Le code vestimentaire UBS (document en anglais)

CEE Banking Sector Report

October 2011

Banking Sector Convergence 2.0

Analysts

Raiffeisen Bank International AG, Vienna

Gunter Deuber

gunter.deuber@raiffeisenresearch.at

Raiffeisen Centrobank AG, Vienna

Jovan Sikimic

sikimic@rcb.at

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Contents

Table of

contents

Summary 3

Banking trends in CEE

Introduction 4

Definition of sub-regions 4

Regional economic outlook 6

Ownership structures and market concentration 7

Financial intermediation 12

Recent asset growth dynamics 13

Lending structures and lending trends 14

Recent lending dynamics 19

Deposits 22

Recent deposit dynamics 23

Long-term loan growth outlook 24

Most attractive CEE banking markets 2011-15 29

Challenges and opportunities for banking in CEE 32

Country overviews

Poland 38

Hungary 40

Czech Republic 42

Slovakia 44

Slovenia 46

Croatia 48

Romania 50

Bulgaria 52

Serbia 54

Bosnia and Herzegovina 56

Albania 58

Russia 60

Ukraine 62

Belarus 64

Market players in CEE 66

Key abbreviations 77

Acknowledgements 78

Disclaimer 79

Contacts 80

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Summary

CEE Banking Sector Report

Summary

Loan growth in CEE accelerated in 2010 and H1 2011, a development

reflected in the aggregated data for the region's banking sectors and major

banks. Raiffeisen Bank International (RBI), UniCredit, Intesa Sanpaolo,

Erste and Société Générale all posted loan growth. With lending volumes

returning to growth and the economic situation in CEE stabilising, non-performing

loans are almost at the peak or already past it at all major CEE

banks, which is also confirmed by aggregated banking sector data. However,

Hungary and some SEE markets remain challenging with regard to

loan quality. Although the trend of ever rising loan-to-deposit ratios has

now stopped, these ratios have decreased only in a limited number of

CEE economies. Consequently, no significant changes occurred within the

large banking groups in CEE in terms of their funding balances.

No major changes took place in the rankings of the region's Top-5 banks

(in terms of total assets) in 2010/H1 2011. A certain amount of consolidation

and new market entries were observable among the banks ranked

11-20, with Santander strengthening its CEE presence via its acquisition

in Poland, Volksbank International being sold to Sberbank, and Greece's

EFG and Alpha Bank set to merge. This consolidation may continue on

what is essentially a buyer's market: KBC and BCP have announced plans

to divest in CEE, Hypo Alpe Adria remains a mid-term takeover target.

Currently, CEE banking groups are focusing on Poland and Russia and to

a lesser extent, also on Romania and Serbia. The focus on these markets

makes sense from a fundamental perspective, as they all have still room

to grow their loan stock and financial intermediation. However, the macroeconomic

environment for CEE started to deteriorate in H2 2011 due

to the expected slowdown of the world economy and in the Eurozone

in particular. For this reason, one has to be cautious regarding the nearterm

banking sector outlook in CEE. Moreover, recent negative developments

with regard to the regulatory landscape in some CEE countries

(e.g. outsized bank levies or interference in private loan agreements)

must be watched carefully, as they set flawed standards and may undermine

the attractiveness of the respective banking sectors.

The expected lower availability of external financing suggests that deposits

will retain the attractiveness they gained in CEE in recent years. As a

result, sustainable loan growth in CEE will be more closely tied to deposit

growth than in the past. In addition, some CEE economies may well face

a more prolonged period of relatively low loan growth. Loan-to-GDP

...