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| © 2017 Euromoney |
| Regional awards |
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AlbaniaBest bank: Banka Kombetare Tregtare |
The narrative in the Albanian banking sector was unchanged last year as Banka Kombetare Tregtare (BKT) continued to assert its dominance over former market leader Raiffeisen Bank. By the end of December, the Turkish-owned lender accounted for more than a quarter of all deposits in the country and nearly 22% of overall loans, while its Austrian rival saw its share of both markets slip to below 20%.
Retail and consumer lending remain the key drivers of BKT’s impressive profitability – return on equity topped 19% again last year – but the bank is increasingly making inroads into the corporate market. Lending to Albanian businesses rose by 22% in 2016, while the number of borrowers was up by 12.6%.
BKT is also reaping dividends on the corporate side from investment in technology. Take-up of the lender’s business e-banking service was up by 50% last year, and early indications suggest that the recent extension of the BKT Smart mobile app to corporate customers will prove equally popular.
Innovation has also continued apace on the retail side. Last year, BKT became the first Albanian bank to introduce contactless payment technology on its market-leading Prima Extra credit card. Despite its rapid growth the lender remains well-capitalized and has so far avoided the asset-quality issues that have blighted Albania’s banks since the financial crisis. A jump in non-performing loans to 7.5% of the total by end-December might be cause for concern elsewhere but looks modest in the context of a sector average of around 18% in Albania. With long-standing CEO Seyhan Pencabligil at the helm, BKT – a subsidiary of Turkish non-financial conglomerate Calik Holding – looks set for another strong performance in 2017.
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ArmeniaBest bank: Ameriabank |
Rising capital requirements prompted a surge of consolidation in Armenia’s banking sector last year, including the acquisition by number two lender Ardshinbank of smaller rival Areximbank, but failed to dent Ameriabank’s appetite for growth. The market leader became the first Armenian bank to push overall net lending past the $1 billion mark in 2016, following a 60% jump in outstanding loans over the course of the year.
Concerns about the pace of growth were allayed, however, by a fall in the loan portfolio to a more sustainable $956 million by the end of the awards period. A 20% drop in related-party lending this year was also welcomed by analysts and ratings agencies.
As with the rest of the Armenian banking sector, asset quality remains a challenge for Ameriabank. While the headline NPL ratio was flattered by the rapid growth of the bank’s loan book, ending last year at 3.5%, impairment charges still took a hefty bite out of its bottom line. Nevertheless, a return on average equity of 10.2% for 2016 was strong by local standards, and a drop in impairment losses from the previous year pointed to an encouraging trend.
Last year also saw Ameriabank maintain its record of innovation, with upgrades to the lender’s phone banking system and the introduction of a range of new products, including energy-efficient loans for small and medium-sized enterprises. It also showcased its investment banking capabilities with the inaugural placement of its own corporate, dollar-denominated bonds on the local market in spring 2016. The $15 million issue was followed by a further two dollar placements, as well as one in local currency.
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AzerbaijanBest bank: Pasha Bank |
A toxic cocktail of bad governance and massive currency devaluation pushed Azerbaijan’s banking sector into crisis in 2016. The country’s largest lender, International Bank of Azerbaijan (IBA), ended the year with a negative tier-1 ratio of 4.7% and in the red to the tune of more than $1 billion despite receiving $5.6 billion of state support over the previous 18 months.
A further $296 million recapitalization in January failed to stem the losses and in May IBA defaulted on its international debt. Meanwhile, 11 smaller banks were shuttered in the 12 months to end-December and more closures are expected this year. In this environment, any lender that managed to avoid heavy losses and balance sheet deterioration stood out – and Pasha Bank did more than that. Despite substantial increases in operating expenses and impairment charges, Azerbaijan’s leading corporate and investment bank saw its net profit for 2016 jump to Am69.3 million ($41 million) on the back of increases of 37.7% and 63.5% in net interest income and net fee and commission income.
The turmoil in local-currency markets also worked to the bank’s advantage, boosting its take from FX dealing by more than three times to Am57.8 million. Both lending and deposit growth were healthy, at 22.7% and 71.1%, although very high concentration in the deposit base remained a weakness. As with all institutions of any size in Azerbaijan, Pasha Bank has close ties to the state. The lender is part of Pasha Holding, a local conglomerate controlled by Arif Pashayev, the father-in-law of president Ilham Aliyev.
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BelarusBest bank: Priorbank |
Belarus’s economy remained mired in recession last year, but once again an adverse operating environment failed to prevent Priorbank putting in a strong performance. The Raiffeisen subsidiary posted a pre-tax profit of BR205 billion ($11 million), equivalent to a return on equity of 29%, on the back of a 27.2% rise in net interest income.
The bank also bucked local trends by growing its loan book by close to 10% against a backdrop of sector-wide deleveraging, with corporate lending providing the key driver of expansion. Retail lending proved more challenging, but a centralized retention programme for existing clients and the introduction of a new combined debit-card and cash-loan product helped Priorbank defend its number two position in the market. As a result, total assets rose by 7.4% and customer numbers by 2.3%.
The SME segment proved particularly fertile ground for customer acquisition, thanks to the introduction of new products, including Belarus’s first online overdraft for small businesses and a smartphone-based point-of-sale service.
Technological innovation also boosted take-up of Priorbank’s digital offering for retail clients. The launch of a new internet banking platform helped increase online operational turnover by 36%, while mobile payments rose 88% following the introduction of a new app for Android and iOS.
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Bosnia and HerzegovinaBest bank: Raiffeisen Bank |
Last year saw the first signs of sustained recovery in the Bosnian banking sector after a protracted post-financial crisis slump. NPLs were down to 11.8% of total lending by the end of December, the lowest level since 2011, while industry net profit rose to KM220 million ($127 million) from just KM31.6 million in 2015.
The country’s two largest banks continued to outperform the rest of the sector, however, accounting for more than half of overall net income. Once again it was market leader UniCredit Mostar that had the edge in terms of profitability, with a sector-best return on assets of 2%. This year, however, it is number two player Raiffeisen Bank that takes the country award for Bosnia by virtue of its superior asset quality and commitment to innovation.
Notable achievements by the Austrian subsidiary in the awards period included the introduction of a facility enabling customers to contact the bank via Viber, emerging Europe’s popular rival to Skype, and the launch of a new digital branch concept. On the traditional banking side, the introduction of new loan features helped Raiffeisen retain and attract premium customers, while a redesigned account package proved popular with Bosnia’s SMEs.
A focus on the POS market also paid off, with merchant turnover and fees up 21% and 19% respectively year on year. Pre-tax return on equity was slightly down on 2015 but remained healthy at 13.1%. Meanwhile, a reduction in NPLs to 8.8% of total lending put Raiffeisen Bank well ahead of its peers in terms of asset quality. Provisioning was also strong by local standards, at 76.6% of impaired loans, while a fully loaded common equity tier-1 ratio of 12.3% provided a comfortable capital cushion.
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BulgariaBest bank: DSK Bank
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UniCredit Bulbank continues to dominate the Bulgarian banking market, accounting for more than 20% of the sector by total assets at year end 2016, but in terms of profitability number two player DSK Bank again came out an easy winner this year. Despite a slight fall in net income from 2015, a return on average equity of 18% still put the OTP subsidiary well ahead of its main rivals, which struggled to break the 11% mark. Return on assets was also outstanding, at 2.4%.
DSK’s focus has historically been on the retail market. The bank has the largest branch network in Bulgaria and is a clear leader in consumer and mortgage lending, with market shares of 29.1% and 21.7% respectively at the end of December. The launch last year of new account packages aimed at students and younger customers played to DSK’s traditional strengths. The introduction of commercial factoring services reflected a new emphasis on boosting penetration of Bulgaria’s corporate market. Asset quality remains a concern for most leading banks in Bulgaria, but here again DSK outperformed peers last year, notching up a 3.4 percentage point reduction in its NPL ratio to 9.7% despite muted loan growth.
Meanwhile, in investment banking the revival of corporate bond issuance in Bulgaria gave a well-deserved fillip to one of the country’s longest-established domestic players. Founded in 1998, BAC Securities was taken over by its current shareholders, led by managing director Alex Bebov, five years later. Expansion into Romania and Serbia followed rapidly, giving the firm the regional reach required by international investors.
Today, BAC provides brokerage services to a diverse client base across western, central and southeastern Europe. In its home markets, the firm also offers a full range of investment banking services. Traditionally, demand has been strongest on the advisory side, reflecting low issuance volumes in both debt and equity capital markets in the region. Last year, however, saw a clutch of companies take advantage of rising investor appetite for Bulgarian risk to raise bond market funding.
In July, Bulgarian Energy Holding reopened the Eurobond market for corporates from the country with a €550 million issue. That was followed in November by a €130 million placement from electricity firm Energo Pro Varna, the largest ever on the local bond market, and a debut domestic issue by insurance holding company Eurohold Bulgaria. BAC’s local expertise earned the firm mandates on all three issues, including as sole lead on Energo Pro Varna’s well-received seven-year deal.
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CroatiaBest bank: Zagrebacka Banka
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Croatia’s banking sector returned to profitability last year after heavy losses in 2015 caused by the forced conversion of foreign currency loans into euros. Asset quality also improved as rising provisioning requirements prompted banks to start the long-overdue process of restructuring and selling off legacy bad debts.
Market leader Zagrebacka Banka showed the way on both counts, posting its strongest results since the financial crisis along with a substantial reduction in NPLs. The UniCredit subsidiary notched up a sector-best net profit of K1.7 billion ($259 million) for the year, equating to a return on equity of 11.2%. This was partly due to lower impairment charges, but operating income also rose by 21.7% thanks to falling funding costs and further efficiency measures.
The bank’s overall loan portfolio shrank as the NPL work-out process gathered steam, but individual segments showed a dramatic increase in new lending for the first time since 2009. Issuance of mortgages and cash loans was up by 37% and 11% respectively, while new lending to small businesses rose by 14%. NPLs remained relatively high at 14.1% of the total at the end of December, albeit down 1.5 percentage points year on year. Coverage of 71.5% was well above the sector average, however, and asset quality will improve further after the sale in May of a €450 million portfolio of bad debts. Meanwhile, deposits increased by 6.7%, boosting the bank’s deposit-to-loan ratio to a healthy 96%.
The economic recovery that started in Croatia in 2015 was consolidated last year when GDP grew by close to 3%. Returning confidence among local businesses combined with rising interest in the country from external investors after its accession to the EU in 2013 finally prompted a pick-up in investment banking activity.
Intercapital Securities was well-positioned to benefit from this turnaround. Croatia’s leading non-bank investment firm was able to leverage its strong track record in both capital markets and advisory to secure a clutch of notable mandates. Highlights included acting as financial adviser to European tourism group PPHE on its acquisition of Croatia’s Arenatourist Group, a complex structured transaction that also saw Intercapital negotiate post-acquisition financing with local pension funds in Zagreb and resulted in a further mandate this year to lead the firm’s debut on the Zagreb Stock Exchange.
Intercapital was also tapped to advise the Croatian government and Bouygues Construction on a €220 million motorway extension project financing, while other ECM mandates included the private placement of shares in regional food giant Atlantic Grupa for the EBRD. On the brokerage side, Intercapital easily outpaced rivals in the local market last year, accounting for 26.8% of equity turnover on the Zagreb Stock Exchange and 24.8% of secondary bond trading.
The firm also consolidated its presence in the Slovenian market, becoming a full member of the Ljubljana Stock Exchange, as well as expanding its coverage of other regional markets including Bulgaria, Romania, Serbia and Bosnia.
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Czech RepublicBest bank: Ceska Sporitelna
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Competition remained cutthroat at the head of the Czech banking market last year, with KBC subsidiary CSOB and Erste’s Ceska Sporitelna once again posting near-identical sets of strong results. Both lenders recorded double-digit balance sheet growth on the back of surging mortgage demand, along with returns on assets of around 1.5%.
CSOB scored highly for innovation after the launch last August of the Czech Republic’s first mobile wallet for contactless payment. However, it is Ceska Sporitelna that earns the country award for its move towards a more data-based, proactive approach to customer service.
This shift has been driven by incoming CEO Tomas Salomon. After taking over in January 2016, Salomon spearheaded a review of Ceska Sporitelna’s strategy that led to the launch in November of My Healthy Finance, an initiative designed to provide long-term advisory services to retail customers.
“Czech banks have talked about advisory in the past, but in practice that usually meant just reacting to customer demands or hard-selling of campaign products,” says Salomon. “We want instead to use the data and knowledge of our clients that we have built up to help them plan their financial future.”
The initial response to the programme has been positive. By mid-April, Ceska Sporitelna had signed up 300,000 customers or 8% of its retail client base. Take-up is expected to accelerate this year following the roll-out of George, Erste’s ground-breaking digital platform, which will enable the provision of advisory services online and via mobile devices.
Salomon says building longer-term customer relationships will also help the bank meet the challenge from new players in the Czech market, which have mostly tried to compete on price. “In the past, we reacted to what these smaller banks were doing rather than focusing on our own strategy,” he says. “I’m really trying to change that.”
Other notable innovations by Ceska Sporitelna in the awards period included the launch of Friends 24, a mobile app that allows users to make small payments without going through formal banking channels, as well as the introduction of the Czech Republic’s first fully digitalized consumer loan product. The bank also began offering online mortgage refinancing in August.
Meanwhile, Wood & Co wins this year’s award for best investment bank in the Czech Republic for its work on the landmark IPO of GE Money Bank last May. The firm, which was founded in Prague in 1991, has long since expanded beyond its home market to cover most of emerging Europe.
It remains the dominant force in Czech equity markets, however, with a market share of 40%. As such, the bank was the natural choice for a local partner when General Electric listed its Czech subsidiary. The transaction, which raised $849 million for the US conglomerate, was the largest IPO in central Europe for nearly five years and the largest in the Czech Republic since the financial crisis. Wood & Co acted as lead manager alongside bookrunners Citi, Goldman Sachs and JPMorgan. The same team also managed GE’s exit from the newly renamed Moneta Money Bank through follow-on offerings in September and November.
Wood & Co also landed a number of notable advisory mandates in the awards period, including as financial adviser to Macquarie Infrastructure and Real Assets on its acquisition of a 31% stake in Czech and Slovak holding company EP Infrastructure.
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EstoniaBest bank: SEB Pank |
Strong labour market conditions and accelerating economic growth made for a positive environment for Estonia’s banks over the awards period. The retail segment proved particularly buoyant as near-zero inflation and wage growth of 7.6% gave a dramatic boost to household purchasing power.
SEB Pank was able to take full advantage of the return of consumer confidence. The Estonian number two player leveraged its traditional strength in retail to grow outstanding lending to the segment by 7%, thanks largely to an impressive 30% increase in new mortgages. Loan growth in the SME sector was more modest, despite SEB’s continuing focus on the segment, but the bank gained ground with Estonia’s larger companies.
Lending to corporates was up by 7% year on year, while deposits from the segment rose by 29%.
The expansion of SEB’s loan portfolio was reflected in the bank’s bottom line. Pre-tax profit increased by 16.2% last year to €89.7 million, while return on average assets rose 10 basis points to 1.54%.
SEB’s continued investment in technology paid dividends in the form of more than 50% annual growth in usage of mobile banking. The pace of take-up is expected to remain high this year after the implementation in the first quarter of an extensive upgrade to the bank’s mobile app, which introduced new features including smart-ID authentication. Other notable innovations in the awards period include the introduction of a remote account-opening facility.
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GeorgiaBest bank: TBC Bank |
TBC Bank confirmed its status as the momentum player in Georgian banking last year, posting another set of outstanding results in 2016 and overtaking arch rival Bank of Georgia to become the largest lender.
Highlights of the awards period include TBC’s achievement of a premium listing on the London Stock Exchange in August and the successful integration of Bank Republic, formerly the number three player in Georgia. The former allowed TBC to access a wider investor base as well as enhancing liquidity in its shares, while the Bank Republic acquisition gave the lender a local market share of 38.9% of loans and 37.8% of deposits.
Organic growth also contributed to TBC’s new-found dominance of the Georgian market. The bank expanded its own loan book by 27% last year, while deposits were up by 35%. Growth of 12% and 9% in the lucrative SME and micro segments was a particularly notable achievement.
TBC also maintained its edge over Bank of Georgia on key profitability and sustainability metrics. A return on tangible common equity of 22.4% was just ahead of its rival’s 22.1%, while TBC’s NPLs at end-December accounted for 3.5% of the total versus 4.3% for Bank of Georgia. The new market leader also earned plaudits from analysts for its relatively modest loan-to-deposit ratio of 110.5% and diversified funding structure. Customer deposits accounted for 70% of TBC’s total liabilities at end-2016, with retail deposits making up more than 80% of the total. The bank’s capital adequacy remains low by emerging market standards but a tier-1 ratio of 10.4% is comfortably above the minimum required by the Georgian regulator.
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HungaryBest bank: OTP Bank |
Buoyed by another year of healthy economic growth, Hungarian market leader OTP Bank finally shook off the after-effects of the financial crisis last year and grew its loan portfolio for the first time since 2008.
This was partly achieved through the acquisition of Axa Bank’s Hungarian retail portfolio, which added 7.3% to OTP’s total outstanding loans. Organic lending growth was also healthy at 4.7%, buoyed by a 14% increase in borrowing by corporates and a 9.9% rise in the SME segment. Ultra-low interest rates prevented this expansion from making a big impact on OTP’s bottom line. Despite a slight decline in net interest margin to 3.36% by the end of December, however, the bank managed to post a full-year net income of Ft122.2 billion ($447 million).
Last year also saw a notable improvement in OTP’s asset quality in its home market. While the group’s subsidiaries in Russia and Ukraine continued to struggle with impaired loans, NPLs at the Hungarian operation were down to 9.8% of the total by the end of December, a 2.3 percentage point drop from a year earlier. With a gross loan-to-deposit ratio of just 53%, OTP – which has been led by chairman and CEO Sandor Csanyi since 1992 – is well-positioned to take advantage of returning consumer and business confidence in Hungary.
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KazakhstanBest bank: Halyk Bank |
In another difficult year for the Kazakh financial sector, Halyk Bank’s strong governance and conservative approach to risk again stood it in good stead. The country’s second-largest lender bucked sector trends last year by posting impressive returns while at the same time preventing asset-quality deterioration and maintaining a healthy capital base.
Full-year net income was up by 9.2% to KT131.4 billion ($420 million), equating to a return on equity of 22.3%. Net interest income was particularly buoyant, rising 22.4% despite a 0.7 percentage point fall in the bank’s net interest margin to 5.5%. Lending growth of 5% helped to keep Halyk’s NPL ratio at a manageable 10.2%, while a 25.5% increase in deposits enhanced the bank’s already strong funding position. Total equity also rose by more than 25% after chairwoman Umut Shayakhmetova’s decision to suspend dividend payments for a second year in succession, boosting the bank’s CET1 ratio to 19.4% at year-end 2016.
Halyk also remains one of Kazakhstan’s most efficient banks, with a cost-to-income ratio of just 28.5% last year. Whether or not the bank will be able to maintain its outstanding track record if, as expected, it agrees to take over larger rival Kazkommertsbank (KKB) remains to be seen. Kazakh policymakers have pledged to support the merger by transferring bad debts from failed bank BTA, which KKB took over in 2014, to a state problem loan fund. Nevertheless, analysts and ratings agencies worry that the transaction will present financial and operational challenges for Halyk. For the moment, however, the bank is a worthy winner of this year’s country award for Kazakhstan.
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KosovoBest bank: TEB |
Banking in Kosovo remained a highly competitive business last year as a surprisingly broad array of incumbents and challengers fought to service lucrative segments such as retail and SMEs. Market leader Raiffeisen Bank once again put in a strong showing and maintained its position as the go-to bank for corporates in Kosovo, but the award this year goes to smaller rival TEB in recognition of its impressive profitability and balanced growth.
Ranked number four in the country by total assets, TEB recorded its highest-ever net profit last year (€18.3 million) and a stellar return on equity of 35.7%. Overall lending was up by 3.7%, with SMEs accounting for a substantial chunk of the increase. A focus on Kosovo’s fast-growing agricultural industry proved particularly fruitful, driving an increase in outstanding loans to the sector of 13.5%.
TEB also worked with the EBRD to support women in business. An initial credit line provided by the development bank for female entrepreneurs was fully utilized last year and TEB signed a second facility in December. Meanwhile, continuous improvements to its credit-card offering enabled the bank to maintain its dominance of the segment last year. At the end of 2016, TEB accounted for 75% of all active credit cards issued in Kosovo. Asset quality remained stable, however, thanks to risk management models inherited from TEB’s owners, BNP Paribas and Turk Economi Bankasi.
The bank’s NPL ratio fell 100 basis points last year to 6.1% at end-December.
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KyrgyzstanBest bank: Demir Bank |
The aftershocks of the Russian recession and rouble collapse continued to reverberate in the Kyrgyz banking system during the awards period, hurting profits and impacting asset quality. Despite the adverse operating environment, however, Demir Bank lived up to its reputation as one of Kyrgyzstan’s most innovative financial institutions.
Recent technological advances include the introduction of wireless POS terminals and cash-in ATMs, as well as enhanced security features for corporate online banking. Last year also saw the launch of a pilot project allowing online payments in foreign currency via Swift, which is currently being rolled out to Demir Bank’s retail and corporate clients. The bank’s call centre was also upgraded to serve as a sales channel as well as point of contact with customers.
These developments helped Demir Bank to grow its corporate and SME client base by 14% in the 12 months to March, while retail customer numbers rose 22%. New lending was subdued in 2016 but picked up again in the first quarter of this year, bringing net loan growth over the awards period to 1.6%. This included the disbursement of further tranches of funding for energy-efficiency projects provided by the EBRD, which along with the IFC, owns 30% of Demir Bank.
By the end of March this year, the lender had provided financing worth €5.8 million to 104 qualifying projects.
Despite these successes, Demir Bank was unable to avoid the negative trends affecting the wider Kyrgyz banking sector and saw net income for 2016 fall 42.2% to Som173 million ($2.53 million). Return on equity of 10.2%, however, remained respectable, while an NPL ratio of 5.4% at the end of March was modest by local standards.
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LatviaBest bank: SEB Banka |
Latvia’s recovery story faltered last year as sluggish absorption of EU funds failed to mitigate the impact on the local economy of western sanctions on Russia. Ultra-low interest rates also continued to take a toll on the banking sector, squeezing margins and dampening profits.
Leading lender Swedbank saw net income fall by 17.4%, while return on equity slid to 11.7%. By contrast, SEB Banka managed to boost its bottom line by 49% to €52 million and its return on equity to 12%, earning the number two player this year’s country award.
The result was flattered by a one-off gain from the sale of shares in Visa Europe, but was primarily driven by the first expansion of the bank’s loan portfolio since the financial crisis. A rise in new lending of 51% on the back of strong corporate demand translated into a 3% increase in overall outstanding loans. Provisioning charges were also down, falling 46% from 2015 levels, while deposits rose by 6% to €2.2 billion.
Innovation remains a key battleground in Baltic banking, and SEB continued to update its digital offering last year, introducing tablets in branches and launching its first online consumer loan facility. The bank also began providing 24-hour customer support through its call centre, Skype and social media.
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LithuaniaBest bank: Swedbank |
Domestic consumption powered Lithuania’s economic growth last year, as a 7.7% surge in average wages combined with low inflation to boost household purchasing power. The rising tide lifted most of the country’s banks but Swedbank’s local subsidiary nonetheless stood out by virtue of its enhanced profitability and technological advances.
The number two lender posted a net profit of €90 million for 2016, boosting its annual return on equity by 5.2 percentage points to 11.9%. A 14% increase in interest income, on the back of rising loan volumes and margins, accounted for the majority of the improvement. Swedbank’s overall lending volume was up 15% last year, partly the result of organic growth, but also reflecting the integration of Danske Bank’s Lithuanian retail portfolio, which was finalized in June. The impact of this acquisition was slightly mitigated by a rise in operating expenses, reflecting Swedbank’s continued commitment to investment in technology.
Innovations on the digital side last year included the launch of a tablet-friendly version of the bank’s online platform, the enabling of online account opening and a move to full digitalization of consumer loans. Meanwhile, upgrades to Swedbank’s mobile app, including a function allowing customers to check their balance by shaking a smartphone, drove a 96% increase in usage of the facility. Last year also saw Swedbank introduce contactless payment cards for the first time in Lithuania, while the lender’s small business customers also benefited from the launch of mobile card terminals for smartphones.
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FYR MacedoniaBest bank: Ohridska Banka Société Générale |
Another set of record results earns Ohridska Banka Société Générale (OBSG) the best bank award for the former Yugoslav Republic of Macedonia for the second year in succession. The French subsidiary posted net profit of €7.1 million in 2016, marking an increase of 8.9% on 2016 and equating to a sector-beating return on equity of 15.4%.
The improvement was primarily driven by a surge in net interest income, which rose 16.6% last year on the back of above-market lending growth. While the rest of Macedonia’s banking sector struggled to avoid further deleveraging, OBSG expanded its loan book by 10.9%. Retail lending growth was particularly strong, at 13.8%, partly thanks to the bank’s launch of mortgage products with long fixed-rate periods.
This in turn helped slash OBSG’s NPL ratio by three percentage points to 4.2%, well below the industry average of 6.6%. Meanwhile, deposit growth was also healthy at 12.7%, bringing OBSG’s loan-to-deposit ratio down to a sustainable 100.5%. Overall, OBSG increased its market share of total loans and deposits to 9.1% and 7.9% respectively last year, consolidating its position as the number four lender in Macedonia.
The bank also continued to invest in technology, launching a new mobile banking platform in 2016 as well as revamping its online offering. The latter included the introduction of a financial adviser module targeted at the bank’s mass-affluent client base.
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MoldovaBest bank: Mobiasbanca |
The last three years have not been kind to Moldova’s leading banks. Three were closed in the wake of a massive fraud that siphoned $1 billion out of the system in November 2014. The three largest lenders left standing remain under central bank supervision because of concerns over corporate governance and nontransparent shareholdings.
One institution that has benefited from the turmoil, however, is Mobiasbanca, the winner of this year’s award for Moldova’s best bank. The Société Générale subsidiary has been quick to capitalize on the weakness of its larger rivals, growing its market share of both loans and deposits by double digits in each of the last two years.
The flight to quality was most marked on the liability side. Mobiasbanca accounted for 18.1% of corporate deposits in Moldova at the end of December 2016, up from just 6.6% two years earlier, while on the same date the bank’s share of retail deposits stood at 10.4%.
Lending growth has also been impressive, particularly on the retail side. Mobiasbanca consolidated its position as the clear leader in consumer and mortgage lending in Moldova last year, achieving market shares of 38% and 36% respectively. The introduction of innovative products such as a combined consumer loan and accident insurance package helped to attract new customers, as did the reduction of approval times to one day for consumer loans and one week for mortgages.
Mobiasbanca is also a key partner for multilateral institutions in Moldova. The bank currently has 28 active loan agreements with seven international financial institutions and signed another €10 million facility with the EBRD last year to support Moldovan companies upgrading to EU standards.
As a result, Mobiasbanca was able to increase its share of the overall lending market by a further 0.7 percentage points to 11.5% last year. This in turn allowed the bank to post another year of excellent results. Net profit rose 41.7% to MLei326 million ($18 million), while return on equity was up five percentage points to a sector-best 25.6%.
Mobiasbanca has been part of the Société Générale network since January 2007 and has 54 outlets across Moldova.
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MontenegroBest bank: Erste Bank Montenegro |
Strong demand for retail credit helped Erste Bank Montenegro outperform the market in terms of both profitability and growth in 2016, earning the lender this year’s best bank in Montenegro award. The Austrian subsidiary accounted for a quarter of all new retail lending in the 11 months to the end of February, boosting its share of the market by 0.9 percentage points to 16.1%.
A campaign promoting consumer loans and mortgages proved particularly successful, both with new borrowers and those looking to refinance existing debt, thanks to a combination of low interest rates and sector-best loan maturities.
Corporate lending was also up last year, by 5.6%, taking Erste Bank Montenegro’s share of that market to 8.4%. The rapid expansion of the bank’s lending portfolio more than compensated for a 51 basis point fall in net interest margin to 5.79%. Net interest income for 2016 was up 3% year on year to €19.1 million, contributing to a 21% rise in net profit to €7.9 million and equating to a return on equity of 14.2%.
Erste Bank Montenegro also scored highly on asset quality. PLs fell by 1.4 percentage points to 5.9% of total outstanding lending at the end of December, well below the sector average, while the bank’s solvency ratio once again topped 20%.
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PolandBest bank: Bank Zachodni WBK
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Conditions continued to deteriorate for Poland’s banks last year as credit demand faltered, record low interest rates continued to squeeze margins and a swingeing new sector levy came into force. Aggregate return on equity fell to just 8.5%, the lowest level since 2003, according to analysts at Raiffeisen Bank International.
The Law and Justice government pushed ahead with plans to ‘repolonize’ the sector. Alior Bank, which is owned by state-controlled insurer PZU, bought BPH Bank from GE in March. Then in December PZU – in conjunction with development fund PFR – announced plans to purchase a controlling stake in Poland’s second-largest lender, Bank Pekao, from UniCredit. The acquisition was completed in June.
That left Bank Zachodni WBK (BZ WBK), this year’s award winner, as the largest lender in the country without state ties. Fortunately, the Santander subsidiary is well-equipped to cope with competition from the public sector. Despite increasingly challenging market conditions, the bank’s diversified business model and commitment to innovation delivered another year of strong results in 2016.
Total assets were up by 7.4% to Zl150.1 billion ($40.1 million), confirming BZ WBK’s position as number three in the Polish market. Growth in the retail segment was particularly strong, with new mortgage lending rising 30% by volume. Meanwhile, a deposit-gathering drive resulted in a 22.9% increase in personal and savings account balances. This did not, however, prevent BZ WBK from boosting net interest margin to 3.79% by the fourth quarter of 2016, which in turn helped the bank post a slightly improved return on equity of 14%.
A proactive approach to efficiency also paid off in the form of a 2.4 percentage point reduction in the bank’s cost-to-income ratio to 46% last year, despite substantial continuing investments in technology, including the launch last year of Digital Lab, a multimedia centre for the development and testing of new online and mobile products.
The award for best investment bank in Poland this year goes to Trigon in recognition of its broad product offering, strong track record across advisory and capital markets, and dominant position in the local market.
Founded as an M&A boutique in Warsaw in 1989, the firm today boasts a full-service offering, including brokerage and asset management arms. Its research coverage is the most extensive in Poland, while its equity capital markets capabilities are increasingly in demand among the country’s rapidly growing technology sector.
Two of the three new companies brought to the Warsaw Stock Exchange by Trigon last year were from the Polish gaming sector, while the firm also acted as sole lead on secondary listings for a clutch of other tech players including chatroom provider LiveChat.
Advisory mandates covered sectors including telecoms, IT and healthcare. Trigon is the largest independent investment bank in Poland, with 150 employees.
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RomaniaBest bank: Banca Transilvania |
The post-crisis rehabilitation of Romania’s leading foreign-owned lenders continued apace last year but the momentum player – and the winner of Euromoney’s country award – was once again local champion Banca Transilvania.
The Cluj-based lender knocked Société Générale’s BRD off the number two spot in 2016 on the back of a 4.5% increase in total assets to L394 billion ($95.7 billion), leaving it behind only Erste subsidiary BCR in terms of size. The bank easily beat both its closest rivals on profitability, however, posting a sector-best net result of L1.2 billion. Loan growth of 10.3% was also well above levels seen in the wider Romanian market, where credit demand continued to lag increasingly strong economic growth.
SMEs remain a key segment for Banca Transilvania, which issued more than 18,000 new loans to smaller businesses last year, but the lender also continued to make substantial inroads into sectors such as credit cards and corporate lending. Last year also saw further improvement in asset quality, as NPLs fell to 4.6% at year-end 2016 from 9.8% a year earlier. An expansion of more than 9% in deposits ensured ample scope for further growth.
At the end of December 2016, Banca Transilvania’s loan-to-deposit ratio still stood at just 70%.
The strong performance continued in the first quarter of this year, when the bank posted a 17.1% return on equity on the back of a 7.7% increase in net income from a year earlier, despite boosting its tier-1 capital ratio to 17.5% through the retention of profits from 2016.
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RussiaBest bank: Alfa-Bank
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Russia’s banking sector began to shake off the effects of two years of recession and the bursting of a consumer lending bubble in 2016, but returns remained well below pre-crisis levels for most lenders. The most notable exception was Sberbank, which leveraged its state ownership and dominant market position to post a sector-beating return on equity of 20.8%.
The best bank in Russia award this year, however, goes to smaller private-sector rival Alfa-Bank in recognition of its impressive track record of sustainable growth, stable profitability and prudent risk management.
The lender, which is part of Mikhail Fridman’s Alfa Group, recorded a 9.8% rise in net profit to $527 million last year, equating to a return on equity of 10.5%.
The increase was largely driven by a 50bp improvement in net interest margin to 4.5%, but net fee and commission income was also up by 8.4% in dollar terms. Growth was also healthy, with lending to the retail segment up 8.8% and to corporates up 20.9%. A focus on the mass corporate segment proved particularly fruitful, netting the bank an additional 71,000 customers last year.
A reduction in NPLs to 4.2% of the total by the end of December 2016, from 6.9% a year earlier, also helped improve Alfa-Bank’s bottom line, as did a 1.8 percentage point fall in the cost of risk to 1.3%. Combined with a substantial strengthening of capital buffers through a subordinated debt issue, these improvements prompted both Standard & Poor’s and Fitch to upgrade the outlook on their ratings for Alfa-Bank in March.
It also earned plaudits from bond investors, both in Russia and abroad, enabling the bank to live up to its reputation as a canny and innovator funder. The $700 million additional tier-1 bond issued by Alfa-Bank in October was the first-ever in Basel III-compliant format from Russia, while the first quarter saw the bank reopen the eurorouble and euro-denominated markets for financial borrowers from the country for the first time since the start of the Ukraine crisis.
The award for best investment bank in Russia once again goes to the investment banking arm of state-controlled lender VTB. Over the last three years, VTB Capital has obtained a near stranglehold on Russian capital markets and advisory activity as international players have pulled back from the market and domestic transactions have come to the forefront.
The firm was represented on more than half of all Eurobond deals from Russia during the awards period – including as sole lead on the two sovereign transactions – and accounted for just under a quarter of total volumes, according to Dealogic.
This dominance was mirrored in primary equity issuance, where VTB Capital collared eight of the 21 deals in the 12 months to the end of March. These included IPOs for energy firm RussNeft and pension fund manager Financial Group Future, as well as secondary offerings for corporates including Alrosa, Phosagro and Rusal. In M&A, the firm’s showpiece deal was the $12.9 billion purchase of Essar Oil by Russian state energy giant Rosneft, on which VTB Capital acted for seller Essar Energy.
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SerbiaBest bank: Banca Intesa Beograd |
A proactive approach to innovation and a set of sector-beating results for 2016 earn Banca Intesa Beograd this year’s best bank award for Serbia. The market leader nudged its return on equity up to 9% last year, comfortably above the industry average of 6.9%, on the back of a 15.6% rise in net profit to RSD9.9 billion ($90.6 million).
Growth was also impressive by local standards. Lending rose by 5.4%, taking Banca Intesa’s market share to 15.5%, while deposits increased by 15.7%. Meanwhile, intensive work on legacy bad debt portfolios resulted in a four percentage point drop in the bank’s NPL ratio to 11.9%. Provisioning also improved, although at 56.5% the coverage ratio remained on the low side. A capital adequacy ratio of 21.5%, however, was well above the regulatory minimum.
Banca Intesa also reinforced its track record of investment in technology during the awards period. A complete overhaul of the bank’s core IT systems and services last year was complemented by continuous improvements to its digital platforms, which helped boost transaction volumes in online and mobile banking by 230% and 59% respectively.
Banca Intesa also broke new ground with the launch of Serbia’s first mobile wallet using Wave2Pay contactless technology, as well as introducing an online application for cash loans and rolling out a new digital-focused branch concept.
Other highlights of 2016 include the introduction of a new Agroprotect loan for farmers, launched as part of Banca Intesa’s drive to increase its footprint in the Serbia’s fast-growing agricultural sector. The product is the first in Serbia to offer crop insurance as part of a loan package.
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SlovakiaBest bank: Tatra Banka |
Picking a winner in the Slovak banking sector was even more testing than usual this year after strong performances by all three market leaders. Slovenska Sporitelna once again leveraged its dominant market position to turn in a set of impressive results, posting the highest outright profit and a return on equity of 14%.
Second-placed VUB took advantage of changes to mortgage legislation to tempt customers away from rivals with lower interest rate products. The Intesa subsidiary expanded its lending book by 17% last year but inevitably put a crimp in returns.
By contrast, number three player Tatra Banka – the winner of this year’s best bank in Slovakia award – opted to defend its existing mortgage portfolio but focus on growth in higher-margin consumer lending. As a result, the Raiffeisen subsidiary was able to record a sector-beating pre-tax return on equity of 19.6% while still expanding its balance sheet by 7.6%. Tatra Banka also once again outperformed its peers on asset quality, cutting NPLs to just 3.5% of total lending by the end of December – the lowest level since 2009.
An increased focus on the mass retail segment did not lead the lender to neglect its core premium and corporate client bases. Tatra Banka added a further 350 names to its private banking client list last year and boosted assets under management by 12.9%. On the corporate side, highlights include the arrangement of 2016’s largest syndicated real estate loan in Slovakia for the Eurovea complex in Bratislava and acting as bookrunner on the sovereign’s 20-year Eurobond in March this year.
The launch last year of a new MobilePay app also confirmed Tatra Banka’s status as the market leader in Slovakia, and the wider region, in terms of digital innovation.
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SloveniaBest bank: SKB Banka
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Another year of restructuring in the Slovenian banking sector saw market leader NLB being prepped for privatization via an IPO and number two player NKBM, newly acquired by US private equity firm Apollo Global Management, working to digest multiple acquisitions. Abanka, the third-largest lender, is also still in state hands pending a sale.
Against this shifting background, SKB Banka continued to go from strength to strength and is again a worthy winner of this year’s best bank in Slovenia award. Despite ultra-low interest rates, the lender managed to grow net interest income by 7.1% in 2016 on the back of a jump in leasing volumes. Loans to the bank’s traditional corporate base were also up, by 18.7%, while retail lending rose by 7.1%. This pace of growth was higher than the wider Slovenian market, netting SKB Banka a 1.3 percentage point increase in market share of total lending to 9.9% and taking it to number four in the Slovenian ranking.
Net non-interest income also rose by 22%, partly due to the one-off sale of equity investments, while a 4.9 percentage point reduction in the bank’s NPL ratio to 8.9% brought provisioning and impairment costs down by 30.1%. Expenses rose slightly due to investment in automation, digitalization and optimization of business processes. This made little impression on the bank’s bottom line, however. Net profit increased by 85.5% to a record €63.7 million.
SKB Banka has been part of the Société Générale network since 2001.
Barclays wins this year’s award for best investment bank in Slovenia for its work in helping the country’s debt management office (DMO) refinance large chunks of dollar debt with cheaper euro-denominated funding.
Eurozone member Slovenia was forced to turn to the dollar bond market for funding in 2012 as its banking sector descended into crisis. It returned to euros in 2014 and early last year decided to attempt a buy-back of its outstanding dollar bonds.
The first liability management exercise, in May 2016, was well-received by both euro investors and dollar bondholders. The model was revisited with equal success in August, October and March. In total, €4.55 billion of new paper was issued during the period and $3.2 billion of bonds bought back. The key partner of the Slovenian finance ministry in this process was Barclays, thanks to its unique combination of local expertise and global reach.
The UK house is the leading primary dealer in Slovenia and sees the country as an important part of its eurozone portfolio. It has acted on every sovereign Eurobond from the jurisdiction since April 2014, helping the DMO work its way back up the investor spectrum in Europe as the country’s economic fundamentals and credit ratings improved. The success of the complex liability management exercises cements Barclays’ position as the leading debt capital markets house in Slovenia.
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TurkeyBest bank: Akbank
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Turkey’s leading banks once again demonstrated their ability to weather even the most challenging environment last year, coming almost unscathed through July’s coup attempt and the subsequent economic fallout. Indeed, the two largest private-sector lenders, Akbank and Garanti, both boosted net income by more than 50% on the back of rising lira spreads and volume growth.
It is Akbank that takes this year’s best bank in Turkey award, however, in recognition of its ability to combine superior profitability with an ultra-prudent approach to risk. Despite a relatively low net interest margin of 3.41%, the lender managed to post a sector-beating return on equity of 16.9% in 2016. Combined with rigorous efficiency, that translated into a cost-to-income ratio of 35% that was well below levels achieved by its peers.
Akbank’s funding model was also the most balanced of Turkey’s leading private-sector lenders, as reflected in a loan-to-deposit ratio of just 102.8% at the end of December versus 112.7% for Garanti and 125.8% for Isbank. Meanwhile, an NPL ratio of 2.3% was impressive even by the high standards of the Turkish market, and cost of risk was well below that of Akbank’s closest rivals, at 0.8%.
The awards period also saw Akbank build on its reputation as one of Turkey’s leading innovators. By the end of 2016, 94% of all the bank’s transactions were passing through digital channels, of which mobile banking accounted for more than half. Under the leadership of CEO Hakin Binbasgil, Akbank also undertook an overhaul of its physical network last year to reflect changing consumer behaviour, closing 51 of 901 branches.
That was followed in the first quarter of this year by the start of a revamp of remaining network as part of the lender’s ‘nextgen Akbank’ strategy, which is designed to bring digitalization into branches and improve advisory services, particularly for the key SME market. Other highlights last year include the introduction of a new one-stop corporate investment banking service, as well as the launch of a new wealth management platform in conjunction with subsidiaries Ak Investment and Ak Asset Management.
Akbank’s financial strength also ensured that it remained the darling of international investors during the awards period. The bank made a triumphant return to the Eurobond market in March after a two-year absence, with its first-ever Basel III-compliant tier-2 bond, while equity buyers boosted its share price by 8.9% to TL8.53 ($2.42) in the 12 months to the end of March.
Citi’s strong track record across capital markets and advisory earns the US house this year’s award for best investment bank in Turkey.
In a busy year for Eurobond issuance, which more than doubled from 2015’s $7 billion to $14.5 billion, Citi leveraged its expertise in the segment to bag a clutch of high-profile mandates. These included debut Basel III-compliant tier-2 transactions from Alternatifbank, Akbank and TSKB – the last of which was also Turkey’s first ever green bond – as well as the $1.5 billion sovereign tap that reopened the international market for Turkish borrowers after July’s coup attempt.
Citi also led ground-breaking liability management exercises for Isbank, Arcelik and Vakifbank. An honourable mention for DCM also goes to Standard Chartered, which jumped up the league tables to rank fifth last year for Turkish Eurobonds on the back of a clutch of valuable mandates.
Meanwhile, in equity capital markets Citi was tapped to lead the only two internationally marketed secondary offerings during the awards period, from software provider Logo Yazilim and Turk Telekom.
On the M&A side, cross-border activity slowed last year as foreign direct investment paused in the wake of the coup attempt. According to Dealogic, only $7.3 billion of deals were announced during the awards period, down from $16 billion in the previous period. Nevertheless, Citi managed to notch up two notable transactions, acting as sole sell-side adviser to Ionian Hotel Enterprises on its $1.4 billion purchase by leading Turkish conglomerate Dogus Holding; and as buy-side adviser to a consortium led by South Korean cinema chain CJ CGV on its purchase of Turkish chain Mars Entertainment from private equity funds for $800 million.
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UkraineBest bank: Raiffeisen Bank Aval |
Ukraine’s banking system has changed dramatically over the last three years. Numerous smaller lenders have been closed by the central bank because of capital shortages and governance issues. The market leader, PrivatBank, was nationalized in December after an inspection of its books revealed close to 100% of its lending to be to parties related to its shareholders.
One of Ukraine’s leading western lenders, UniCredit, left the market in October, while Russian banks are being forced out by public and political pressure. Raiffeisen also considered selling up, but in the end opted to raise capital for its Ukrainian subsidiary from the EBRD, which acquired a 30% stake in the bank in late 2015.
So far the gamble has paid off handsomely. Raiffeisen Bank Aval bounced back from two years of losses to post a pre-tax profit of Hrn4.2 billion ($161 million) for 2016, earning the lender this year’s best bank award for Ukraine. Balance sheet growth of 9.2% was also impressive in a sector that is still seeing heavy deleveraging, as was the bank’s success in attracting 1,500 new corporate and 100,000 new retail customers, despite substantial reductions in its branch network.
A focus on Ukraine’s fast-growing agricultural sector proved particularly fruitful. Lending to the sector increased by Hrn1.6 billion last year, thanks to partnerships with leading equipment manufacturers, including John Deere.
Raiffeisen Bank Aval still has plenty of work to do. A 6.9 percentage reduction in the bank’s NPL ratio last year only brought it down to 50.6% by the end of December. Coverage, however, remained excellent at 94.5% of overdue loans, while a 7.9 percentage point improvement in the capital adequacy ratio to 26.8% by the year’s end also testified to management’s commitment to sustainability.
