Page 46 - BNE_magazine_bne_September 2019

46 I Central Europe bne September 2019
Western banks operating in CEE rose again in 2018 to previous record levels of just over 40% (with Erste and RBI among the three largest Western
CEE banks).
In the short term, the outlook for banking in CEE remains positive. Most economies in CE/SEE had a good start to the year, credit growth is solid, but not exuberant. Risk taking is modest, while local currency loans dominate
in new retail business. Currently, we
do not see massive downside risks in view of solid and tightening lending standards. As some markets are showing significant growth in retail, certain regulatory brakes have been lifted in almost all “hot markets”. These should take effect in the coming 12-24 months. We currently see a clear trend towards micro- and/or macro-prudential vigilance or measures in at least ten of the CEE markets (among them Belarus, Bulgaria, Croatia, the Czech Republic, Romania, Russia and Slovakia). Those measures make sense in view of the sectoral credit growth trends outlined above, even if the overall credit and retail loan expansion is not yet in the range of overheated growth rates a decade ago (at 15-30% y/y). That said,
we can clearly see late cycle phenomena in some CE/SEE economies and banking sectors. In this respect, it will not be easy to outperform growth and earnings developments of 2018 again in 2019. Nevertheless, we are confident that
the CEE banking assets will surpass the €3,000bn mark in the next one to two years (currently ~€2,500bn).
We expect large parts of the loan volume growth to take place in the dominant markets of Poland and Russia in the next three years. In other words: more than 60% of the overall loan stock growth
in the CEE region should take place in these two markets (approx. €180bn). However, both markets are unlikely to be among the fastest growing regional banking markets over the next two to three years, i.e. Raiffeisen Research analysts do not expect sustained double- digit loan growth in the two countries. There is more potential for such growth rates in Romania, Hungary, Ukraine and, to some extent, Belarus. Overall, Raiffeisen expects the highest loan growth rates in the SEE region going forward, reflecting the solid growth prospects in Romania and Serbia as well as the overall debt and NPL relief in the region (coupled with decent earnings
prospects). Except for Hungary, credit growth rates in CE are expected to be more subdued than in previous years. Here a moderation of loan growth
shall largely reflect tighter regulation, cyclical developments as well as fierce margin pressure. Nevertheless, the
mix of market size, market maturity
and growth prospects will mean that nearly two-thirds of the regional credit volume growth in CEE (excluding Russia and Poland) should take place in the Czech Republic, Hungary, Romania
and Ukraine, followed by Slovakia and Serbia in terms of growth prospects. Overall, the loan stock is projected to grow by some €95bn-100bn in the CE-3 countries, the SEE region and the EE countries (excluding Russia) in 2019-2021.
So far so good, but it's also worth considering that CE/SEE bank assets are still just under 5% of euro area bank assets! Therefore, pressure remains to achieve the necessary economies of scale, at a country level and across borders, in conventional banking and digitisation. However, the earnings situation should create the necessary scope for organic growth, M&A and/or investments in digitisation.
Central, Eastern and Southeast European sovereigns to return to debt markets on large scale in 2020, Raiffeisen says
Clare Nuttall in Glasgow
After a series of successful Euro- bonds and other debt issuances, the governments of Central
and Southeast Europe have already secured most of the funding they need for this year, but with more obligations maturing in 2020 they are expected to
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return to the markets on a large scale next year, Raiffeisen Research said in a report.
Looking at the amounts raised so far, the CE-4 countries (Czechia, Hungary, Poland and Slovakia) have issued a combined
€3.4bn, which is close to the €3.5bn debt maturing this year, says the report.
The figures are even more impressive
in other parts of the region: the SEE-4 countries (Bulgaria, Croatia, Romania and Serbia) managed €5.6bn, compared