Focus: The big banking exclusives in Euromoney
Online extra - at end of Q&A:
What do you think the GDP will be in your country at the end of 2008 and what will be the key drivers for that?
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Participants in this discussion
Andreas Treichl, Erste Group
Rushan Khvesyuk, Alfa Bank
Roman Solodchenko, Bank TurenAlem
Seyhan Pencapligil, Banka Kombetare Tregtare
Johann Jonach, ZAO Raiffeisenbank, Russia
Zafer Kurtul, Akbank
Tayfun Bayazit, Yapi Kredi
Erik Sultankulov, Alliance bank
Bozo Prka, Privredna banka Zagreb
Igor Vida, Tatra banka, Slovakia
Michael Müller, Raiffeisen Bank Bosna I Hercegovina
Dominic Bruynseels, BCR |
What have been the main effects of the credit crunch on your business and the markets in which it operates?
AT, Erste Group Many western bankers have learnt quite a surprising lesson. The view has always been that banking in the west is safe and eastern markets are risky. How wrong they have been. Erste Bank, as one of the largest banks in central and eastern Europe, has always had a very responsible attitude to doing business in this part of world, highlighted by the fact that we have aimed for slightly lower, but more sustainable and safer returns. The main impact of the credit crunch, in whichever region one operates, has been the mistrust now evident between banks. On the upside, taking risk has become a costly exercise. From my point of view, that is a good development. Until the beginning of the crisis, a lot of banks were acting as if there was no risk in the market – a strategy doomed to failure. Another positive effect will hopefully be that banks will be only operating in those areas that they really understand.
RK, Alfa Bank Whereas in previous years the focus was on how to maintain business profitability and diversify the source of revenues, now it is on how to fund lending growth. The local inter-bank market is unstable and the maturity of liabilities is becoming shorter. In the meantime, as corporate borrowers are unable to borrow internationally, thereby increasing their demand for local loans, the market is maintaining very strong lending growth. In a nutshell, there is less competition for clients on the lending side, while competition on the liabilities side has increased dramatically. Each bank now has a choice between decreasing the growth rate and lessening risks or gaining market share but increasing risks.
RS, Bank TurenAlem We have experienced significant slowdown in lending activities, an increase in cost of funds and credits to customers, and deterioration of asset quality.
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"The main impact of the credit crunch, in whichever region one operates, has been the mistrust now evident between banks"
Andreas Treichl, Erste Bank |
SP, Banka Kombetare Tregtare As Albania is a relatively closed economy, there has not been a significant impact on the economy in general and banking business in particular. However, due to the fact that the majority of banks and banking assets are owned by foreigners, the transfer pricing of funds between the parent banks and Albanian subsidiaries has changed considerably. As a result, most European parent banks are now charging more for the funds they provide to their subsidiaries, which in turn prefer to increase deposit rates as an alternative funding source. Deposit interest rates have risen significantly across the board, while credit rates remain stable; the result is that many banks announced losses for the first six months. Having said that, Albania continues to be liquid and largely unleveraged, with only about half of total deposits placed as loans.
JJ, ZAO Raiffeisenbank Russian banks have not been directly affected by high-risk financial instruments connected to sub-prime mortgage lending in the US but the credit crunch has affected the Russian banking system.
The Russian bond market closed almost completely for new issues for quite some time and even now only top names can place paper.
Internationally, loans have also become more expensive, and the number of borrowers with access to these markets has severely contracted. The best option for Russian borrowers in international markets is still syndicated loans.
ZK, Akbank Given the absence of exposure to sub-prime instruments, the Turkish banking sector has been relatively less affected and its growth in the first half of 2008 has been robust. The strong structure of the sector after reforms following the 2001 crisis was also essential in keep banking resilient in face of external turbulence. Despite the credit crunch, international borrowing in the sector, for example in the form of syndicated loans, is still ample.
TB, Yapi Kredi Global financial turmoil and its effect on the financial system of developed countries caused the risk appetite of investors in those countries to shrink, triggering an increase in the risk premia of emerging economies. With additional specific risks that mainly originated from political uncertainty, Turkey also had to face an increase in its risk premium, reflected in CDS spreads and market interest rates.
Under these circumstances funding from syndication and securitization of Turkish banks fell, restraining long-term credit supply. With the negative effect of a rise in interest rates on demand, loan growth partly slowed down in the second quarter of the year, especially on mortgages. But we have had solid loan growth, with a 20% increase in total loans in the first seven months of the year (12% in real terms). Meanwhile, the NPL ratio remained at around 3.1%.
ES, Alliance Bank There are two main effects of the credit crunch on the banking business in Kazakhstan: short-term liquidity challenges and consequent lending slowdown; and long-term increase in borrowing costs. As Kazakhstan and its banking system have become integrated into the international capital markets, it is sensitive to every scare taking place outside. However, due to the prompt strategic reaction of the banks and government support, the system has weathered the initial fallout.
BP, Privredna banka Zagreb It is difficult, if not impossible to precisely quantify the impact of the credit crunch. The Croatian central bank has imposed high reserve requirements, marginal reserve requirements on foreign inflows and credit ceilings to ensure macroeconomic stability. Thus the credit crunch did not have any direct or significant impact on our banking market. Of course foreign funds became even more expensive as Euribor and CDS spreads went up, domestic interest rates increased mostly due to domestic inflation and regulation and the Croatian economy is slowing down.