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Albania
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Another strong performance in a challenging operating environment earned Banka Kombetare Tregtare (BKT) the top spot in Albania again this year. Despite almost nonexistent growth in the wider economy, the country’s number two lender leveraged its dominant position in the retail market to expand its loan book by 3.7% and its deposit base by an impressive 14.4%, boosting its share of the overall deposit market by 1.8 percentage points to 21.9%. BKT was also one of very few Albanian lenders to see an improvement in its bottom line in 2013, with net profit up 27.1% to a sector-best $39.3 million. Return on equity was slightly below the bank’s long-term average, but remained healthy at 16.6% for the full year, and was back up to 17.5% in the first quarter of 2014.
Asset quality was also a key strength. At end-December, BKT’s non-performing loan ratio stood at just 8.6%, well below both the sector average of 23.5% and market leader Raiffeisen’s 14.1%. What is more, in early 2014 BKT became one of the first Albanian banks to reverse the rise in impairments, with NPLs falling to 7.9% by the end of March.
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Armenia
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In a highly competitive banking market, Ameriabank gets the nod ahead of close rivals VTB Armenia and Ardshininvestbank in recognition of its balanced growth, consistent profitability and commitment to innovation. An increase of 20.1% in the Sberbank subsidiary’s loan portfolio last year to Dram169.9 billion ($412 million) was matched by an even more impressive 34.6% rise in deposits, boosting the deposit-to-loan ratio by 9.3 percentage points to a healthy 99.2%. Meanwhile, net profit held steady at Dram6.1 billion and return on equity was only fractionally below 2012 levels at 15.8%. At the same time, a continuing focus on efficiency drove a five percentage point reduction in the cost-to-income ratio to 40.5% and vigilant risk management ensured that NPLs remained at just 1.8% of total loans. On the corporate side, key innovations last year included the implementation of international factoring services, while the options for Ameriabank’s retail clients were expanded through the introduction of a range of flexible deposit and loan products. The bank also undertook a complete overhaul of its offering for small and medium-sized enterprises, with new products including fast and simple loans that allow businesses to receive financing in less than two days. Ameriabank’s strength in investment banking was also demonstrated by its inclusion on mandates for the first local currency bonds from the International Finance Corporate and European Bank for Reconstruction and Development.
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Azerbaijan
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A return to annual GDP growth of more than 5% boosted revenues and balance sheets across Azerbaijan’s banking sector last year, but overall profitability remained weak. AccessBank, however, was the exception that proves the rule. In 2013, the SME and microfinance specialist again easily outperformed its rivals, posting an industry-best net profit of $34.7 million – up 72% on 2012 – and an equally unbeatable return on equity of 28.8%. Growth was also stellar, with total assets increasing by 53.3% to pass the $1 billion mark. Despite a 54.9% rise in the local deposit base in 2013, the majority of AccessBank’s financing is still provided by multilateral shareholders including the IFC, EBRD and KfW. Nevertheless, the bank has continued to pursue alternative funding sources, issuing its first manat-denominated bond in December and raising $60 million in the largest-ever syndicated loan from an Azerbaijani private-sector financial institution in March. AccessBank also maintained a strong pace of network expansion in 2013, opening a further eight branches in Azerbaijan’s regions. The lender now has a total of 41 outlets across the country, more than half of which are outside Baku and the surrounding district of Abershon.
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Bosnia and Herzegovina
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The two-way battle for dominance in Bosnia’s banking market continued in 2013 as the local subsidiaries of Raiffeisen and UniCredit leveraged their dominant position to post sector-beating returns. Raiffeisen Bank’s improved profitability and resumption of balance sheet growth, however, gave the country’s largest individual lender a narrow edge over UniCredit Mostar in a close finish. Pre-tax profit at the former rose by 11.1% to €24.4 million last year, while return on equity was up 1.1 percentage points at 8.4%, more than double the sector average of 3.4%. Raiffeisen Bank’s total assets, meanwhile, increased by 2.5% to €1.9 billion by year-end, equating to a market share of 17.5%. Deposit growth was particularly strong at 7.2%, reflecting Raiffeisen Bank’s pre-eminence in the burgeoning Bosnian retail market. The bank’s lending record was less impressive, but a deposit-to-loan ratio of 124.3% at end-December should allow ample scope for growth as credit demand returns to the economy.
The introduction last year of new products targeted at SMEs and young people demonstrated Raiffeisen Bank’s commitment to innovation, as did the launch of its enhanced mobile banking platform, while an expanded range of capital-lite products for corporates helped to boost fee and commission income. Asset quality remained a concern but the deterioration in the loan portfolio appeared to have been halted and the year-end NPL ratio of 11.7% remained well below the sector average of 15.1%, while coverage was adequate at 61.3%.
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Bulgaria
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OTP’s regional network failed to generate much in the way of profit for the Hungarian national champion last year as deteriorating asset quality plagued its Russian subsidiary and economic weakness stymied growth in its markets in southeastern Europe. The exception was Bulgaria, where DSK Bank once again outperformed a highly competitive sector, including much larger rival UniCredit Bulbank, to post an industry-best net profit of Lev203 million ($140 million) for the full year. Not only did this mark a 24% increase on the 2012 figure, which earned DSK Bank last year’s award, it was also the best result from the lender since the 2008 financial crisis. Return on equity of 14% was also well ahead of the sector average of 5.3% and jumped again to 19.9% in the first three months of 2014, when the bank posted a record quarterly profit of Lev64.6 million. Growth was mainly on the deposit side, as DSK Bank’s dominant retail position made it ideally placed to take advantage of a surge in household savings. This contributed to a 10-percentage point improvement in the bank’s loan-to-deposit ratio to below 90%, while at the same time modest growth in consumer lending kept the net interest margin stable at 5.5%. Asset quality continued to be a weakness, with NPLs rising to 20.1% of the total by end-2013. The decline appeared to have been halted by the first quarter, however, and coverage of 88.5% was well above the sector average.
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Croatia
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A fifth year of recession in Croatia took a toll on the country’s banking sector in 2013, with overall return on equity falling to just 1.3% and further industry-wide deleveraging. Market leader Zagrebacka Banka bucked the latter trend with a 1% increase in lending but saw net profit slashed by nearly half to K465 million ($83 million) and return on equity reduced to just 3%. Number two lender Privredna Banka Zagreb (PBZ) also saw some erosion of its bottom line last year but nevertheless managed to post a sector-best result of K821 million, equating to a relatively impressive return on equity of 6.4%. Asset quality was another key strength for PBZ, which was one of the very few Croatian lenders to see a big reduction in impairments in 2013. Despite a contraction in the bank’s loan portfolio, the NPL ratio fell by 1.9 percentage points to 13.3% by end-December, well below both the sector average of 15.6% and Zagrebacka Banka’s 15.2%.
Majority owned by Italian group Intesa Sanpaolo, PBZ boasts the most extensive branch network in Croatia – comprising 200 branches across all six regions – and a market-leading position in segments such as credit cards. It is also one of the largest fixed income and foreign exchange dealers in the country, as well as a leading player on the domestic syndicated loan market.
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Czech Republic
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The Czech Republic consolidated its status as CEE’s most profitable banking market last year as lenders shrugged off ultra-low interest rates to post a sector-wide return on equity of close to 20%. As usual, the three largest banks all turned in strong performances, but after a two-year hiatus the award goes back to Ceskoslovenska Obchodni Banka (CSOB) in recognition of its superior profitability, asset quality and lending growth. A surge in demand for mortgages, prompted by a combination of returning consumer confidence and low rates, played to CSOB’s strengths and enabled the KBC subsidiary to grow its loan book by 7% to Kc509 billion ($25.1 billion) in 2013. That was nearly double the 3.7% expansion at closest rival Ceska Sporitelna and helped put CSOB back at the top of the Czech table in balance sheet terms by end-December. A return on equity of 18.2% also put CSOB ahead of both Ceska Sporitelna and number three lender Komercni Banka, which posted figures of 16.2% and 13.1% respectively. Meanwhile, CSOB’s already sector-beating NPL ratio fell a further 45 basis points to 3.1% by year-end. The bank also brought its capital structure in line with Basle III requirements, replacing subordinated debt with tier 1 share capital, and boosted its overall capital-adequacy ratio to 15.6%.
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Georgia
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Putting a pin between Georgia’s two leading lenders last year was even more difficult than usual. Bank of Georgia and TBC Bank posted near-identical returns on equity of just over 18.5% and both grew their deposit bases by around 16%. TBC Bank narrowly edges it, however, by virtue of a superior increase in net income – 27%, compared with 17% for Bank of Georgia – and faster lending growth. Loan portfolio expansion of 17% to GeL2.96 million ($1.67 million) by end-December took TBC Bank’s share of the overall market to around 27.5%, narrowing the gap between it and its larger rival by another two percentage points. TBC Bank also maintained its position as Georgia’s leading internet banking provider, expanding its online user base by 90% to 131,000 by end-2013.
Notable innovations by the lender in the awards period include the launch of a comprehensive support programme for Georgian SMEs and the introduction of a range of bancassurance products through a tie-up with GPI Holding, part of the Vienna Insurance Group. TBC Bank’s strong fundamentals received external validation when the lender reopened the international IPO market for CEE companies in June with a $239 million London listing. Shareholders including the EBRD, IFC and fund manager Ashmore sold stakes in the IPO, which also included $96 million primary share and was the first from the country since Bank of Georgia’s equity market debut in 2006.
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Hungary
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Hungary’s economy returned to growth last year but further increases to the already punitive tax burden on the financial sector, combined with continued household deleveraging and uncertainty over the fate of legacy foreign exchange mortgage portfolios, ensured that very little of the upside fed through into banks’ bottom line. Most of the country’s leading lenders remained in the red and even those that did achieve a positive full-year result – OTP Bank, K&H Bank and UniCredit Hungary – saw falls in profitability. Of these, it was KBC subsidiary K&H Bank that once again proved the most resilient. While national champion OTP Bank saw its net income eroded by as much as 40%, the number two lender’s full-year figure of Ft17.4 billion ($77 million) was only 15.2% down on 2012 and equated to a sector-best return on equity of 8.3%.
K&H Bank’s balance sheet and deposit base also expanded faster than those of its larger rival, at 4.1% and 3.5% respectively, while the shrinkage of its loan book was less acute at just 4%. Key to K&H Bank’s ability to both defend its bottom line and increase market share was its superior asset quality. At 12.9% at end-December, the lender’s NPL ratio was well below both the sector average of 18.5% and OTP Bank’s 17.4%. What is more, a slight decline in the figure to 12.7% by the end of March indicated that K&H Bank had become one of the first Hungarian lenders to reverse the long-standing trend of portfolio deterioration. The first quarter also saw the bank double its net income year-on-year to Ft6.1 billion, thanks in part to an increase in local-currency mortgage lending and active participation in the government’s funding for growth scheme.
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Kazakhstan
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The financial crisis continued to cast a long shadow over Kazakhstan’s banking sector last year in the form of high NPL levels and continuing uncertainty over the fate of repeatedly bailed-out BTA Bank. The country’s second-largest lender, Halyk Bank, was relieved of the necessity of taking over BTA in November – an honour that finally fell to larger rival Kazkommertsbank in February – and went on to post asset growth of 4.1% year-on-year and a respectable return on equity of 20.8%. On all metrics, however, Halyk Bank was outperformed again by a pair of smaller and nimbler lenders unencumbered by large legacy portfolios of impaired loans.
Eurasian Bank and Tsesnabank each boosted net income by more than a third in 2013 and notched returns on equity in excess of 24%. Growth at both lenders was also stellar but, whereas Eurasian Bank’s 23.1% loan portfolio expansion was primarily driven by higher-risk retail business, Tsesnabank’s impressive 40.9% increase in gross loans outstanding was more balanced. High-quality corporate borrowers accounted for the majority of the bank’s new business last year and, even after a 93% increase in retail lending, loans to businesses still made up 82.8% of its portfolio by end-December. This corporate focus also helped to keep Tsesnabank’s NPL ratio down to just 4%, making the lender one of very few in Kazakhstan to meet new regulatory requirements to reduce problem loans to below 10% of the total by end-2015. Headquartered in Astana, Tsesnabank has tripled its market share by total assets in each of the past three years to 6% by end-December and is now the country’s fifth-largest bank.
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Kosovo
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Raiffeisen Bank Kosovo’s commitment to supporting all sectors of the fledgling Balkan economy was rewarded with a 19.9% rise in pre-tax profit last year to €17 million – equating to a return on equity of 15.8% – and balance sheet growth of 11.1%. Loans to corporates increased by 12%, reinforcing the bank’s long-standing dominance of the market, while the introduction of a new working capital credit line for smaller businesses helped boost its share of overall SME lending to around 37%. Raiffeisen Bank Kosovo also expanded its offering for corporates last year with the launch of the country’s first ever factoring service, and both retail and business customers benefited from an extensive upgrade to the bank’s multichannel platform and the introduction of a range of new card products.
Its physical network, meanwhile, was enhanced by the addition of three sub-branches, bringing the countrywide total to 43. Asset quality remained a concern, with NPLs rising by 1.2 percentage points to 9.3% by end-December. This mild deterioration was balanced, however, by another very strong performance in the first quarter of 2014, when Raiffeisen Bank Kosovo recorded a net result of €7 million and a return on equity of 20.9%.
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Kyrgystan
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Another year of impressive growth, enhanced profitability and strong fundamentals maintained DemirBank’s long-standing record as Kyrgyzstan’s most reliable lender. Healthy increases in both interest and fee income more than offset a 16.1% rise in operating expenses last year, driving an improvement in net profit of 19.6% to Som341 million ($6.5 million). Total assets were up by 22.3% to Som11.5 billion, with loan volumes rising twice as fast as deposits. A deposit-to-loan ratio of 179.2% at end-March, however, left ample scope for further lending expansion. Asset quality deteriorated slightly, with NPLs reaching 2.9% by the end of the first quarter, but coverage was ample at 108%.
Much of DemirBank’s growth was attributable to its focus on expanding access to financial services and increasing Kyrgyzstan’s low levels of banking penetration. An increase in the bank’s payroll client base to 548 companies totalling 31,000 salaried staff by the end of March, contributed to a 22% boost in total customer numbers over the awards period. Last year also saw the lender expand its point-of-sale network by 46% to 1,195 outlets, while further upgrades to its internet banking platform earned DemirBank a 25% increase in online subscribers in the 12 months to March. DemirBank is majority owned by Turkish financier Halit Cingillioglu, with the EBRD and IFC holding the remaining 30%.
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Montenegro
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Montenegro bounced back from recession last year to record GDP growth of 3.5%, but very high NPL levels continued to bedevil the banking sector, constraining credit expansion and eroding profits. Market leader Crnogorska Komercijalna Bank (CKB), an OTP subsidiary, managed to post a positive annual after-tax result but dipped into the red in the fourth quarter, while number two lender NLB Montenegrobanka’s net income remained in negative territory for full-year 2013. By contrast, smaller rival Erste Bank AD Podgorica saw a modest increase in its bottom line result last year to €5.4 million, equating to a respectable return on equity of 12.7%. Much of this resilience was due to the bank’s superior and improving asset quality. Erste Bank AD Podgorica’s NPL ratio fell by 1.2 percentage points last year to 9.1%, precisely half the sector average and less than a quarter of the 37.4% recorded by CKB. The Austrian subsidiary also outperformed the market in terms of lending growth in 2013, increasing its net loan portfolio by 5.3% year-on-year to €259 million and its share of the overall lending market to 13.5%. Demand for credit from companies was particularly strong, resulting in an 8.8% expansion of the combined corporate and SME portfolio.
A subsidiary of the Austrian group’s Croatian operation, Erste Bank AD Podgorica was serving more than 70,000 customers from its 16 branches in Montenegro by end-2013 and had total assets of €350 million.
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Poland
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All the big names of Polish banking maintained healthy growth and double-digit returns on equity last year despite ferocious competition and a low interest-rate environment. Market leaders PKO BP and Bank Pekao saw a slight erosion of net income as margin pressure began to bite, however, while Commerzbank’s rebranded mBank – formerly BRE Bank – could only manage to come out flat on the year. The new number three by total assets, Bank Zachodni WBK, saw its balance sheet swollen by the successful absorption of Kredyt Bank and posted an industry-beating ROE of 16.6%, but asset quality was a concern as the Santander subsidiary’s NPL ratio rose by 2.5 percentage points to an above-average 7.9% of total loans by end-December. Slightly smaller ING Bank Slaski, however, not only boosted net profit by 15.5% to Zl962 million ($314 million) last year but also recorded the fastest pace of organic growth in the Polish market, expanding its asset base by 10.8%. Lending increased by 9% and deposits by 16.8% as the Dutch subsidiary added 352,000 individuals and 6,000 corporate clients.
That took the bank’s overall market share to 6.2%, 1.2 percentage points up on end-2012, making it the fifth-largest lender by balance sheet size. ING Bank Slaski also scored highly on innovation, adding new products and services to its offering for both retail and corporate clients. In 2013, the lender launched Aleo, a ground-breaking B2B trading and auction platform to enable companies to better manage procurement and sales and became the first bank in Poland to offer accounting services targeted at medium- and large-cap corporates. Other landmarks included the roll-out of Poland’s first contactless ATMs and the launch of an advanced mobile banking application for tablets, based on the ING BankMobile smartphone app, as well as the introduction of the e-faktura electronic invoice distribution and payment service. These achievements were endorsed by investors, who drove ING Bank Slaski’s share price up by 25% on the year, to a record Zl136.60 following the publication of financial results for the fourth quarter.
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Romania
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| Steven van Groningen,CEO, Raiffeisen Romania. The bank has expanded through acquisition |
A painful and comprehensive restructuring of Banca Comerciala Romana by parent group Erste paid off last year as the Romanian market leader posted a net profit for the first time since 2010. NPLs remained very high, however, and a bottom line result of just €200,000 in the first quarter of 2014 suggested that the lender’s recovery still had some way to go. Number two player BRD meanwhile remained in the red last year, setting up another two-way contest between local leader Banca Transilvania and Raiffeisen’s Romanian subsidiary. Of the two, Banca Transilvania continued to set the pace in terms of loan growth, boosting its portfolio by 9%, but the deteriorating asset quality that has accompanied its rapid expansion in retail lending once again put a dampener on the bank’s profitability.
Raiffeisen Bank, by contrast, opted to expand its balance sheet through acquisition, buying the local retail portfolio of Citibank in March last year in the first transaction of its kind since the financial crisis. The merger, which was completed two months ahead of schedule, brought more than €90 million in gross assets and €175 million in deposits to the Austrian subsidiary, boosting its retail customer base by 33% and overall assets under management by 28%. An increasing focus on retail did not, however, lead Raiffeisen Bank to neglect its core corporate base. Last year saw the lender, led by Steven van Groningen, step up activities in the structured trade finance and project finance segments, as well as introducing new products for SME clients. These initiatives helped to boost Raiffeisen Bank’s net income for 2013 by 18% to €104 million, equating to a sector-beating return on equity of 16.4%. At the same time, a 1.5 percentage point rise in the bank’s NPL ratio still took the figure to only 8.7% by end-December, compared with 12.6% at Banca Transilvania and a sector-wide average of 21.9%.
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Russia
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Faltering economic growth and weakening demand for consumer credit failed to make much of a dent in Russian banks’ bottom line last year. State-owned behemoth Sberbank once again made the most of its overwhelming market dominance, expanding its balance sheet by 20.6% and posting a return on equity above 20%, while the local subsidiaries of leading foreign lenders such as Société Générale, Raiffeisen, UniCredit and OTP all made substantial contributions to their parents’ profits. This year, however, the award goes to one of the country’s rising stars.
Originally founded in 1992, Credit Bank of Moscow quickly carved out a niche serving retailers in the Russian capital but remained well down the Russian rankings until after the financial crisis. In the past three years, however, a boom in its core sector combined with an ambitious growth and diversification strategy has boosted the lender from 56th by total assets to 13th. This rapid expansion has been matched by stellar profitability and, more unusually, by strong capitalization and very low impairment levels.
Last year saw Credit Bank of Moscow expand its loan book by 54.4% to R318 billion ($9.18 billion) and increase its net profit by 53.7% to R8.9 billion, taking return on equity to 20.1%. At the same time, the bank’s NPL ratio remained among the lowest in Russia, at just 1.3%, while tier 1 and overall capital adequacy ratios of 11% and 16% were also well above the sector average.
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| Roman Avdeev. Credit Bank of Moscow has taken advantage of growth in its core customer base |
These strong fundamentals earned Credit Bank of Moscow upgrades from Standard & Poor’s and Fitch, which last year raised ratings on the lender to BB- and BB respectively. Eurobond investors have also warmed to the bank’s growth story. A modest $100 million debut in 2006 was followed by two further senior unsecured deals, most recently a $500 million in January 2013. Even more impressively, in April last year Credit Bank of Moscow became the first ever Russian lender to issue lower tier-2 debt in Basle III-compliant format, nearly a month before Sberbank ventured into the new market. A London IPO planned for this year was also expected to meet with a very warm welcome from international investors but had to be put on hold as the Ukrainian crisis escalated. Credit Bank of Moscow is majority owned by Russian serial entrepreneur Roman Avdeev, who bought the lender in 1994, with the EBRD and IFC each holding a 7.5% stake. The two multilaterals paid $190 million for their joint holding in 2012.
Last year saw VTB Capital cement its position as the go-to investment bank in Russia, with market-leading performances in equity and M&A, and a respectable fourth in the debt league tables. On the advisory side, a combination of expertise in depth and unparalleled industry connections ensured that the bank remained the clear leader in the awards period. In total, VTB Capital acted on 20 transactions worth a total of $24.2 billion, amounting to more than 25% of overall activity. Notable deals include the $3.5 billion merger of Rostelecom’s mobile business with that of rival Tele2 Russia and a series of multi-billion dollar acquisitions of stakes in potash producer Uralkali, while a clutch of smaller transactions covered sectors including transport, technology and real estate.
VTB Capital also accounted for more than a quarter of all ECM activity out of Russia in the 12 months to March, acting on seven deals, including the New York IPO of software development and IT outsourcing company Luxoft and the London listing of Russian hypermarket chain Lenta. Meanwhile, on the debt side the bank earned mandates on debut corporate deals for Polyus Gold and Uralkali, as well as on innovative subordinated issues for lenders such as Nomos Bank and Bank St Petersburg. VTB Capital was also picked as the senior state-owned bank on the Russian Federation’s $7 billion four-tranche, dual-currency bond in September.
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Serbia
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Serbia has been widely tipped as the market to watch in southeastern Europe, but in 2013 the operating environment for banks remained challenging, particularly in the corporate and SME sectors, where very high levels of impaired assets continued to put a dampener on lending growth. Market leader Banca Intesa Beograd was not immune to this malaise. The long-standing award winner saw a six percentage point jump in its NPL ratio to 17.8% by the end of December, while coverage of 41% was modest at best. By contrast, smaller rival Raiffeisen Banka not only kept overall NPLs down to 11.2% in 2013 and coverage adequate at 77.8%, but also achieved a 20% reduction in impaired debt levels in the SME portfolio. The lender also grew its small business loan and deposit bases by 5% and 14% respectively, enabling the segment to post its best net result since 2008. The corporate segment also performed above target, thanks to a strong emphasis on the use of competitive external funding sources – including state-subsidized loans and supranational financing – and on capital-lite products such as documentary business, cash management and treasury. Meanwhile, on the retail side the bank maintained its market leading position in the credit card segment, where the number of transactions was up by 17% on 2012, and grew the customer base for its profitable premium banking offering by a further 18%.
This focus on core strengths and creditworthy customers, combined with a stringent efficiency drive, enabled Raiffeisen Banka to post a sector-beating return on equity of 10.2% for 2013 and a big cut in its cost-income ratio to 47.2%. A net profit for the first quarter of €14 million boded well for another strong full-year result in 2014.
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Slovakia
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Three banks continued to dominate the Slovak market in 2013, but it is Slovenska Sporitelna that takes the award again ahead of smaller rivals VUB Banka and Tatra Banka by virtue of its superiority across nearly all key metrics. For a second year in succession the market leader, part of Erste Group’s CEE network, shrugged off an extraordinary bank levy of 0.4% on all non-equity liabilities to post an unchanged bottom line result of €185 million. That equated to a return on equity of 15.1%, nearly double the industry average and well above the levels recorded by the bank’s closest competitors. A cost-income ratio of 42.8% was also among the best in sector.
This outperformance was primarily a function of Slovenska Sporitelna’s dominance in the retail segment, last year’s main growth driver in Slovakia. A surge in savings and credit demand by households, both segments in which the bank commands more than a quarter of the market, boosted its deposit base by 8.1% to €9.09 billion and total lending by 5.9% to €7.51 billion. As well as benefiting from these broader trends, however, the Austrian subsidiary also took a proactive approach to developing its retail and SME client base. Efficient deployment of loyalty schemes supported both customer retention and the use of digital banking, while a move to target the growing mass affluent retail client base also paid dividends.
The bank’s bottom line also received a boost from a decrease in provisioning costs associated with improved asset quality. NPLs declined by 0.8 percentage last year to 5.5%, while coverage remained ample at 87.3%.
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Turkey
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Strong performances by Turkey’s top three banks in 2013 once again made for a tough decision for the awards judges. Despite a deteriorating operating environment from the end of May, Garanti, Isbank and Akbank all notched stable net profits, double-digit returns on equity and lending growth of more than 25% while keeping NPL ratios of below 3% and maintaining more-than-adequate capital levels.
Concerns around renewed political risk and a widening current account deficit also failed to prevent all three lenders from hammering down margins in the international syndicated loan market or dampen the enthusiasm of global bond buyers for their paper. Nevertheless, some differentiation was possible. Garanti had the edge in terms of profitability, posting a sector-best TL3.41 billion ($1.59 billion) net result that equated to a 15.2% return on equity, compared with Akbank’s 14% and Isbank’s 13.7%. The number one by total assets also scored highest on loan portfolio growth, recording a 28.6% increase to TL128 billion.
Led by CEO Hakan Binbasgil, Akbank, however, was close behind on lending, which was up 27.8% by the end of December, and outperformed Garanti in deposit base expansion by 2.2 percentage points. While increasing slightly over the year, Akbank’s loan-to-deposit ratio thus remained comfortably below that of both Garanti and Isbank at 104.9%.
Tier 1 capital and NPL ratios of 14.5% and 1.5% respectively were also better than those recorded by the lender’s larger peers. With economic growth in Turkey expected to dip below 3% again this year, these strong fundamentals are likely to prove invaluable in protecting Akbank’s balance sheet and ensuring its continuing profitability. Similarly, a focus on boosting non-interest income should help to cushion the bank against a potentially volatile rate environment. Thanks to strong growth in segments such as bancassurance and money transfer, backed by a steady improvement in the bank’s cross-selling ratio from 2.8x in 2009 to 3.3x last year, net fee and commission income was up 25% in 2013.
A focus on more capital-lite business, however, did not affect Akbank’s appetite for providing support to Turkey’s real economy. Enhanced risk management systems, combined with a comprehensive outreach programme, enabled the bank to grow its SME Turkish lira loan portfolio by 42% and foreign currency lending to smaller enterprises by 17%.
HSBC made a strong comeback in Turkish DCM in the awards period, boosting its allocated deal volume by 37.2% to $2.18 billion and moving up to second from last year’s fourth place, but it was Citi that topped the league tables yet again. The US house acted on 14 deals for a total allocated volume of $2.55 billion, with landmark transactions including inaugural dollar deals for glass producer Sisecam and Coca-Cola Icecek, as well as the first ever Turkish infrastructure Eurobond – from Mersin International Port – and Turkiye Finans’s $500 million five-year, the largest non-sovereign sukuk deal from Turkey to date.
The hoped-for surge of primary equity market activity failed to materialize in Turkey last year after US Federal Reserve tapering plans and mass protests in Gezi Park caused a sharp spike in share price volatility, and the awards period saw just seven follow-on deals come to market with a total value of less than $3 billion. Of these, by far the largest was the $1.59 billion capital raise by state-backed real estate firm Emlak Konut. Originally scheduled for June, the deal was postponed following the outbreak of political unrest but was successfully revived and closed in November. Bank of America Merrill Lynch retained its position as sole global coordinator and sole international bookrunner on the offering, which attracted demand from 20 global sub-regions following a three-day bookbuild. The US house also acted as sole bookrunner on utility Aksa Enerji’s TL400 million re-IPO in May.
In a very slow year for M&A activity in Turkey, Is Investment was nonetheless able to leverage its local expertise and connections to notch eight advisory mandates – five on the sellside and three on the buyside – in the 12 months to end-March. The investment banking arm of leading Turkish lender Isbank helped local firms to expand overseas, acting on outward-bound cross-border deals including tile-maker Seramiksan’s purchase of Italy’s Ceramica Rondine and Trakya Glass’s acquisition of German auto-glass manufacturer Richard Fritz. It also advised Turkish investors on the disposal of assets to foreign buyers, such as the Ulkeroglu family’s sale of Dharma Ilac to French pharmaceuticals firm Expanscience.
