CEE Banking Sector Report - October 2011
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11 Noiembrie 2011 |
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RAIFFEISEN BANK S.A. |
Adresa
Piaţa Charles de Gaulle, Nr. 15
011857 Bucureşti, Sector 1
Telefon
+40-21-306.10.00
+40-21-306.15.54
Fax
+40-21-230.07.00
Website
www.raiffeisen.ro
Summary
Loan growth returns, NPLs close to peaks
Loan growth in CEE accelerated in 2010 and H1 2011, a development reflected in the aggregated data for the region's banking sectors and major banks. Raiffeisen Bank International (RBI), UniCredit, Intesa Sanpaolo, Erste and Société Générale all posted loan growth. With lending volumes returning to growth and the economic situation in CEE stabilising, non-performing loans are almost at the peak or already past it at all major CEE banks, which is also confirmed by aggregated banking sector data. However, Hungary and some SEE markets remain challenging with regard toloan quality. Although the trend of ever rising loan-to-deposit ratios has now stopped, these ratios have decreased only in a limited number of CEE economies. Consequently, no significant changes occurred within the large banking groups in CEE in terms of their funding balances.
Up to now no major changes in loan-to-deposit ratios
No major changes among Top-5 banks
No major changes took place in the rankings of the region's Top-5 banks (in terms of total assets) in 2010/H1 2011. A certain amount of consolidation and new market entries were observable among the banks ranked 11-20, with Santander strengthening its CEE presence via its acquisition in Poland, Volksbank International being sold to Sberbank, and Greece's EFG and Alpha Bank set to merge. This consolidation may continue on what is essentially a buyer's market: KBC and BCP have announced plans to divest in CEE, Hypo Alpe Adria remains a mid-term takeover target.
New market entries - some takeover targets remain
Poland and Russia as growth markets
Currently, CEE banking groups are focusing on Poland and Russia and to a lesser extent, also on Romania and Serbia. The focus on these markets makes sense from a fundamental perspective, as they all have still room to grow their loan stock and financial intermediation. However, the macroeconomic environment for CEE started to deteriorate in H2 2011 due to the expected slowdown of the world economy and in the Eurozone in particular. For this reason, one has to be cautious regarding the nearterm banking sector outlook in CEE. Moreover, recent negative developmentswith regard to the regulatory landscape in some CEE countries (e.g. outsized bank levies or interference in private loan agreements) must be watched carefully, as they set flawed standards and may undermine the attractiveness of the respective banking sectors.
80% of CEE banking assets in high growth markets
The expected lower availability of external financing suggests that deposits will retain the attractiveness they gained in CEE in recent years. As a result, sustainable loan growth in CEE will be more closely tied to deposit growth than in the past. In addition, some CEE economies may well face a more prolonged period of relatively low loan growth. Loan-to-GDP ratios are at a relatively high level in some CEE economies with lower income levels. Moreover, some market segments such as household lending do not appear to be underpenetrated in any CEE economy anymore. Consequently, loan growth in CEE will not occur in the same manner witnessed during the past decade. It is for this reason that we've chosen the title “Banking Sector Convergence 2.0” for our 2011 CEE Banking Sector Report. However, the medium- to longer-term outlook for banking sector growth remains very favourable in at least six CEE markets, a group that includes some of the region's largest economies: Russia, Poland, the Czech Republic, Romania, Slovakia and Albania are likely to remain high growth markets in which nominal loan and asset growth is likely to clearly outpace nominal GDP growth going forward. It is worth noting that these six markets represent 80% of total banking sector assetsin CEE.
Country overview - Romania
SEE's growth market - Still low level of financial intermediation
After two years of negative growth and an adjustment of the external position to more sustainable levels, the Romanian economy experienced a decent recovery in H1 2011. However, the recovery was already losing some of its momentum in Q2 2011,reflecting the fact that Western European economies were cooling down and that domestic demand remained subdued.
In 2010, loan growth was driven mainly by exportoriented companies (corporate loan growth was up 7% in EUR-terms). Moreover, a government support scheme for mortgage loans (which accounted for most of the increase in households loans in 2010) added to the loan growth (overall loan growth up 3.4% in 2010, mortgage lending up 17.8% ). As a result, new loans have been originated predominantlyin FCY, causing the ratio of FCY-denominated loans (mostly in EUR) of total loans to remain above 60%. Weak domestic demand continued to weigh on LCY lending, especially for consumer loans, which remained on a downtrend. On the back ofsluggish loan growth, NPLs continued to rise (currently 13.4%), but at a slower pace than in 2010.
The loan-to-deposit ratio remains over the 100% level and even increased slightly in H1 2011 due to the very sluggish growth in deposits. In H1 2011, overall loan growth remained subdued, especially in retail lending. We expect this trend to continuewell into 2012. The effects of the support scheme for mortgages are gradually fading away, while the financial position of most households remains fragile.
