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UniCredit |
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Best investment bank in Central & Eastern Europe and Baltics |
Citi |
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UniCredit |
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UBS |
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Rothschild |
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Deutsche Bank |
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Best transaction services house in Central & Eastern Europe and Baltics |
UniCredit |
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Country Awards for Excellence 2015: Central & Eastern Europe and Baltics |
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Best bank in Central & Eastern Europe and Baltics
Central and eastern Europe’s regional banks could be forgiven for feeling they are due for a respite. While most were still struggling to shake off the effects of the financial and eurozone crises, they were hit again last year by the near-collapse of the Ukrainian banking system, a dramatic slowdown in Russia, as well as further hefty penalties in Hungary. As if that were not enough, the Swiss National Bank’s decision in January to remove the cap on its currency put the issue of Swiss franc mortgages back on the political agenda in countries across the region.
Unsurprisingly, none of the major regional players escaped unscathed from this latest wave of setbacks. Losses in Ukraine weighed on returns for Raiffeisen and UniCredit, both of which also saw a substantial drop in profits from Russia in hard currency terms last year. The end of Russia’s long retail spending splurge hit consumer finance banks such as OTP’s local operation particularly hard, while looming recession also put a dampener on Société Générale’s attempts to turn around its loss-making subsidiary Rosbank. Meanwhile, bad debts continued to bedevil the two leading players in the Romanian market, SocGen and Erste. The latter was also among the lenders most affected by the Hungarian government’s repeated assaults on the banking sector.
In view of this challenging operating environment, it comes as little surprise to find that three of the parent groups with the biggest presence in CEE – Raiffeisen, Erste and OTP – were dragged into the red last year by their regional networks. What is perhaps more surprising is that UniCredit, the leading player in emerging Europe, not only made a handsome profit from its regional operations last year but has announced plans to expand its network at a time when others are pulling back.
The key to the Italian bank’s success lies in a combination of luck, good management and strong fundamentals. Geographical diversification – UniCredit has operations in 14 countries across CEE – has played a big part in maintaining profitability across the segment, as has a leading presence in growth markets such as Poland, Turkey, Czech Republic and Slovakia.
UniCredit’s focus on the corporate sector in Hungary and Russia has also spared it much of the pain inflicted on its more retail-oriented peers. Russia continues to be an important profit generator for the group despite the economic slowdown, while UniCredit’s Hungarian operation has the distinction of being the only large lender in the country to remain in the black throughout the past five years.
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Gianni Franco Papa has worked hard to resolve the legacy of the financial crisis and improve efficiency at UniCredit |
Yet UniCredit’s success has been about more than just being in the right place and the right segment at the right time. Until February under the leadership of Gianni Franco Papa, the CEE division has worked hard over the past four years to come through the legacy of the financial crisis and improve efficiency. These efforts are now paying handsome dividends. In 2014, provisioning charges for the CEE network were down by 40.2% on the previous year to €654 million, while risk costs fell to 118 basis points from 192bp. Net loan write-downs also showed a substantial decline, particularly in Hungary, Romania and Croatia.
Meanwhile, a stringent programme of branch reduction – around 450 outlets have been closed over four years – has helped keep the division’s cost-to-income ratio down to 41.5%, as has the merger of UniCredit’s Czech and Slovak operations.
As a result, UniCredit is now well-positioned to take advantage of the retreat via deleveraging or outright disposal of other foreign lenders from the region. The Italian group has already acquired portfolios in Czech Republic, Slovakia and Romania and, according to new division head Carlo Vivaldi, is “ready to evaluate external growth opportunities” in markets across the region.
Clearly, challenges remain. Further deterioration in the Russian market is a strong possibility, as is more pain in Ukraine, where UniCredit’s subsidiary remains officially, if somewhat optimistically, up for sale. A rising tide of bank nationalism in countries such as Russia, Turkey, Poland and Hungary could yet bode ill for UniCredit as the foreign group most exposed to those markets, while muted credit demand and low interest rates will likely continue to dampen returns across CEE for several years to come. Nevertheless, for the moment UniCredit has decisively proved itself the strongest and most resilient of the regional banks, and a worthy winner of this year’s award.
Best investment bank in Central & Eastern Europe and Baltics
The awards period was also a challenging one for investment banks in CEE. International deal flow from Russia, the region’s largest market, all but dried up in the wake of the annexation of Crimea and subsequent imposition of western sanctions – and hopes of a revival of investor appetite for unsanctioned Russian assets were stymied in the autumn of 2014 by the simultaneous plunge of the oil price and the rouble.
The situation in Ukraine also took a toll on volumes, both directly and indirectly. Issuance from Ukraine itself ceased altogether as the economy collapsed and the sovereign teetered on the brink of default. More importantly, the surprise return of geopolitical risk to what had been seen as a relatively stable region curbed the enthusiasm of local entrepreneurs and international investors alike.
Meanwhile, the Polish government put a dampener on what had been emerging Europe’s most vibrant equity market by nationalizing its private pension funds; and even Turkey, formerly the darling of international investors, fell partially out of favour thanks to the increasingly authoritarian and anti-market stance of president Recep Tayyip Erdogan.
As a result, deal flow in CEE declined dramatically. In the 12 months to March, international bond issuance from the region was down 44.3% on the previous awards period; primary equity activity fell by 54.1% and M&A volumes by 42.6%.
In this type of environment, the investment banks that perform best are those that combine strong diversification – across countries, sectors and asset classes – with a depth of coverage that allows them to capture day-to-day deal flow as well as the headline transactions.
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Jim Cowles, Citi, stands head and shoulders above its competitors, thanks to its unrivalled CEE network |
In this respect, Citi continues to stand head and shoulders above its competitors. Thanks to its unrivalled CEE network – comprising nearly 100 bankers in 10 countries from Poland to Kazakhstan, as well as a large team in its London CEEMEA hub – the US house, under EMEA regional CEO Jim Cowles, was able once again to top both the debt and equity league tables.
It was not all about volume, however. Among the 40 bond deals that Citi worked on in the awards period were landmark transactions such as Bulgaria’s €3.1 million triple-trancher, debut issues from Polish corporates PZU and PGE and Vakifbank’s Basel III-compliant tier-2 deal.
On the equity side, Citi’s big achievement was the sale of the bank’s own $1.2 billion stake in Akbank through the largest-ever accelerated bookbuild in the Turkish market. The US house also notched up notable successes as global coordinator on the IPOs of Romania’s Electrica and Hungary’s Wizz Air, as well as acting on secondary offerings from Moscow Exchange, Bank of Georgia and Alior Bank.
Citi also maintained a strong presence in M&A, racking up more deals in CEE than any of its global competitors. The bank acted on 18 transactions across the region, with clients including Poland’s PGNiG, Russia’s Severstal and CIS Petrocas Energy.
Best debt house in Central & Eastern Europe and Baltics
While Citi remains the dominant force in CEE debt capital markets, the big league table climber of the awards period was UniCredit. In 2014/15, the Italian bank jumped to seventh in Dealogic’s rankings from just 14th in the year before, while its allocated deal volume was up by two-thirds to $4 billion-equivalent.
This was partly due to the return of the euro as the currency of choice for CEE borrowers. In the 12 months to March, issuance in the single currency accounted for 64.7% of total international volumes, compared with less than a third a year earlier.
This naturally favoured the big European houses, but UniCredit, with its extensive regional network and unique access to local corporates, was particularly well-placed to take advantage of the shift to euros. Notable deals included debut bonds from Slovakia’s SPP and Czech Republic’s Net4Gas, a ground-breaking €2 billion dual-trancher for the Slovenian sovereign and a €500 million deal for Vakifbank that was the first in the currency from a Turkish lender in more than a decade.
The award also recognizes UniCredit’s leading role in local currency bond markets across CEE. The Italian bank is number one for local debt issuance in Croatia and Bulgaria, in the top five in Turkey and Romania, and ranks seventh in Poland.
Since the closure of international markets to Russian borrowers, UniCredit has also been particularly successful in leveraging its extensive corporate relationships in the country to boost its presence on the local debt markets. The bank jumped to number six in the rouble bond league tables in 2014, with landmark deals including Volkswagen Bank’s market debut and a R15 billion ($275 million) trade for local telecoms operator Megafon.
Best equity house in Central & Eastern Europe and Baltics
Russian sanctions, Poland’s pension fund reforms and concerns around Turkey’s economy took a particularly heavy toll on primary equity markets in CEE last year. Deal volume halved to just $8.5 billion, of which Citi’s sale of its stake in Akbank accounted for nearly 15%. Even without that trade, the US house easily topped the ECM rankings – but the bank that caught the judges’ eye as a rising star was UBS.
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Sanctions against Russia have taken a heavy toll on primary equity markets in CEE last year |
Unlike its global investment banking rivals, many of which have been scaling back in CEE since the start of the Ukrainian crisis, the Swiss house has grown its franchise in the region over the past 18 months. It now has a full office in Warsaw covering central Europe, as well as an expanded presence in Moscow and – highlighting the bank’s increasing focus on frontier markets – a team in Kazakhstan. UBS has also continued to invest in its regional equity salesforce, which provides valuable support to its CEE primary equity team – led by EMEA ECM head Javier Martinez-Piqueras – thanks to the bank’s policy of marketing assets from all jurisdictions across the whole network. The benefits of this strategy are becoming increasingly evident. In the 12 months to March, UBS won five ECM mandates in emerging Europe, including two from Georgia – TBC Bank’s $640 million IPO and a secondary offering from Bank of Georgia – and a $231 million accelerated bookbuild for Poland’s BZ WBK. Four out of five were for financial institutions, an area in which UBS has traditionally been strong, but the bank also notched a corporate deal with an accelerated bookbuild for Turkey’s Coca-Cola Icecek in December 2014.
Best M&A house in Central & Eastern Europe and Baltics
For the second time in three years, Rothschild’s impressive regional reach and ability to maintain deal flow in challenging markets earn the advisory-only house the award for M&A. In a year of thin volumes – overall activity amounted to just $87.3 billion – the UK firm notched up a string of complex and high-profile mandates spanning a broad range of geographies and industry sectors. These included acting as sole adviser to Anadolu Group on its $803 million acquisition of a 40.3% stake in supermarket chain Migros Ticaret, one of the largest deals ever announced in the Turkish retail sector; advising Rabobank on the €1 billion sale of Polish lender Bank BGZ to BNP Paribas; and acting for Russian steel firm Evraz on the $287 million disposal of its Czech unit to a group of private investors.
Rothschild also advised Abbott Laboratories on its $631 million acquisition of Veropharm from entrepreneur Roman Avdeev, the largest healthcare transaction in Russia to date. Key to the firm’s success is its ability to coordinate its global advisory network with an extensive regional presence. Rothschild has advisory teams based in Moscow, Athens, Istanbul and Warsaw, as well as representatives in Budapest and Bucharest and local partnerships in Czech Republic, Bulgaria and the Baltics.
Best risk adviser in Central & Eastern Europe and Baltics
At a time when risk advisory skills were needed more than ever in CEE, Deutsche Bank once again emerged as the leading provider of innovative solutions for corporates and individuals. The German house’s development of automated rolling collars (ARCs), which limit both upside and downside currency losses by providing short-term collars that continually reset, proved particularly popular in a year in which the rouble lost as much as half its value against the dollar and the Turkish lira went into a steady decline.
Best transaction services house in Central & Eastern Europe and Baltics
UniCredit also wins best transaction services house this year for its firmly held resolve to continue operating in the region despite a challenging geopolitical climate.
UniCredit held a 12% market share of foreign payments, excluding Russia, in 2014. It was also involved in 13% of bank-to-bank payments and 14% of letters of guarantee, according to Swift.
The bank has successfully implemented tools that have been used in other regions to support its clients in CEE. Leveraging its position across the eastern European markets enabled the bank to win the request for proposals of an international technology company. The win saw the bank implement its @GlobalTrade tool in CEE for the first time. @GlobalTrade allows clients round-the-clock access to support the guarantee business.
Covering the region’s small SMEs through to international corporations, the bank has worked hard to streamline its operations. In return, the clients appreciate the bank’s clear commitment to the region.
