AfE 2016 logo-196 135 Regional awards Press release View full 2016 results
Albania Armenia Azerbaijan Belarus Bosnia and Herzegovina Bulgaria Croatia Czech Republic Estonia Georgia Hungary Kazakhstan Kosovo Kyrgyzstan Latvia Lithuania FYR Macedonia Montenegro Poland Romania Russia Serbia Slovakia Slovenia . Turkey uzbekistan.gif Uzbekistan
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Albania Best bank: Banka Kombetare Tregtare |
The inexorable rise of Banka Kombetare Tregtare (BKT) continued in 2015, as the Turkish-owned bank overtook long-standing market leader Raiffeisen Bank to become Albania’s largest lender. By the end of 2015, BKT’s share of the overall loan market had risen to 19.6% on the back of year-on-year portfolio growth of 9.1%, while that of its Austrian rival had dropped to 18.9%. Raiffeisen’s deleveraging was partly driven by a reduction in risk appetite on the part of the parent group, but high levels of legacy bad debts also weighed on growth and profitability.
In contrast, BKT’s relatively unencumbered balance sheet – non-performing loans accounted for just 5.9% of the total at end-December 2015, compared with 19.5% at Raiffeisen – gave the bank ample scope to fill the gap left by its rival’s retreat. Superior asset quality was also a factor in BKT’s ability to produce a record net result of L6.1 billion ($48.2 million) and a sector-beating return on equity of 19% last year.
BKT’s achievements in the awards period were not merely financial, however. The bank also made a big investment in technology, developing a new BKT Smart mobile application that was launched early this year. BKT is a subsidiary of Turkish non-financial conglomerate Calik Holding.
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Armenia Best bank: Ameriabank |
The economic environment remained challenging in Armenia last year as weakness in Russia kept the currency depressed and weighed on growth. Despite high levels of dollarization, however, the country’s leading banks proved remarkably resilient. Asset-quality deterioration was moderate and the sector stayed in profit.
Topping the table in terms of profitability was Ameriabank, which managed to maintain a return on equity of 10.3% for 2015 despite a 32.7% drop in net income. This bottom-line erosion was mainly the result of a sharp increase in impairment costs, as NPLs rose from 3.1% of the total to 7.2% by end-December. By comparison with its peers, however, Ameriabank’s levels of restructured loans remained low and its collateral coverage high.
Armenia’s largest lender also benefited from a boost to its capital base in January in the form of a $50 million subordinated loan from the IFC. In the same month, the European Bank for Reconstruction and Development approved a $40 million equity investment in Ameriabank, along with plans to help the lender move towards a public listing.
Meanwhile, Ameriabank maintained its commitment to innovation. In October, the lender signed an agreement with leading financial software company CR2 for the provision of a new cutting-edge omnichannel banking platform. Other technological achievements include the introduction of television banking through a tie-up with local telecoms provider Ucom, the creation of a virtual branch for phone banking and the launch of a remote access portal for the bank’s board members.
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Azerbaijan Best bank: AccessBank |
Azerbaijan’s banks ended the awards period in a parlous state, battered by two large currency devaluations and economic recession. The sector was loss-making in 2015 and is expected to remain in the red this year as asset quality deteriorates.
Against this backdrop, AccessBank’s ability to turn a net profit last year – albeit of just Am2.6 million ($1.2 million) – stands out. This relatively strong result was achieved through a combination of stringent cost reduction, strategic deleveraging and prudent management of the bank’s foreign exchange exposure in the wake of the initial devaluation in February 2015.
Asset-quality pressures were inevitably severe given AccessBank’s high levels of dollar lending and NPLs jumped to 14% of the total by the end of March. This was offset, however, by a strong track record of provisioning and by a proactive approach to restructuring and rescheduling overdue debts. Careful liquidity management also protected the bank against the impact of local-currency deposit outflows in the wake of December’s devaluation.
Meanwhile, capitalization remained strong, thanks in part to support from multilateral shareholders including the IFC. At the end of the first quarter, AccessBank, which has been led by CEO Michael Hoffmann since 2012, reported tier-1 and total capital ratios of 23.4% and 35.6% respectively.
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Belarus Best bank: Priorbank |
Once again, Belarus’s only substantial western-owned bank easily outperformed its domestic peers in the awards period. Priorbank’s outstanding return on equity of 39% for 2015 was flattered by a valuation gain from capital hedging and the discontinuation of hyperinflation accounting. Even without these one-off events, however, the Raiffeisen subsidiary saw strong profit growth last year and was able to maintain its sector-beating profitability in the first quarter of 2016.
These results look particularly impressive against a backdrop of currency depreciation – the Belarusian rouble lost nearly a third of its value against the euro in the year to the end of March – and sharp economic contraction. Despite these challenges, the introduction of a range of new products and services for the segment enabled Priorbank to expand its small and medium-sized enterprise client base by 4.3% last year. Retail lending in local currency was another growth area, increasing by 8.9% in 2015, thanks in part to a renewed focus on salary customers.
Meanwhile, a new corporate services package proved extremely popular with Priorbank’s traditional business clients, with take-up topping 20% of the existing customer base. Comprising financial analysis, efficient corporate debt structure calculation and a range of other services, the Corpo package has not only helped Belarusian businesses navigate the difficult economic environment but also provided Priorbank with a valuable additional risk-management tool. Technological innovation also remained a key strength, demonstrated by the launch last year of Belarus’s first mobile point of sale terminal and the introduction of voice biometrics for call-centre authentication.
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Bosnia and Herzegovina Best bank: UniCredit Bank Mostar |
The local subsidiaries of UniCredit and Raiffeisen continued to battle it out for dominance in Bosnia’s banking market last year. Raiffeisen Bank notched its highest-ever net profit of KM67 million ($38.4 million) for the year. On profitability, however, it was UniCredit Bank Mostar that topped the rankings, with a return on assets of 2%. The market leader also posted sector-beating growth, increasing its deposit base by 12.4% and its loan portfolio by 5.6%.
Corporate business was a key driver of this expansion. By the end of December, UniCredit Mostar’s share of overall lending to the sector had risen to 14.5%, while in corporate deposits the bank accounted for 16.7% of the market. The acquisition and integration of local leasing and brokerage arms from the Italian parent group also helped optimize UniCredit Mostar’s business model and offering for corporate clients.
An increased focus on SMEs helped the bank attract new customers at the smaller end of the business spectrum.
Retail clients, meanwhile, benefited from the introduction of contactless payment technology and the implementation of a new branch concept designed to improve efficiency and service. Asset quality remained a concern, with NPLs at end December still amounting to 11.7% of the total compared with 10.5% for Raiffeisen. At 78%, however, UniCredit Mostar’s coverage was notably better than that of its closest rival. A capital adequacy ratio of 15.2% was also comfortably above the regulatory minimum.
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Bulgaria Best bank: DSK Bank |
UniCredit Bulbank easily maintained its status as Bulgaria’s largest lender last year despite slight deleveraging. In terms of bottom line results, however, the market leader was overshadowed by number two player DSK Bank, which boosted net profit by more than a third to a sector-best Lev306 million ($178 million) in 2015.
This was achieved through a combination of increased fee income, excellent operating efficiency – DSK Bank’s cost-to-income ratio of 36.1% was well below that of its main peers – and reduced impairment costs. While NPL levels remained relatively high, at 13.1% of total lending, improved loan management processes prevented further deterioration and a prudent provisioning policy ensured an ample buffer for existing bad debts.
Under the leadership of chairman and chief executive Violina Marinova, DSK Bank has maintained its retail focus to end last year as the undisputed leader in Bulgaria in consumer and mortgage lending, with market shares of 29.1% and 22.9% respectively. The bank has also continued to widen the scope of its offering for corporate clients, launching a commercial factoring service in 2015. DSK Bank is a subsidiary of Hungary’s OTP Group.
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Croatia Best bank: Privredna Banka Zagreb |
Charges related to the forced conversion of foreign currency loans into euros pushed most of Croatia’s leading lenders into the red last year. The exception was Privredna Banka Zagreb (PBZ), which managed to post a K370 million ($55.9 million) net profit despite taking a K1.3 billion hit on its Swiss franc-linked portfolio.
The Intesa Sanpaolo subsidiary also bucked sector trends by cutting its NPL ratio by two percentage points to 11.9% in the year to the end of December, thanks to improvements in the collection, restructuring and sale of impaired assets. Lacklustre credit demand proved more difficult to counteract, although the introduction of segment-specific loan products enabled PBZ to grow its SME loan portfolio last year.
A weak operating environment did not, however, deter the bank from investing in innovation. In 2015, PBZ launched the first contactless mobile payment service based on host-card emulation technology for near-field communication in the Croatian market. Initially offered to Visa and American Express customers, the Wave2Pay service is due to be rolled out to the bank’s other credit card customers over the coming months. PBZ remains the Croatian market leader in credit cards, with 40 different products and a market share of more than 30%.
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Czech Republic Best bank: Ceska Sporitelna |
The Czech Republic remains the standout banking market in emerging Europe thanks to a combination of strong economic growth, burgeoning credit demand and high levels of financial engagement. This rising tide once again lifted all the country’s leading banks last year but, in a very tight race, it is Ceska Sporitelna that gets the nod by virtue of its superior profitability and commitment to innovation.
In 2015 the number two lender notched a pre-tax profit of Kc17.9 billion ($753 million), well ahead of the Kc16.5 billion posted by market leader Ceskoslovenska Obchodni Banka. Ceska Sporitelna’s loan growth was more muted than that of its closest rival but still came in at a healthy 6.6% on the back of a sector-beating increase in mortgage lending of nearly 40%.
The bank also maintained its leadership in corporate lending, funding some of the biggest projects in the Czech Republic last year. Deposit growth was slightly lower, at 5.7%, but a loan-to-deposit ratio of 74.6% still offers ample scope for expansion. Capitalization meanwhile remained strong. By the end of December, Ceska Sporitelna’s tier-1 ratio stood at 21.2%, up 2.8 percentage points year on year.
Technology also continued to be a strong focus for the Erste subsidiary, with new initiatives in the awards period including the Czech market’s first barrier-free website, the introduction of cashless branches and improvements in internet banking security.
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Estonia Best bank: Nordea Bank |
The smallest of Estonia’s big three Scandinavian-owned lenders, Nordea Bank nevertheless consistently manages to hold its own in terms of profitability, growth and innovation. While market leader Swedbank and closest rival SEB Pank saw mild erosion to their bottom line last year, the number three player recorded a 26.2% increase in net profit.
Lending growth came in at a respectable 1.7%, while deposits increased by 2.7%. Nordea Bank also proved notably successful at expanding its customer base in Estonia’s small and competitive market, recording a 3% increase in client numbers in the year to end-December.
Key to the bank’s appeal has been its proactive approach to digital development, an essential attribute for players in tech-friendly Estonia. In 2015, Nordea Bank launched the first ever online advisory branches in the Baltics, offering customers products and services that were previously only available through the physical network.
Last year also saw the launch of Nordea Netbank, a new app for iPad designed to serve as a gateway between the bank’s mobile and online platforms. Meanwhile, new products included an innovative loan interest protection solution for mortgage holders and a model portfolio for novice retail investors.
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Georgia Best bank: TBC Bank |
A weak economic environment failed to dampen either growth or returns at Georgia’s leading banks last year. Both the market leaders managed to grow their loan portfolios by close to 30% and posted stellar bottom line results. However, TBC Bank earns this year’s country award ahead of market leader Bank of Georgia in recognition of its superior profitability and balanced growth strategy.
The number two player recorded a return on average equity of 20.1% in 2015, up 1.7 percentage points on the previous year and comfortably ahead of Bank of Georgia’s 18.2%. Consistently high margins were a contributor to this impressive result, but a stringent approach to efficiency also helped – TBC Bank’s cost-to-income ratio for the year was just 43.9%, well below the sector average.
Under the leadership of chief executive Vakhtang Butskhrikidze, the lender has also made good progress on diversifying its loan portfolio and reducing concentration risk. By the end of December, corporate exposures accounted for just 32.3% of the total, down from 39.1% two years earlier, while lending to the fast-growing SME and micro segments had jumped to 13.5% and 10.6% respectively. Lending to households also increased over the period, boosting the bank’s market share in the segment to 31.6%.
TBC Bank also continues to outperform peers in terms of capitalization. At end December, the lender’s tier-1 ratio was the highest among Georgia’s market leaders at 12.8%.
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Hungary Best bank: K&H Bank |
After sustaining heavy losses related to the forced conversion of foreign currency loans in 2014, Hungary’s banking sector returned to profit last year. For most banks, however, loan growth remained out of reach, with overall exposures shrinking by 11.7% as muted credit demand failed to compensate for the damage caused by overdue balance sheet clean-ups and legacy FX lending issues.
Against this backdrop, K&H Bank’s ability to grow its loan portfolio by 9% year on year looks particularly impressive, as does a net profit of Ft37.9 billion ($138 million). On the retail side, digital innovation played a key role in attracting new business, with remote premium advisory services and an expanded range of online loan calculators proving particularly popular with customers. Recent launches also include a new online savings planner account and a revamped mobile banking app, as well as a dedicated mortgage bank.
Elsewhere, Hungary’s number three player reinforced its leadership in the SME market, accounting for 15.9% of all lending in the second phase of the government’s Funding for Growth Scheme, as well as becoming the first bank in the jurisdiction to offer loan guarantees through the European Union’s Cosme programme. Other business-friendly initiatives include the creation of the Family-Owned Business Partnership, a facility designed to help Hungarian companies manage generational transfer.
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Kazakhstan Best bank: Halyk Bank |
Faced with a weakening economy and currency depreciation in neighbouring markets, the Kazakh authorities finally gave up the struggle to defend the tenge’s peg to the dollar in August last year. The resultant devaluation, which saw the Kazakh currency lose more than half its value in less than six months, put severe pressure on the banking sector. Dollarization soared and tenge liquidity all but dried up, eroding profits and prompting a sharp decline in asset quality.
Individual banks’ fortunes, however, varied widely. Market leader Kazkommertsbank continued to wrestle with the legacy of failed lender BTA Bank, while several of the country’s smaller lenders paid the price for over-rapid expansion in recent years.
By contrast, Halyk Bank reaped the rewards of strong fundamentals and a prudent approach to growth in the form of a flight to quality. In the 12 months to end-December, the Kazakh number two acquired half a million new retail customers and grew its deposit base by 58.5% in local-currency terms, despite offering some of the lowest rates on the market. Combined with healthy loan growth and excellent cost efficiency, this enabled the bank to post a return on average equity of 24.4% for the full year.
As with the rest of the sector, Halyk Bank saw a spike in bad debts following the devaluation. The pace of impairment, however, appears to have been controlled by the end of the year, with NPLs accounting for 10.3% of the total, down from 13% at the end of September. Coverage, meanwhile, was more than adequate, at 118.5%. A BIS tier-1 ratio of 18% provides an ample capital cushion.
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Kosovo Best bank: Raiffeisen Bank Kosovo |
Last year saw Raiffeisen Bank Kosovo lay claim for the first time to the title of Kosovo’s largest lender, supplanting the previous market leader ProCredit Bank. Unlike smaller rival TEB, which has focused on the consumer market, the Austrian subsidiary’s success in one of the smallest Balkan markets has been primarily based on its unrivalled corporate expertise. Fourteen years after its acquisition by the Raiffeisen group, the bank remains the go-to house for foreign exchange and is the only provider of project finance and factoring in Kosovo.
This strategy continues to pay handsome dividends. In 2015, Raiffeisen Bank posted a pre-tax profit of €22 million, up 17.9% year-on-year and equivalent to a return on equity of 18.4%. This strong result was achieved despite a slight reduction in net interest margin to 4.91%. Overall lending growth was less impressive. However, the bank did see expansion in the promising microfinance market, with net loans increasing by 8.6% to €52.6 million.
Meanwhile, innovative risk management techniques brought NPLs in the segment down to below 5% of the total for the first time since the financial crisis. Investments in technology also paid off, with point of sale, ATM and online banking transactions all increasing by more than 40% from 2014 levels.
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Kyrgyzstan Best bank: Demir Bank |
The spillover from Russia’s recession put a dent in credit demand and sparked a sharp rise in impairments in Kyrgyzstan last year. This failed to prevent Demir Bank posting another set of strong results. Despite taking a 20.8% hit to net income, the Turkish-owned lender recorded a return on equity of 21.3% on the back of a rise in net interest margin to 8.8%.
Demir Bank’s achievements were not all financial, however. The lender also remains one of the leading innovators in the Kyrgyz market, particularly in the field of technology. New products launched last year include wireless point of sale (POS) terminals, cash-in ATMs and PayWave contactless cards.
The start of an internet banking optimization project saw the bank add Swift transfer and tax payment facilities to its online offering. These initiatives helped Demir Bank grow its retail and corporate customer bases by 27% and 17% respectively last year, in addition to boosting the number of active internet banking users by 23%.
The lender also maintained its position as a key financer of Kyrgyz trade. Demir has long been a participant in trade facilitation programmes of the EBRD and IFC, which between them own a 30% stake in the bank, and last year signed an agreement with Turk Eximbank to support trade between Turkey and Kyrgyzstan.
Demir Bank is led by chairman Sevki Sarilar and majority-owned by Turkish financier Halit Cingillioglu.
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Latvia Best bank: Swedbank |
Swedbank once again leveraged its dominant market share in Latvia to post sector-beating results last year. While number two lender SEB saw a larger rise in pre-tax profits, by 28.1% compared with 12.7% for Swedbank, the latter’s return on equity of 11.5% easily trumped the 8% posted by its closest rival. Swedbank also managed to secure the first annual increase in its loan book since the financial crisis – albeit of just 0.1% – while SEB experienced further mild deleveraging.
Other notable achievements notched up by the market leader during the awards period include the introduction of a ground-breaking multi-functional payment portal for corporate customers, the acquisition of Danske Bank’s retail portfolio and the signing of an agreement with local governments to increase the availability of financial services in Latvia’s regions.
Last year also saw Swedbank receive consent from the ECB to reduce excess capitalization after the lender’s conservative dividend policy boosted its total capital adequacy ratio to 39.3%. The proposed reduction will still leave the bank with a CAR of 22.6%, well above both the regulatory minimum and the market average.
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Lithuania Best bank: SEB |
For Lithuania’s banks, the impact of rising real wages was largely offset last year by the reduction in margins, the decline in foreign exchange business and increased administrative costs associated with euro adoption. Despite these problems, however, market leader SEB turned in another strong performance.
SEB’s return on equity was inevitably affected by the external environment but still came in at a respectable 7.6%, while loan growth of 3.1% was well ahead of that of leading rivals. Indeed, the Swedish-owned bank was able to increase its share of overall market lending by more than two percentage points to 30.7% in the 12 months to end-December. Much of this credit growth came from mortgages and SME lending, with both segments seeing new debt issuance jump by more than 40% year on year.
A strong focus on payment cards promotion and POS terminal proliferation also paid off. Card payments were up 8% from 2014 levels, giving SEB a 35% share of the Lithuanian market. Meanwhile, both retail and corporate clients benefited from enhancements to the bank’s multichannel offering through the introduction of e-invoices and the launch of online opening for savings accounts. SEB also continued to see strong take-up of its remote advisory service via Skype, with the number of consultations rising by 25%.
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FYR Macedonia Best bank: Ohridska Banka |
A year of outstanding growth delivered Ohridska Banka’s best ever bottom-line result last year. Net income at the Société Générale subsidiary jumped by 72% to €6.5 million, giving a return on average equity of 16.5%, well above the market average of 10.4%.
Corporate business was key to the bank’s success. By the end of the year Ohridska Banka’s customer base included three-quarters of Macedonia’s largest companies, while strong relationships with development banks such as the EBRD and KfW helped to improve penetration in the SME and microfinance segments.
As a result, the bank was able to increase lending to Macedonian firms by 15.6% year on year, compared with 7.2% for the sector as a whole. Retail loan growth of 14.4% was closer to the sector average of 13.4%. A non-performing loan ratio of 7.2%, however, was well below that of the bank’s larger rivals, while coverage was ample at 107.5%.
Unusually for the Macedonian market, Ohridska Banka is not wholly locally funded – however, a loan-to-deposit ratio of 102.2% is modest by global and historical standards.
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Montenegro Best bank: Société Générale Montenegro |
The award for best bank in Montenegro also goes to another Société Générale subsidiary that posted record profits and sector-beating growth last year. Société Générale Montenegro’s return on equity for the year of 12.7% was easily the highest in the market and loan growth of 9.5% was substantially above the sector average of 1.9%. The SME portfolio saw the most rapid expansion, with lending increasing by 12.5% year on year, but corporate and retail credit growth was also strong at 4.9% and 8.6% respectively.
Société Générale Montenegro also reinforced its status as the first choice for Montenegrin businesses in other areas. The volume of international payments intermediated by the market leader rose by more than 25% last year, as did issuance of letters of credit and guarantees. A focus on POS acquiring also resulted in a 38% increase in the number of transactions processed and a 20% rise in volumes.
Meanwhile, a strong pace of innovation was maintained. New services introduced during the awards period included dynamic currency conversion at ATMs and contactless payment via cards and stickers. Despite these and other investments in technology, the bank’s cost-to-income ratio fell by five percentage points last year to 53%, the lowest level in the Montenegrin market.
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Poland Best bank: Bank Zachodni WBK Best investment bank: UniCredit |
Polish bank stocks suffered last year as hostile political rhetoric from the new Law and Justice government raised the prospect of Hungarian-style attacks on the sector. By the end of the current awards period, however, plans to force an expensive conversion of foreign currency mortgages into zloty appeared to have been put on hold, while an onerous new bank tax had been in effect for only two months.
Low interest rates continued to squeeze margins, but a combination of buoyant credit demand and strong fundamentals enabled all the country’s leading lenders and many of their smaller rivals to post respectable profits. At 9%, PKO BP’s return on equity was the lowest among the top five Polish banks, with the remaining four all making it into double digits.
On this and most other metrics, however, the bank that stood out again this year was Bank Zachodni WBK (BZ WBK). The number three lender not only notched a sector-best return on equity of 13.7% but also recorded a higher outright pre-tax profit than any of its rivals, thanks to year-on-year increases in both interest and fee income. Loan growth of 10%, driven by the expansion of both the SME and corporate portfolios, was also well above the sector average.
Under Gerry Byrne, the bank’s Irish chairman, BZ WBK has also kept NPLs under control and maintained a strong capital base. At the end of March, the group’s tier-1 ratio stood at 13.7%, 1.3 percentage points up on the previous year, while its NPL ratio had been reduced by the same amount to 7%.
Investment banking volumes in the Polish market have fallen sharply since the glory days at the start of the decade. New equity listings have slowed to a trickle, while in the awards period both domestic and global debt capital markets activity consisted primarily of sovereign issuance. The handful of deals that did emerge were mostly too small to attract the attention of bulge bracket banks, leaving the field open for local and regional specialists. State-owned bank PKO BP topped the equity league tables, while Rothschild took the lion’s share of M&A activity.
The house that was judged to have turned in the best performance across all product lines, however, was UniCredit. As owner of Polish number two lender, Bank Pekao, the Italian group combines deep penetration of the country’s corporate sector with regional and global reach. As a result, the bank was able to secure mandates on a broad range of transactions in the 12 months to March, including three global sovereign bonds, three IPOs – for Idea Bank, Wirtualna Polska and AAT Holding – and CVC Capital Partners’ €477 million acquisition of state-owned energy firm PKP Energetyka.
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Romania Best bank: Banca Transilvania |
Raiffeisen Bank turned in another year of excellent results in 2015 and remains the pick of Romania’s foreign-owned lenders. The country award this year, however, goes to emerging domestic champion Banca Transilvania.
The Cluj-based bank, which has raced up the sector rankings since the financial crisis, took another step forward last year with the integration of Volksbank Romania. The acquisition, which was announced in December 2014, not only boosted Banca Transilvania’s balance sheet by 43% but also enabled the number three lender to increase its market share in Bucharest and the south of Romania.
The success of the merger was not a foregone conclusion, however. Rejected by Sberbank when it acquired the rest of Volksbank’s Balkan network, the Romanian operation had one of the country’s largest portfolios of Swiss franc loans and was facing litigation threats from retail borrowers. Thanks to a substantial financial sweetener secured as part of the sale, however, Banca Transilvania was able to take a proactive approach to both issues, offering advantageous conversion terms for foreign currency debtors and generous settlements to potential litigants.
As a result, the merger was completed by the end of December and the bank booked a record net profit of L2.4 billion ($602 million) for the year and a return on equity of 18.5%. While this result was flattered by positive one-off effects from the Volksbank transaction, an increase of more than 50% in net profit in the first quarter of 2016 provided confirmation of Banca Transilvania’s continuing ability to generate profits.
This year also saw the lender mark another stage in its development with a move into the investment banking market through the purchase in March of leading Romanian advisory firm Capital Partners.
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Russia Best bank: Raiffeisenbank Best investment bank: VTB Capital |
Russia’s economic woes took a heavy toll on the banking sector last year, stalling growth and driving many leading lenders into losses. Domestic banks bore the brunt of the downturn as surging risk costs, combined with a more interventionist approach to regulation, exposed weaknesses in governance and balance sheets.
Even leading state-owned lender Sberbank saw its return on equity reduced to just 10.2%, despite boasting a resilient business model and safe-haven status. Last year’s winner, UniCredit Bank, also took a hit to profitability, with a fall in pre-tax income of 20%.
By contrast, rival Austrian-owned lender Raiffeisenbank under chief executive Sergei Monin posted an outstanding return on equity of 25.4% for 2015, even without allowing for profits booked in relation to the sale of the bank’s Russian pension operation. This result was all the more impressive because it was achieved in tandem with a reduction in gross lending of 6.9%, in line with a group-wide de-risking strategy.
Against this background, Raiffeisenbank’s commitment to winning new business and maintaining a breakneck pace of innovation also stood out. In the profitable SME sector, for example, the bank took advantage of weakness among other leading players to grow its client base by 40% over the year. This was partly achieved through the introduction of a range of new products for business customers, including online account opening, new service bundles for mid-market companies and a standing order facility for rouble transactions.
Retail customers, meanwhile, benefited from the extension of Raiffeisenbank’s popular payroll account product to individual clients as well as the introduction of a new programme of property insurance and a number of technological upgrades. Asset quality was a slight concern, with NPLs rising to 8.2% of the total by end 2015 – however, coverage was strong at 74.1%. A tier-1 ratio of 14.8% also provided a comfortable capital cushion going into 2016.
With sanctions on many big names and international investors still wary of Russian risk, investment banking activity was inevitably inward-focused in the awards period. This favoured domestic players and in particular long-standing market leader VTB Capital.
With the exception of global bond deals, the state-owned firm was dominant across all asset classes, cornering 19.9% of the M&A market and acting on six out of eight primary equity deals. The latter included the Moscow IPOs of United Wagon Company, Credit Bank of Moscow and Novorossiysk Grain Plant, while notable advisory mandates included the take-privates of Uralkali and Polyus Gold.
VTB Capital also topped the league tables for Russia’s increasingly buoyant domestic bond market, accounting for more than 20% of all activity in the 12 months to the end of March.
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Serbia Best bank: Raiffeisen Banka |
Apart from troubled state-owned lender Komercijalna Banka, Serbia’s leading lenders all posted respectable results last year as economic recovery prompted a revival of credit demand. Banca Intesa Beograd and UniCredit Bank Serbia notched returns on equity of 8.8% and 10.9% respectively.
Both, however, continued to struggle with legacy portfolios of soured corporate debts. Banca Intesa managed to cut its NPL ratio by 3.1 percentage points last year, but by the end of December it still stood at 15.9%. Meanwhile, UniCredit Bank saw NPLs jump to 16% of the total in the same period despite a 9% increase in overall lending.
By contrast, Raiffeisen Banka’s 12.3% NPL ratio looked moderate and coverage of 84.3% was also higher than that of the number four lender’s larger rivals. Further proof of the bank’s financial soundness was provided by an asset-quality review undertaken by Serbia’s central bank last year in which Raiffeisen Banka performed better under stress testing than any of the other 13 lenders surveyed.
Prudent risk management did not, however, prevent the bank from achieving good growth across several key segments last year. On the retail side, Raiffeisen Banka grew its client base by 10% year-on-year, while December saw the highest volume of new loans issued to households since August 2007.
Premium banking also saw impressive expansion, with newly acquired customers up 14% on the previous year and overall assets under management rising by 76%. Small business banking saw similar growth levels, making 2015 the best year for the segment since the financial crisis, while on the corporate side the bank continued to focus on portfolio stabilization and capital-light products.
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Slovakia Best bank: Tatra Banka |
Market leader Slovenska Sporitelna remained the most profitable bank in Slovakia last year, posting a 14% return on equity on the back of an impressively resilient net interest margin of 3.72%. Tatra Banka wins the country award this year, however, by virtue of its ambitious growth strategy and outstanding commitment to innovation.
Last year saw the number three lender embark on a new five-year business plan, the cornerstone of which is integrating Tatra Banka with Raiffeisen’s other Slovak subsidiary. Branded as Raiffeisen Bank, the Austrian group’s secondary operation in the country is a mass-market brand, whereas Tatra Banka itself has traditionally targeted a mass-affluent clientele.
The new strategy also envisages an expansion of Raiffeisen Bank, a process that got well underway last year with a doubling of the bank’s client base and a tripling of its loan portfolio.
The introduction of a new mall branch format, unique to Slovakia, was a factor in the success of the growth drive. Meanwhile, Tatra Banka maintained its status as a national and regional leader in digital development.
The lender’s mobile app offers an extensive range of services including spending reports, ATM withdrawal by phone, smart watch functionality and NFC Track, a unique service that allows users to check their balance by tapping a payment card on a smart phone.
Other popular innovations include Viamo, a peer-to-peer and peer-to-business application, and call-centre verification using voice biometrics. Despite such investment in technology, however, Tatra Banka profitability is second only to that of Slovenska Sporitelna. In 2015, the bank notched its second highest-ever net pre-tax profit of €164 million, giving a return on equity of 12.4%.
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Slovenia Best bank: SKB Banka |
Slovenia’s long banking-sector clean-up began to show tangible results last year, as overall returns moved back into positive territory for the first time since 2009.
Nevertheless, the sector remained in a state of flux. In the first of a series of promised privatizations, number two lender NKBM was bought by private equity group Apollo Global Management last year, along with Raiffeisen’s Slovenian subsidiary.
Market leader Nova Ljubljanska Banka remains in state hands, as does Abanka, although both are due to be sold by the end of 2019. Meanwhile, improved NPL resolution procedures led to a further decline in bad-debt stocks, as well as in overall lending, but legacy impaired corporate loans continued to prove tough to shift.
One lender that has managed to remain apparently immune to the general malaise, however, is SKB Banka. Part of the Société Générale group, the number five player once again easily outperformed its larger peers last year, posting a return on equity of 9.8%.
Loan growth remained elusive but, against a backdrop of sector deleveraging of 5.6%, SKB Banka’s ability to maintain lending at 2014 levels looks impressive. The bank also continued to boost its local funding base, increasing deposits by 8.7%, against 5% for the sector as a whole.
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Turkey Best bank: Akbank Best investment bank: Unlu & Co |
Competition at the top of the Turkish banking market was as fierce as ever last year, with Akbank and Garanti in particular maintaining a blistering rate of growth and profitability. In terms of bottom line results, Garanti had the edge in 2015 with a return on equity of 14.5% against Akbank’s 12.1%. Garanti’s loan portfolio expansion of 19.2% was also superior to that of its smaller rival. However, it was Akbank’s strong fundamentals and more balanced approach to growth that caught the judges’ eye again this year.
Whereas Garanti has maintained a focus on consumer lending, Akbank, led by CEO Hakan Binbasgil, has responded to the changing regulatory and economic environment in Turkey by adapting its asset mix and emphasizing capital-light business lines. Credit-card lending, for example, has been scaled back as regulation has reduced profits in the sector, while Akbank has built on its traditional corporate expertise to expand in the fast-growing and profitable SME market.
This flexibility is already paying dividends. In the first quarter of 2016, Akbank and Garanti posted identical pre-tax results of TL1.36 billion ($465 million). As the smaller of the two, however, Akbank’s return on equity came in at 15%, compared with 14.2% for Garanti.
Akbank also continues to outperform both its peers and the wider sector in terms of capitalization and asset quality. At end of December, the bank’s tier-1 ratio stood at 13.3%, while NPLs accounted for just 2.2% of total lending.
The resilience of Akbank’s business model is also increasingly being recognized by equity investors. In the first five months of the year, the bank’s stock rose by 19% against 6.3% for Garanti, making Akbank the largest Turkish lender by market capitalization for the first time since March 2012.
Turkish investment banking activity remained subdued during the awards period, although debt capital markets received a fillip this year with a flurry of global deals at the end of the first quarter.
That market continued to be dominated by Citi, our regional investment banking winner for CEE. For a second year in succession, however, the award for Turkey goes to Unlu & Co.
The boutique investment bank was the only domestic player to feature in the top 10 for Turkish M&A last year, according to Dealogic, thanks to mandates including Yildiz Holdings’ disposals of its dairy and beverage subsidiaries (to Lactalis Group and Japan’s DyDo Drinco) and the acquisition of Gama Energy by Malaysia’s Tenaga Nasional Berhad.
Unlu & Co, which was originally founded by chairman Mahmut Unlu in 1996, also acted on three domestic corporate bonds and two of only a handful of equity deals to emerge since last March, namely accelerated bookbuilds for Petkim and Soda Sanayii.
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Uzbekistan Best bank: Asia Alliance Bank |
Few banking sectors in CEE can match Uzbekistan’s for growth. In the past five years, total lending in the country has more than tripled, thanks to average annual growth of close to 30%. Asia Alliance Bank has been at the forefront of this impressive expansion.
Founded in 2009, the Tashkent-based bank has grown rapidly, with lending reaching Som436 billion ($147 million) by the end of 2015.
To date, corporate business has been the main focus for the lender, with most loans issued to larger firms in key economic sectors such as manufacturing, trade, transport and communication. Part of this success in the corporate sector can be attributed to Asia Alliance Bank’s proactive approach to forming partnerships with financial entities outside Uzbekistan’s relatively closed borders. The bank currently boasts correspondent relationships with 14 foreign banks, including Commerzbank and LBBW.
Other key strengths include sector-best capital adequacy and liquidity ratios of 19.74% and 103.5% respectively, as well as excellent and balanced returns.
In 2015, interest income accounted for 39.7% of total revenues, compared with 39.8% from fee and commission income. A return on average assets of 3.9% was also 0.6 percentage points higher than that of closest rival Hankorbank.
