The banking market in the twenty countries of Central and Eastern Europe* continues to grow rapidly, according to a study released by Raiffeisen Zentralbank Osterreich AG and Raiffeisen Centrobank AG. Following an increase of 3.5% in 2002, the balance sheet total expanded by 10.1% in 2003, to 572bn Euro. The spectacular 2003 growth was driven mainly by Russia (a rise of 15.6%), Hungary (growth of almost 20%) and the second wave accession countries (banking balance sheets in Bulgaria, Romania, Croatia showed a rise in excess of 13%). The banking balance sheet growth was more subdued in the countries which recently joined the European Union, amounting to 0.8%, which, according to Raiffeisen, was the result of exchange rate losses, mainly with regard to the Polish zloty, and a continuing diminution of the balance sheet total of the Polish and Czech banks. However, the report concluded that the international banks in CEE are growing significantly faster than the market as a whole.
The average interest rate spread - the difference between interest rates for deposits and loans - declined noticeably in the region in the past year, and this is evidence of lessening country-specific risks on the one hand and increased competition on the other.
Central Eastern Europe continues to have strong growth potential. In 2003, the balance sheet total amounted to only 59% of the CEE countries' GDP, whereas a similar indicator in the eurozone stood at 201% of GDP. Household credit corresponded to 49% of GDP in the eurozone, while, in the CEE, it amounted to a mere 7% in 2003. Growth in the banking industry in these countries will be boosted further by the accelerated economic growth in the CEE, which will considerably outpace the growth forecast for the eurozone (5.9% in 2004 compared with 1.8%).
Although the entire CEE market is expected to have considerable growth potential, the levels of development of specific markets differ and they are categorised in the report in groups indicating similar levels of development. These are: new EU member countries, second wave accession countries, South Eastern European Transition markets and the Ukraine, Belarus and Russia.
The report says that disinvestments, mergers and privatisations will continue in the CEE. KBC recently sold its subsidiaries in Lithuania and Ukraine. The Bayerische Landesbank has left the Czech Republic and Croatia, and Societe Generale and Rabobank have withdrawn from Hungary. As a consequence, the banks remaining on the market such as Erste Bank, Unicredito, HVB/BACA, BAWAG and Nordea are fighting for their market shares. This process, combined with the privatisation of state owned banks, is leading to a progressive consolidation and concentration process. Poland's PKO BP, the CEE's largest bank, and BCR, Romania's largest credit institution, are to be privatised.
According to the balance sheet total, KBC is the largest international bank in CEE, followed by Erste Bank, Unicredito, HVB/BACA group and Raiffeisen International.
*CEE20: Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Estonia, Latvia, Lithuania, Romania, Bulgaria, Croatia, Bosnia and Herzegovina, Serbia and Montenegro, Macedonia, Albania, Kosova, Moldavia, Belarus, Ukraine, Russia
By: N. Peter Kramer
