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bne September 2019 Central Europe I 45
profitability ratios – even though the SEE banking profit pool is still relatively small with some €4.5bn compared to CE (approx. €9.5bn) and EE (approx. €20bn), but there state banks have
a market share of just under 70%!
That said, the overall profit pool in
CEE banking in 2018 (at over €30bn) almost reached its historic peak seen
in 2011/2012 (which we estimate
at just over €35bn). In CE/SEE, the estimated profit pool of almost €14bn in 2018 well exceeded earlier highs from times before the global financial crisis (2008). Developments in the region are also supportive for foreign banks. In the Czech Republic (the
Russia, resulting in business opportuni- ties for the remaining dedicated and risk-disciplined players.
In SEE the consolidation has led to
a moderate increase in the market share of the five largest banks (to 63%), while the aggregated market share of domestically owned banks also grew
at the expense of foreign lenders. Currently, the market share of foreign banks in SEE stands at 78%, down from 85% some years ago. However, this development has been largely driven
by the Romania market (and to
a minor extent Bosnia & Herzegovina). In Romania a locally-owned lender
The market share of foreign lenders
in CE dropped by some 10 percentage points in recent years (from 75% to 64%; 53% when excluding OTP from the calculations) mainly based on past restructurings in Hungary and Poland.
However, in 2017 and 2018 the market share of foreign-owned banks in CE also remained stable as foreign-owned banks actively participated in the restructuring on the Polish market. Santander is now the second largest lender there, BNP
has the ambition to make it into the Top-5, Millennium took over Eurobank (SocGen) and ING continues to play
a strong role on the market. Given
the names mentioned it is also clear that there is an increasing divergence between Western banks represented in Poland and banks operating in the other CE-3 countries (the Czech Republic, Hungary, Slovakia) and SEE or EE markets (i.e. the likes of RBI, UniCredit and partially Erste). In the whole CE region the largest banks are as follows: Erste, PKO (only present in Poland), KBC, Santander, Pekao (both present only in Poland), UniCredit, SocGen
and RBI. For the CE-3 countries the list is as follows: Erste, KBC, UniCredit, SocGen, RBI, OTP, Intesa (none present in Poland). In SEE the largest players are UniCredit, Erste, RBI, OTP, Intesa. And Austrian banks seem to have more appetite and/or leeway for growth once again. Their market share among major
“Southeast Europe is currently the star in CEE when it comes to profitability ratios”
most stable but highly profitable market in CEE) as well as in the turnaround marketplaces Romania
and Russia – all core markets of major Western CEE banks – an average ROE of over 14% was recorded in 2018
(the highest level since 2007/2008). However, 2018 also brought some disappointments. The Polish market once again underperformed in terms of profitability, while the ROE in the euro area market of Slovakia also remained in single-digit territory. The Czech and Hungarian markets are currently clearly outperforming in the CE region.
Interestingly, for the first time in several years the market share of 100% foreign-owned banks in Russia increased marginally (up to 7.3% from 6.1% or 6.2% in 2016/2017). We attri- bute this development to the ongoing restructuring among (larger) domestic banks as well as an ongoing appetite of leading foreign banks (among them SocGen, UniCredit and Raiffeisen) to continue doing business on a selec- tive and opportunistic basis. In Russia local foreign-owned banks must remain in the market to serve customers and ultimately also to preserve their own company name and company value, on a recovering market. Moreover, other foreign banks are withdrawing from
(Banca Transilvania) became the largest lender in the country and the sixth largest SEE bank. In all other
SEE countries, the market share of foreign banks did not drop materially as foreign-owned banks (e.g. OTP)
are also actively taking part in the consolidation (e.g. via taking over large parts of the SocGen franchise in smaller SEE markets). In CE, a similar and possibly even somewhat stronger trend towards lower market shares of foreign banks had been visible in recent years.
Gunter Deuber of Raiffeisen Research in Vienna
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