Page 83 - bne Magazine February 2023

bne February 2023
Opinion 83
repression. But, just as Vucic’s supporters believe that if he leaves politics something bad will happen, many Serbs, Croats, Bosniaks and even Slovenians still remember Tito nostalgically and claim that the good life ended after his death.
This belief is in line with the main slogan of Tito’s communists: Tito after Tito. Yugoslavia broke up barely 10 years after Tito’s death. Many songs were written for Tito during his life but also after his death, as well as shortly before the collapse of the country he led. One of those, performed by the Sarajevo band Index even had words of this communist slogan: “and what now, southern country, if anyone asks us, we will say: Tito again, Tito after Tito!”
THE MITTELEUROPEAN VIEW
This slogan is often used to make fun of Vucic and the extent and duration of his power. However, the question of what comes after Vucic remains open, and it looks like even he doesn’t have a precise answer to it.
Ann Smith has been following and writing about transitional justice, war crimes, human rights, security (defence and terrorism), European and Euro-Atlantic aspirations and international relations in the Balkans since 2000. She holds a masters degree in humanitarian international law as well as in journalism/political sciences.
Western banks go back to square one in CEE Gunter Deuber of Raiffeisen Research
The key messages of this year's Raiffeisen Research
CEE Banking Sector Report at the industry level are as follows: Geopolitically, the leading CEE banks in Eastern Europe (Russia, Ukraine, Belarus) were not naïve; on the profitability side, things are still running smoothly in Central and Southeastern Europe for the time being, while market concentration continues to increase. However, increasing competition and repeated government interventions will limit the full earnings potential, especially in 2023.
At the individual bank level, the large Austrian CEE banks still lead the regional banking ranking, but re-emerging players such as Belgium's KBC are catching up, while OTP is now overtaking the first cross-border Western player "historically" rooted in the region (Societe Generale) and is catching up
on UniCredit. Depending on the further woes of the Russian market (especially at RBI and UniCredit), the EU bank ranking in CEE could be shaken up again in 2023 – possibly in favour of KBC and OTP. In the Western Balkans, local banks tended to benefit from the regulatory-induced Sberbank wind-down in 2022, while the long-term EU advantage in CEE banking appears to be increasing.
The dramatic events in Ukraine have clearly upset the applecart for the CEE banking sector this year. Not only Ukrainian banks had to deal with an unprecedented level of economic hardship and operational risk, but also Russian lenders faced a much stricter sanctions environment (60% of the sector “de-Swifted”, some 80% is under Western sanctions). The latter triggered unseen losses for the Russian banking sector on aggregate (RUB1.5 trillion or ~€18bn in H1 2022, driven, inter alia, by forced liquidation of derivative positions, while the loss has narrowed to RUB400bn or ~€5.6bn as of 10M2022).
On a positive note, geopolitical upheavals in the context of the Ukraine war do not pose an existential threat to the large Western-owned CEE banks, some of which are also active
in Russia. We attribute this to cautious regional market strategies that have been in place since 2014/2015. Since 2014/2015, the share of Russia and Eastern Europe in the portfolios of Western CEE banks has fallen from just over 20% to below 10%. Geopolitical naivety is not evident here. Since 2013/2014, major Western banks have adjusted their regional portfolio allocation in such a way that a significant geopolitical escalation in the Eastern European region
does not endanger the existence of regional CEE business strategies. As a result of the careful banking business strategies in Eastern Europe in recent years, the Russian banking market has been about as important for Western banks as Slovakia as of Q1 2022.
“Bonanza times” will not be easily repeated
Central banks and their monetary policies have been the
key factors for commercial banks’ profitability in 2022. This
is especially true for the largest CE/SEE markets, which
led front-loaded tightening cycles in the region and where lenders capitalised on the steep ascent in policy rates. Average monetary policy rates in CE/SEE (i.e. in countries with active and independent monetary policies) are currently at 9%+, higher than prior to the Global Financial Crisis and in the times of the CE/SEE "bonanza boom". However, “bonanza times” will not be easily repeated. Despite massive short-term support from rising rates, the mid-term outlook has to been taken with a dose of cautiousness.
Firstly, in a longer-term retrospective the transmission of the upswing in policy rates into banks’ margins is now much more limited than historically. Thus, the recent recovery
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