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IntelliNews - CEE Banking Sector Report

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The IntelliNews CEE Banking Sector Report offers an extensive summary of the most recent topics related to the CEE retail bank market. It includes a complete coverage of the latest developments as well as the latest corporate news. This sector report is ideal to keep you abreast on recent company and industry news. Written by local professionals, it is a unique market and business intelligence analysis, tailored to save time by providing in-depth information, while helping you to make confident and informed business decisions.


The current report reviews the developments in the banking sector in the region of Central and Eastern Europe (CEE) and in the following countries in particular (in alphabetical order): Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, and Ukraine.

The CEE banking sector is still suffering from the effects of the global economic crisis in 2008/09 and from the consequent sovereign debt crisis in the eurozone, which has not faded out. The adverse external developments resulted in a tough operating environment in the region, characterised by sluggish economic growth, reduced credit appetite and withdrawal of foreign funding.

The CEE banking sector is dominated by Western European banks, which hold more than two thirds of the total assets (with the exception of Russia, where the banking sector is dominated by the government). After the onset of the eurozone debt crisis and the multibillion euro bank bailouts in some countries, western European regulators exerted pressure on banks to reduce foreign investments in order to reduce their debts and improve capital buffers. This led to a significant bank deleveraging in CEE, putting an end to an era of booming lending activity, supported by cheap parent funding. The weakened lending capacity of banks in the region coincided with a softening in credit demand, as the sluggish economy hurt investments and household spending. The cumulative bank funding withdrawal from emerging Europe (excluding Russia and Turkey) since mid-2011 has been 4% of regional GDP, with some countries experiencing much greater outflows than others. A potential disorderly withdrawal of foreign funding, although not very likely, represents one of the major risks for the CEE banking sector.

As a whole, the banking sector across the CEE region remains profitable with a few exceptions, interest margins have tightened, but are still much higher than in Western Europe, lending growth has softened and banks have increasingly focused on attracting funding from domestic sources – mainly through deposits but also via local debt markets. Western banks are believed to remain committed to the region, which has a strong growth potential. The key weakness of the sector is the high level of non-performing loans (NPLs), both in volume and as a share of total loans. The weakened economic environment poses risks for further deterioration of the quality of banks’ lending portfolio, which may lead to a need for additional provisioning. Cleaning of balance sheets from NPLs is considered vital for a future credit expansion, as high NPLs can act as a drag on new credit provision.

The expected increase in provisioning, coupled with tightening interest margins, will affect the banking sector’s profitability this year. Having in mind also the subdued credit demand, cost efficiency and risk management will remain the determining factors for CEE banks' earnings performance. On the part of deposits, further growth will be restricted by the sluggish economy, which dents disposable income, which may be partly offset by higher propensity for savings in view of the economic uncertainty.

Table of  Contents

Executive summary
Macroeconomic developments
Bank deleveraging from CEE slows
Lending conditions in CEE show signs of improvement
Banking sector outlook
Baltic States
Czech Republic

For more information kindly visit :
IntelliNews - CEE Banking Sector Report


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