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6 I Companies & Markets bne March 2025
Banks in Central and Southeast Europe defied analysts expectations and put in a strong year of growth in 2024, according to Raiffeisen Bank International's annual banking report. / bne IntelliNews
Currently the banking sector profit pool in Central Europe (CE) is currently around €20bn, while in SEE it is €8bn.
The profit pool is therefore currently adequately distributed along economic weightings (approx. 70% in CE, 30%
in SEE).
The banking sectors in the booming Balkans in Southeast Europe have performed better than in CE over the last few years as the Balkans reaches a critical mass. The profit pool
in SEE in EUR terms has increased sixfold when taking profits as of 2022-2024 compared to 2014-2016, while in CE it has “only” tripled.
The sustained profitability is attributed to favourable lending margins and controlled risk costs, underpinned
by robust macroeconomic conditions and historically low unemployment rates in the region. These factors have bolstered core earnings, effectively mitigating the impact of ongoing inflationary pressures on operational expenses and the imposition of additional banking taxes.
However, the landscape is becoming increasingly complex, with new sector-specific taxes introduced in Romania, Slovenia and Slovakia during 2024. Including existing levies in Hungary, Czechia and Poland, approximately 85% of the CEE/SEE banking market, by total assets, is now subject to special taxation. These levies vary in structure – encompassing different tax rates, bases and durations – but collectively pose a risk of becoming prolonged fiscal burdens amid ongoing consolidation efforts.
In terms of regional focus, major cross-border lenders are currently prioritising European Union markets within
the CEE/SEE region, while adopting a more cautious approach in the Western Balkans. Following significant reductions, exposures in Russia have stabilised at minimal, non-systemic levels. Conversely, dedicated CEE lenders remain committed to operations in Ukraine, despite the challenging environment, due to the war with Russia.
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Austria leads in the new markets
Austrian banks continue to lead in terms of local market share and cross-border business within the CEE/SEE region, maintaining their position as key players in this dynamic banking landscape. Large Austrian CEE banks and their regional subsidiaries account for around 20-30% of regional banking business in CE/SEE.
Two decades ago, Austrian banks led the charge into the newly opened Central European markets, buying up banks or opening affiliates, fuelling the growth of those markets.
Today the same story is repeating itself as Austrian banks move into the booming Balkans, which have now reached a critical mass in their development as the productivity/labour cost balance shifts to allow these countries to compete with their Central European peers.
The market share of foreign banks in the Western Balkans rose from just under 35% in 2000 to almost 94% in certain countries of the Western Balkans in 2008; in the entire region of Southeastern Europe, the corresponding increase in market share over the same period was from 67% to 89%, according to RBI. However, more recently the share has declined somewhat to around 78% in both regions at present.
“In our view, the outlined development shows the “financial” value of EU membership. This trend can also be seen indirectly in the exposures of Western banks in the Western Balkan countries. These have remained more or less constant in recent years in both absolute and relative terms, despite the very positive economic development in the region, which is more favourable than in some EU countries in CE/SEE,” RBI said in the report.
However, slow progress in the accession process of many candidate countries in the region is limiting the growth in exposure to the Balkans, which will accelerate when these countries are finally admitted to the EU. Since 2013/2014, the