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“Now it is reasonable and feasible to sell NPLS at acceptable prices for all parties,” says Deuber, pointing out that some buy- ers of distressed debt had been reluctant to go into CEE before.
Across the region banks have benefited from strong growth in loans, and especially deposits. Assets are now growing strongly in euro terms after two years of setbacks, with growth once again higher than in the Eurozone. Asset growth was 11% in 2016, above the post 2007-08 crisis average of 6-7% and last year’s Eurozone average of 2-3%. Overall credit growth was 8%, above the post-crisis average of 6% and the Eurozone’s 1% last year. The bank predicts 7% growth in lending in local currency terms in 2017-22, though slightly slower in the more mature Central European market.
Going forward, RBI predicts that the market should be buoyed by the promising macro-economic outlook for the region, boosting lending, particularly in the retail segment. “Strong macro momentum should support retail growth,” says Deuber. “There is still upside left on the banking side”.
FDI to Emerging Europe soars
in 2016
bne IntelliNews
Inflows of foreign direct investment (FDI) to Emerging Europe soared by 45% y/y in 2016, with the recovery driv- en by Russia and the EU member states of Central Europe.
A report from the Vienna Institute for International Economic Studies (wiiw) shows that FDI recovered by 23% in Central Europe, while it expanded at an outstanding rate of almost 150% in the Commonwealth of Independent States (CIS-4) and Ukraine, with Russia in particular seeing a sharp upturn in investment.
The stars of what wiiw terms the Central, East and Southeast Europe (CESEE) region were the Czech Republic and Hungary. In the Czech Republic real estate investments predominated. 2016 saw the largest ever real estate deal in the Czech Repub- lic, with the sale of P3 Logistic Parks to Singaporean sovereign wealth fund GIC. The €2.4bn transaction was the largest on the European real estate market last year.
Meanwhile, Hungary saw more manufacturing sector investments, especially in the automotive and auto
Unlike before the global financial crisis, this growth should be more balanced, with more local financing, and less lending
in foreign currencies and aggressive pursuit of market share. Loan/deposit ratios are already down to 86%, back to pre- boom levels.
The main problem for the banks now is what to do with all these deposits at a time when net interest margins are very narrow and are not expected to improve fast. “Banks are over liquid,” says Deuber. “They cannot accumulate deposits indefinitely.”
One way to use retail deposits, he said, was to invest in banks’ digital footprint, which can create new revenues and cut costs dramatically. “The CEE region is an ideal ‘testing field’ for cross-border digital banking solutions, as the size of some CEE banking markets is comparably small and the users
seem to be quite open to accept new products and services as well as innovative retail and communications channels,” the RBI report said.
components sectors. This increase in FDI came despite an overall decline in investment in the country reported by the local statistics office.
“Both [the Czech Republic and Hungary] received amounts that were the second largest since 2008, surpassing the 2015 slump by a wide margin,” the report noted, also pointing to higher FDI inflows in Romania, Croatia and Estonia.
Russia was another standout performer, with FDI veering sharp- ly upward during the year, albeit to a large extent influenced by the murky sale of a 19.5% stake in oil major Rosneft for €10.2bn – one third of total inflows – to oil trader Glencore and the Qatar sovereign wealth fund announced in December.
Aside from the Rosneft deal, however, the recovery in Russian FDI was also a product of more positive economic trends. “The decline of the economy levelled out and more FDI was attracted by reduced import competition into sectors affected by the sanctions (mainly food production),” the report said.
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