said.

Erste's macroeconomic outlook for 2018 is 'strong', although with growth unlikely to be at the same pace as in 2017. The third quarter of 2017 GDP data for Romania showed a 8.8% annual increase and the structured products market has a positive outlook, although competition so far has been rather weak, according to the bank. "In structured products, we do not feel much pressure from competition," said Mlekusch. Other issuers active in this market include Raiffeisen and Unicredit, BRD - Groupe Societe Generale, "but the market is far from being as competitive as it is in German-speaking countries, for instance, as private banking investors in Romania are focusing on funds or on government bonds".

"From the sellside, [we] are very optimistic about the business in 2018. as we see a big potential for the Romanian market," said Mlekusch.

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