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bne March 2025 Companies & Markets I 7
exposure of Western banks to Western Balkan countries have increased by only around 5% (vs. 40% in EU countries in CE/ SEE), RBI reports.
Many of the banks from Central Europe have targeted the growing markets to the east as potential new markets and have actively expanded in the region.
Hungary’s OTP Bank has been particularly active and Hungary saw its share of CEE business grow to around 16% in the noughties, before falling to a low of 6% in 2018, as a result of the geopolitical tensions.
Poland has also been an extremely attractive regional market, on a par with pre-war Russia. But it was briefly overtaken by the Czech banking sector’s potential in the 2010s, although more recently Poland has returned to the top slot in terms
of growth and potential, says RBI.
Still, Poland’s banking sector is expected see net profits
of PLN36.3bn (€8.5bn) in 2025 fall by 7.6% year on year, a report commissioned by the sector lobby groups the Warsaw Institute of Banking and the Polish Banks’ Association said on January 15, the state-run newswire PAP reported.
Slovakia has developed into a key regional banking market for Western CEE banks in recent years compared to its initial starting point in the early days of the eastward expansion of Western banks into CE/SEE. Back in 1999 Slovakia accounted for 4.5% of CEE exposures at Western banks; as of 2024 this ratio stands at 10.4%, says RBI.
Shares CEE exposures Western banks (% of total)*
Source: company data, BIS, RBI/Raiffeisen Research; * local and cross- border exposures; Other: all other SEE markets plus RU, UA, BY
Russian banks in retreat
The extreme sanctions imposed on Russia has led to Russian banks withdrawing from the European market. Big banks like the Prague-based Sberbank Europe, that was a systematically significant bank in Czechia, have closed their doors and business with Russian banks has been de facto banned by financial sanctions imposed on Russia.
The Russian share of total Western banks' CEE exposures has fallen further from 10% in 2021 – an already cautious positioning – to around 4% as of 2024.
Exposures will remain at this level for the time being, says RBI. This is because Western banks' exposures to Russia have remained relatively constant over the last 12 months or since the third quarter or the fourth quarter 2023.
Apart from French Societe Generale, no Western bank with
a significant market share on the local market in pre-war times, has managed a comprehensive market exit and most remain unwilling to leave what has been a large and lucrative market – RBI itself being a prime example of this trend.
At the same time, Western banks have prioritised a rapid and drastic reduction of their international and cross-border business with Russia. In the categories relevant here, Russia exposures have fallen by 70-90% since the fourth quarter 2021, RBI reports.
However, despite sanctions regime, Europe remains dependent on many Russian imports, with continued, albeit reduced, imports of oil and gas being the most obvious, necessitating the continued contact between Russian and European banks.
Currently, the EU continues to export goods worth just over €2bn per month to Russia. In 2021, monthly export volumes amounted to approximately €7bn and the import of Russian LNG alone in 2024 was up 20% and worth an estimated €11.3bn for this product alone.
Banking services are also needed for the remaining – albeit small – Russian business of Western companies. Of the Western firms operating in Russia pre-war, only 9% have left the market, and of the franchises that did leave, many of them continue to export to Russia via third countries such as Turkey and Kyrgyzstan making banking relations more complicated.
Shares CEE exposures Western banks (% of total)*
Source: BIS, RBI Raiffeisen Research
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