Press detail

Münster/Paris, January 23, 2012 – The banking markets in Central and Eastern Europe (CEE) were hit hard by the crisis and, in part, lost their high growth momentum. Nevertheless, the region still offers an interesting opportunity for banks and financial service providers because the individual national markets have developed quite differently in the past few years.

While countries such as Poland, Russia and Turkey proved to be relatively stable in the crisis, other national banking markets are clearly under pressure. Here, the most pressing problems are high loan defaults, the approach taken to considerable outstanding foreign currency loans and a very poor macroeconomic development. As a result, the prospects for success markedly deteriorated for local financial institutions and international bank groups in some countries. In contrast, the national market leaders, i.e. large universal banks with high, stable customer deposits and a sound capital base, are in a relatively good position. Against this backdrop, success is, as a rule, determined by three key factors in the CEE region: profitability, market position and increasingly, in particular since the onset of the crisis, the risk and capital position. A consistent orientation to those factors becomes more and more an essential requirement for sustainable value generation by banks – in many cases, however, the management does not yet stringently focus on optimising these central factors.

These are the key findings of the Central and Eastern European Banking Study (CEEBS) 2011 by zeb/rolfes.schierenbeck.associates and Efma. This study has been prepared at regular intervals since 2006 and is now published for the sixth time. It analyses data of the 50 largest listed banks as well as approximately 2,000 non-listed credit institutions from 25 CEE countries. Additionally, numerous top managers of local banks and international bank groups were asked for their assessment of the CEE banking markets in detailed expert interviews.

The financial crisis resulted in a reshuffle of growth regions worldwide: While the CEE banking markets achieved the highest gains for banks and investors worldwide before the crisis, other growth regions, such as South America and the emerging economies of Asia, offer better opportunities today. Banks in CEE achieve a growth of shareholder value of 56% per annum from 2003 to 2007, but since the beginning of the crisis these institutions lost 8% per annum of value (2008-2010). In contrast, banks from Latin America also achieved similar high shareholder growth rates of 52% from 2003-2007, but their creation of shareholder value is still positive at 13% per annum (2008-2010), despite the crisis.

The findings indicate that some parts of Central and Eastern Europe have clearly lost some attraction and has become a region of different speeds. While the banking markets of Poland, Russia and Turkey were relatively unaffected by the crisis, other countries, e.g. the Baltic states, Kazakhstan and Belarus, lost a large part of their previous growth dynamism. In many markets, problems also arise from the high share of defaulted, non-performing loans, the frequently low capitalisation of many banks as well as, in many cases, the sharp increase of refinancing costs. To identify such national differences and problems and appropriately consider them in strategies and management is important especially for international bank groups if they wish to be present and achieve sustained success through associated companies and subsidiaries in the region.

“In Central and Eastern Europe, the crisis substantially dampened the dynamism of banking. As a result, some markets clearly lost some of their attractiveness. For international bank groups, this means that the selection of markets and the consistent management of activities in CEE become more and more important,” comments Patrick Desmarès, Secretary General of Efma.

Dr. Andreas Rinker, Managing Partner of zeb/, states: “Even after the end of the boom phase, CEE still is an interesting market. Sustained value gains require high profitability and good market positioning along with above-average growth. Moreover, we can see that banks with low risks and a good capital base fared substantially better in the stock markets. A good balance between stable customer deposits and loans as well as a strong equity situation are the key factors in this context.”

The study shows that bigger universal banks are in a very good position in the current market environment in CEE. They benefit from favourable refinancing opportunities on account of solid customer deposits and from the related stability based on their size in the market. In contrast, institutions specialising in a specific segment are particularly affected by the current risks due to their business focus. These specialists can only be successful at present if they continuously optimise their business model and thereby achieve a competitive edge.

These developments will also continue in the future. “Especially refinancing and the capital base will be the determining issues in the CEE market in the coming years. Apart from capitalisation itself, focussing on core business and reducing activities in non-core segments will be decisive for further development. Other issues for banks include continuous efficiency improvements and the operative handling of credits in default,” explains Helge Böschenbröker, Senior Manager at zeb/.

The results of the study have special consequences for banks. Only those institutions which succeed in appropriately aligning their strategy and operative processes and implement them in their management within the framework of a consistent focus on value creation will be successful in CEE in the long term. Upon closer examination of the market, it is obvious that there is potential for improvement in many credit institutions. “In Central and Eastern Europe, many banks have not yet sufficiently implemented the approach of value-based management. Local credit institutions as well as international bank groups having associated banks and subsidiaries in the region still face major challenges particularly in this field,” summarises Helge Böschenbröker.

About zeb/
zeb/rolfes.schierenbeck.associates is a management consultancy specialising in the financial services sector with thirteen offices in Germany (Berlin, Frankfurt, Hamburg, Munich, Münster, Ulm), Austria (Vienna), Luxembourg, Switzerland (Zurich), Poland (Warsaw), the Czech Republic (Prague), the Ukraine (Kiev) and Hungary (Budapest). With more than 750 employees and its several subsidiaries, zeb/ is among the leading consulting firms for financial service providers in the German-speaking region. Clients are banks, savings banks, insurance companies and other financial institutes.

About Efma
Efma, a not-for-profit association formed in 1971 by bankers and insurers, specialises in retail financial marketing and distribution. Today, more than 3,000 brands in 130 countries are Efma members including over 80% of Europe’s largest retail financial institutions. Efma offers the retail financial service community exclusive access to a multitude of resources, databases, studies, articles, news feeds and publications. It also provides numerous networking opportunities through work groups, online communities and international meetings.

Contact:
Dr. Anne Täubert
Head of Corporate Communications
Tel.: +49.251.97128.220
Fax: +49.251.97128.110
E-mail: ataeubert@zeb.de