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| © 2018 Euromoney |
| Regional awards |
| View full 2018 results |
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AlbaniaBest bank: Raiffeisen Bank |
Bad debts and severe deleveraging have taken a toll on Raiffeisen Bank’s bottom line in recent years and resulted in the Austrian subsidiary ceding the top spot in Albania to local rival Banka Kombetare Tregtare. A strong performance in 2017, however, confirmed that the former market leader is firmly set on the road to recovery.
After dipping into the red in 2016 due a sharp increase in provisioning costs, Raiffeisen Bank posted a net profit of €34 million last year, equating to a return on equity of 17.4%. This was partly achieved through strong growth in retail lending, with disbursements of both unsecured consumer loans and mortgages seeing substantial increases, but was also the result of a strategic focus on boosting non-interest income. Point-of-sale (POS) and credit-card transactions were up 18% year on year, while a new line of tied insurance products proved popular with loan and card customers.
Raiffeisen Bank also showed it had lost none of its appetite for digital innovation, launching a new state-of-the-art platform last spring with enhanced functionality for business clients and partnering with local fintechs to create innovative payment solutions. The lender is also investing heavily in technology upgrades to its branch network, which remains the largest in Albania.
Asset quality remains a concern, with non-performing loans accounting for 15.9% of the total at the end of December. This represented a 6.4 percentage point reduction from 12 months earlier, however, demonstrating the success of the bank’s work-out programme.
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ArmeniaBest bank: Ameriabank |
GDP growth of 7.5% gave Armenia’s banks a welcome boost last year after 2016’s economic stagnation. Competition in the overbanked country remained fierce, however, as lenders struggled to deploy high levels of liquidity raised as equity after changes to capital requirements in 2015.
Despite a drastic industry-wide squeeze on margins, however, Ameriabank managed to boost its bottom line by an impressive 23.2% to Dram7.7 billion ($15.9 million) – and its return on equity to 11.9%. The locally owned lender also maintained its market leading position, with total assets of Dram678 billion and outstanding loans of Dram476 billion at the end of December. High levels of foreign currency exposure and strong balance sheet concentration remain causes for concern but no more so than for leading peers, while Ameriabank’s NPL ratio of 2.9% at year end was well below the sector average.
Other notable achievements in the awards period include the launch of a comprehensive digitalization project, including the introduction of 24/7 payment processing. This contributed to a 33% increase in the number of clients using mobile and internet banking, as well as a 77% increase in digital transactions. Last year also saw Ameriabank cement its position as the leading partner for international financial institutions in Armenia, with new loan agreements signed with Global Climate Partnership Fund and Dutch development bank FMO.
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AzerbaijanBest bank: Pasha Bank |
The fallout from Azerbaijan’s currency collapse in 2015 continues to haunt the country’s banking sector, with leading lenders struggling to rebuild depleted capital bases and weaker rivals falling by the wayside.
The bright spot in this dismal picture continues to be Pasha Bank, Azerbaijan’s leading corporate and investment bank, which last year managed a winning combination of stellar returns and impressive growth. Net profit was up by 36% year on year to Am89.1 million ($52.4 million), giving a return on equity of close to 20%. The bank’s balance sheet expanded by 17%, while gross lending increased by 13%.
Pasha’s ability to come through the last two years relatively unscathed has been largely due to a radical overhaul of the bank’s risk-management systems in 2013.
“We started to look at more prudent financing,” says Taleh Kazimov, who took over as chief executive in June 2015. “Before we lend, we make sure we have a deep understanding of the industry, the client and his financial behaviour. Sometimes we understand our clients’ business better than they do.”
The bank has also invested in educating Azeri companies on the importance of corporate governance, as well as setting up a dedicated recovery team to work with shareholders of distressed assets. The results of these initiatives are evident in Pasha’s asset quality. Overall, NPLs accounted for 10% of total lending at the end of December. For disbursements since 2013, however, the figure was just 1.5%.
The same year also saw the inauguration of Pasha Bank’s international network, with the opening of green-field operations in Turkey and Georgia to serve the growing trade between those countries and Azerbaijan. Further expansion is now planned, with the bank’s latest regional strategy calling for a doubling of lending in Turkey by 2021 and 60% loan growth in Georgia.
“We consider ourselves a regional bank,” says Kazimov. “We are confident that these three economies will continue to expand and that trade between them will continue to grow, and we want to be part of that as a financial intermediary.”
Pasha Bank is owned by a conglomerate controlled by Arif Pashayev, the father-in-law of Azerbaijan’s president, Ilham Aliyev.
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BelarusBest bank: Priorbank |
In a sector dominated by Russian and domestic state-owned banks, Priorbank remains the clear leader in terms of profitability, innovation and risk management. The Raiffeisen subsidiary has a market share of just 5.3% by total assets but accounted for 22.9% of sector profits last year.
Net profit was slightly down on 2016, at €65 million, but still equated to a return on equity of 20.3%. A reduction in corporate lending was more than compensated for by stellar growth in the retail segment. Local currency lending to private individuals was up 41.8% year on year, making Priorbank the second most active issuer of consumer loans by volume in the Belarusian market.
The bank also took the number two spot by card transaction volumes, with turnover hitting €2.7 billion last year. Overall, non-cash payments rose to 54% of the total, a nine percentage point increase on 2016.
A focus on small and medium-sized enterprises also paid handsome dividends. The introduction of pre-approved lending products and a sharp reduction in loan execution times helped boost lending to the segment by 35%, while a 45% increase in deposits contributed to a 10.2 percentage point drop in the bank’s loan-to-deposit ratio to 100.9%.
Priorbank also maintained its commitment to innovation, with new digital products including contactless smartphone payments for Visa card holders, a Viber customer service contact channel and video consultations via Skype. The bank is also positioning itself as a pioneer of open API technology in Belarus.
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Bosnia and HerzegovinaBest bank: Raiffeisen Bank |
Banking in Bosnia remains a two-horse race between the local subsidiaries of UniCredit and Raiffeisen. Market leader UniCredit Mostar outperformed its smaller rival in terms of growth last year, expanding its loan book by 7.1%, but Raiffeisen Bank takes the award for its best-in-class profitability and continuing commitment to innovation.
The Austrian subsidiary posted a return on equity of 14.9% for 2017, up 3.4 percentage points on the previous year, thanks in part to strong growth in the point-of-sale segment on the back of targeted campaigns. Merchant turnover and fees for terminals were up 17.5% and 13.4% respectively year on year. Cards also remained a strength, with the portfolio increasing by 8%.
Raiffeisen Bank’s most notable achievement, however, was the launch of its Viber banking service. The new facility – the first of its kind in Bosnia and Herzegovina – offers bank customers the ability to make P2P payments via the messaging and VoIP (voice over internet protocol) platform, as well as checking their balances, moving funds and making credit card payments.
Last year also saw the start of a technology upgrade of Raiffeisen Bank’s branch network, while in January the lender went live with a website redesign aimed at improving access to internet banking. Meanwhile, work on the bank’s legacy bad debts continues to pay off, with NPLs falling to 7.1% of the total by the end of December from 8.8% a year earlier.
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BulgariaBest bank: UniCredit Bulbank
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UniCredit Bulbank has been the one to beat in Bulgaria for at least a decade, and last year it put in another strong performance to earn this year’s country award. Under the steady guidance of long-standing chief executive Levon Hampartzoumian, who this year marks 17 years in post, the Bulgarian market leader grew its balance sheet by 2.5% and recorded a return on equity of 10.7%. Net fee and commission income continued to be the growth drivers, increasing by 8.1% year on year. A 5.8% rise in trading revenues also helped to offset a modest decline in net interest income caused by the low interest rate environment.
UniCredit Bulbank’s biggest achievement during the year, however, was in its asset quality. A combination of portfolio sales and internal work-outs slashed the bank’s non-performing loan ratio by 511 basis points during the course of 2017 to 8.9% by year end, while coverage increased by 995bp to 68.2%. A common equity tier-1 (CET1) ratio of 26.9% at the end of December also confirms the lender’s strong fundamentals.
Meanwhile investment in technology continued apace. Last year saw the launch of mobile tokens (mTokens) as an alternative solution for authorization and confirmation of e-payments, as well as the introduction of a host of new features on UniCredit Bulbank’s mobile banking platform. As a result, active mobile users more than doubled in the 12 months to the end of December.
Meanwhile, the award for best investment bank in Bulgaria goes again this year to regional boutique BAC Securities. Founded in 1998, the firm has offices in Sofia, Bucharest and Belgrade; it also provides coverage of the Polish market. It offers a full range of brokerage and investment banking services, including M&A advisory, debt and equity capital markets advisory and execution, and balance sheet restructuring. Clients include leading private equity funds in CEE and the UK, as well as credit funds from the UK, US and Poland.
During the awards period, BAC Securities demonstrated the full breadth of its capabilities, with notable mandates including acting as manager on a €70 million five-year Eurobond for Bulgarian insurance company Eurohold and as financial adviser to leading Bulgarian telecoms firm Vivacom on its restructuring of €400 million senior secured notes via a loan syndication. The firm was also lead manager on a coordinated two-country mandatory tender offer process resulting from the acquisition of Yioula Glass’s packaging businesses in Bulgaria and Romania by Portugal’s BA Vidro.
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CroatiaBest bank: Privredna Banka Zagreb |
Croatia’s banks faced a number of challenges last year, with returning GDP growth offset by weak credit demand and the failure of the country’s largest privately owned company, Agrokor. Against this unpromising backdrop, the solid performance of number two player Privredna Banka Zagreb (PBZ) stood out.
The Intesa Sanpaolo subsidiary posted a sector-best net profit of K1.3 billion ($206 million) on the back of healthy growth in lending to retail customers, particularly in the affluent sub-segment, and small and medium-sized enterprises. The corporate segment proved more challenging, but an enhanced focus on multinational companies helped to compensate for declining revenues from domestic clients.
Intensive NPL management efforts also continued to pay dividends. By the end of December, bad debts accounted for 8.9% of total outstanding loans, a reduction of 0.8 percentage points from a year earlier. Meanwhile, deposit growth of 5.2% boosted the deposit-to-loan ratio to 120.4%.
PBZ’s consistent performance has been recognized by Intesa Sanpaolo, which has designated the bank as a centre of excellence for many areas of operations within the group. It has also become a regional hub, managing the Italian group’s subsidiaries in Bosnia and Herzegovina and, since last year, Slovenia.
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Czech RepublicBest bank: Ceskoslovenska Obchodni Banka |
Competition remains as fierce as ever in central Europe’s most profitable banking market, but this year it is Ceskoslovenska Obchodni Banka (CSOB) that takes the country award ahead of closest rival Ceska Sporitelna by virtue of its superior profitability and breadth of innovation.
The KBC subsidiary posted its highest ever net profit last year of Kc17.5 billion ($798 million), a 16% increase on 2016 and equating to a return on equity of 19.3%. The result was flattered by one-off benefits from the settlement of a historical legal case, but fee and commission income was up 3% on the back of higher revenues from asset liability management and investment products, while interest income was boosted by strong growth in mortgage, small and medium-size businesses and consumer lending.
Consistent profitability has enabled CSOB to invest heavily in technology, and last year again saw the launch of a host of digital products and features, including fingerprint sign-in for mobile apps, a simplified electronic banking platform for corporate and small and medium-sized enterprise clients, and the introduction of personal finance management for retail users of the bank’s online platform. Further features were also added to CSOB’s ground-breaking mobile wallet, including transaction history and loyalty card management, while a new mobile app – Patria MobileTrader – was introduced to enable 24/7 trading of investment products.
Last summer also saw CSOB renew its long-standing and successful partnership with the country’s postal service for a further 10 years. In January, the bank for the first time became the sole provider of banking and insurance services to Czech Post.
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EstoniaBest bank: LHV Bank |
Scandinavian groups continue to dominate the Estonian banking market, but this year’s country award goes to home-grown digital challenger LHV Bank in recognition of its impressive growth and outstanding commitment to innovation.
Founded in 2009, the lender is part of LHV Group, which includes the second-largest pension fund provider in the Baltics as well as a Lithuanian consumer finance operation. LHV Bank has only two physical branches, in Tallinn and Tartu, and has rapidly acquired a following among Estonia’s tech-savvy, financially literate retail and small and medium-sized enterprise customers.
Last year was the most successful in the bank’s history, with net profit up 17.4% year on year to €15.5 million. Lending increased by 35.4%, driven mainly by SME demand, while deposits surged by 86.9% to €1.6 billion. The latter was largely driven by LHV’s growing client base of fintech firms, which hold high levels of liquidity with the bank at negative interest rates. LHV already counts more than 40 European and global fintechs as customers, including international payments provider TransferWise, and in March this year it announced the opening of a branch in London to service this growing client base.
In its home market last year, LHV became the first bank in Estonia to introduce video identification for clients, as well as launching a salary payment scheme for SME clients in conjunction with the country’s tax and customs service. The lender’s offering for retail customers was also expanded to include car loans, home repair loans and home insurance.
LHV Group was founded by Estonian entrepreneurs Rain Lohmus and Andres Viisemann, who still own more than 30% of the company. It has been listed on the Nasdaq Tallinn Stock Exchange since 2016 and last year paid its first dividend.
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GeorgiaBest bank: TBC Bank |
Another year of excellent results and impressive innovation earn market leader TBC Bank the country award for Georgia once again.
For 2017, the lender posted a record underlying net profit of GeL369.2 million ($150 million), up 35.1% year on year, and an underlying return on equity of 21.4%. This was partly due to the successful integration of former Société Générale subsidiary Bank Republic, which was completed in May and is expected to deliver annualized cost synergies of GeL24 million, but it was also the result of strong growth in net fee and commission income. The latter increased by 39.5% last year on the back of increased income from card operations and settlement transactions.
The number of active cards rose by 36%, while the point-of-sale terminal network expanded by 12%. Meanwhile settlement transactions growth was boosted by subsidiary TBC Pay, which has a chain of self-service terminals across Georgia. As a result, the share of net fee and commission income in total income reached 14.6%, up by 1.4 percentage points year on year.
TBC also worked to maintain its reputation as a leading digital bank, launching the first Georgian-speaking chatbot last year, as well as becoming the first bank in the Caucasus to introduce biometric voice recognition techniques for customer identification and implementing a fully digital onboarding system for business clients.
TBC Bank is listed on the London Stock Exchange and became a member of the FTSE250 in June 2017.
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HungaryBest bank: OTP Bank |
The recovery in Hungary’s banking market continued apace last year as the effects of strong economic growth, lower bank taxes and returning credit demand began to be felt across the sector. The country’s two largest lenders both leveraged their market-leading positions to produce impressive results. KBC subsidiary K&H Bank posted its highest-ever net profit on the back of strong lending growth and an array of technology advances.
The country award this year, however, goes to national champion OTP Bank in recognition of its superior asset quality, outstanding capitalization and commitment to innovation.
The lender’s parent group notched a record net profit of Ft284 billion ($1.03 billion) last year. While this was helped by improving returns from its CEE network, the core Hungarian operation remained the main driver of profitability, accounting for 51% of total assets at the end of December but 59% of net profit for the year. This was partly due to an acceleration in lending volumes after the turnaround in 2016.
The bank’s FX-adjusted gross loan portfolio grew by 7% last year despite continuing non-performing loan sales and write-offs, which brought the NPL ratio down to 6.4% by the end of December, while performing loan volumes were up 11% on the back of strong mortgage disbursements and a 25% jump in outstanding consumer lending. This helped to offset the continued pressure on margins from low interest rates, resulting in a stabilization of net interest income, while net fee and commission income rose 9% year on year due to stronger card-related fee revenues induced by growing transactional turnover.
Return on equity was relatively low at 12%, but return on assets was more impressive at 2.3%, reflecting OTP’s extremely strong capital base. At the end of December, the standalone common equity tier-1 ratio for Hungary stood at 29%.
Last year also saw OTP continue its investment in technology as part of a digital transformation strategy adopted in 2015. The bank became the first in Hungary to fully digitalize the cash loan sales process, rolled out electronic signature pads and slashed cash management costs by enabling recycling at its cash-in ATMs.
Other notable launches included OTP Financial Advisor, a multichannel advisory tool available in branches and online that uses sophisticated algorithms to generate long-term investment advice for upper-mass and mass-affluent clients.
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KazakhstanBest bank: Halyk Bank |
Further upheavals in the Kazakh banking sector last year saw Halyk Bank emerge as the dominant force in the market. In February the number two lender agreed to recapitalize troubled larger rival Kazkommertsbank (KKB) in return for a commitment by the Kazakh government to take on the KT2.4 trillion ($7.15 billion) of bad debts inherited by the latter from failed lender BTA. That paved the way for Halyk’s purchase in July of a 71.2% stake in KKB, which was followed by a buyout of the minority shareholders.
The deal gave Halyk a 40% market share by total assets in Kazakhstan, as well as an enhanced presence in Russia and an operation in Tajikistan. At the same time, it raised questions about the bank’s ability to maintain its strong financial track record while absorbing such a large and unwieldy acquisition. So far, however, the indications have been positive.
Full-year results for 2017 show a return on average equity for the consolidated group of 22.7%, despite substantial one-off charges in the fourth quarter related to the takeover and a decline in net interest margin to 4.9% due to KKB’s less efficient use of balance sheet. The takeover did affect asset quality, with NPLs for the combined entity accounting for 12.1% of total lending by the end of December, compared with 8.9% for Halyk alone. All were fully provisioned, however, while a combined common equity tier-1 ratio of 16.9% gave the group a comfortable capital cushion.
Halyk will face further challenges this year, following the board’s decision in December to opt for a full merger with KKB. It will continue to benefit from the guidance of chief executive Umut Shayakhmetova, however, who has already steered the bank successfully through numerous external shocks during her 10 years in the role.
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KosovoBest bank: Raiffeisen Bank |
Superior growth and asset quality enabled market leader Raiffeisen Bank to fight off a strong challenge from closest rival TEB to earn the country award for Kosovo this year. Despite a conservative risk management strategy, the Austrian subsidiary managed to expand its loan book by 7.7% in 2017, with new disbursements well diversified across the retail and corporate spectrum.
The bank was also able to step up funding to the microfinance segment thanks to a new partnership with USAid’s Kosovo Credit Guarantee Fund. Other growth areas include cards, where the introduction of contactless payment and acceptance with Visa and MasterCard strengthened Raiffeisen Bank’s leading position in both issuing and acquiring.
The bank also benefited from its status as the only provider of equity brokerage services in Kosovo as demand for international securities reached record levels last year. As a result, return on equity rose by 0.4 percentage points year on year to 16%, while Raiffeisen Bank’s share of sector net profit reached 30.9%.
Meanwhile asset quality continued to improve. By the end of December, non-performing loans accounted for just 5.2% of total lending, down 1 percentage point from a year earlier and 5.5 percentage points below the peak in 2014.
Raiffeisen Bank also scored highly on innovation. As well as undertaking a digital transformation of its 46-strong branch network, the lender last year organized a competition to encourage employees to develop fintech concepts in areas ranging from big data to cryptocurrencies. This was followed in April this year by the launch of an external fintech incubator, Elevator Lab Kosovo.
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KyrgyzstanBest bank: DemirBank |
Another year of excellent results and continuing investment in innovation earns DemirBank the country award for Kyrgyzstan yet again. As the Kyrgyz banking sector shook off the lingering effects of the Russian recession last year, the lender saw net profit surge by 65.7% to Som287 million ($4.2 million) on the back of balance sheet growth of 11%.
Profitability was also impressive, with return on equity reaching 16.7%, while asset quality improved dramatically; non-performing loans were down to just 1.8% of total lending by the end of 2017.
Key growth areas include salary accounts and point of sale, where a targeted campaign enabled DemirBank to boost the number of terminals by 31% year on year, taking its total market share to around 50%. The launch last year of an online facility for salary transfers enhanced DemirBank’s already strong position in the segment and boosted the corporate customer base for the lender’s salary service to 1,200.
DemirBank also provides salary services to 373 state organizations, including the ministries of culture and economy, and the prosecutor general’s office.
The bank also remains a key partner for international financial institutions in Kyrgyzstan. It has been helping the EBRD channel funding to energy-efficiency projects since 2013 and last year signed a new $5 million loan agreement with the development bank.
DemirBank is majority owned by Turkish financier Halit Cingillioglu, with the EBRD and IFC holding the remaining 30%.
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LatviaBest bank: SEB Banka |
Latvian banks have made headlines for all the wrong reasons in recent months. The upheavals in the non-resident sector have, however, obscured the strong fundamentals and stable growth of lenders serving the domestic market. Of these, Swedbank remains the market leader, while last year saw the arrival of a new number two player in the form of Luminor, the entity created by the combination of the Baltic operations of Nordea and DNB.
Nevertheless it is SEB Banka that takes the country award again this year by virtue of its impressive organic growth, healthy profitability and technological sophistication. Despite its relegation to the number three slot in Latvia, the Swedish subsidiary retains substantial market share at the end of 2017, accounting for 13.1% of total banking sector assets and 18.5% of total lending.
These figures were enhanced by a 28% expansion of the bank’s loan portfolio. Corporate lending accounted for 80.2% of the increase, but mortgages also made a substantial contribution, with new disbursements up 30% by volume thanks to SEB Banka’s participation in a government programme designed to help homebuyers with children.
Net income was nonetheless slightly down year on year, but this was largely due to the one-off effects from the sale of shares in Visa Europe in 2016; a return on equity of 9.9% was more than respectable given the continuing ultra-low interest rate environment.
Notable achievements in innovation during the awards period include the introduction of a mobile app for client authentication for internet banking, as well as the launch of a new version of SEB Banka’s mobile banking app. The lender also introduced a new core IT system, developed in-house by SEB engineers in the Baltics, which is being rolled out across the group’s subsidiaries in the region.
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LithuaniaBest bank: SEB bankas |
The external environment for banks in Lithuania showed further improvement last year, with GDP growth hitting 3.8% and credit demand strengthening across all segments. SEB bankas was well-placed to take full advantage of these developments.
The Lithuanian market leader leveraged its dominant position to expand its loan portfolio by 7%. Corporate lending was up by 17% and lending to consumers by 8%, while outstanding leasing and factoring volumes increased by 25% and 31% respectively. This contributed to an improvement of 0.4 percentage points in the bank’s return on equity to a sector-beating 12.5%, as well as further reducing its non-performing loan ratio. By the end of December, bad debts accounted for just 2% of the total, down from a peak of 6.9% in 2013. SEB also strengthened its funding base, with deposits increasing 5% year on year.
Innovation remains a key battleground in banking in Lithuania, which is positioning itself as a fintech hub for the Baltics and the wider CEE region, and SEB was once again at the forefront of this development during the awards period.
In March, the bank opened an innovation centre in Vilnius. Designed to promote knowledge-sharing and business development, the facility is targeted at startups and small and medium-size enterprises across the technology space.
In its core banking business SEB implemented further upgrades to its multichannel offering, adding streamlined payment facilities to its mobile banking app and continuing the transition to cashless branches. Of the lender’s 32 outlets, half now offer advisory services only.
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FYR MacedoniaBest bank: NLB Banka Skopje |
In a highly competitive banking market, the standout performer last year was number three player NLB Banka Skopje, which takes the country award for the former Yugoslav Republic of Macedonia by virtue of its sector-beating profitability, improved asset quality and investment in digitalization.
The Slovenian-owned lender – formerly known as Tutunska Banka – posted a return on equity of 28% on the back of a 60% year-on-year increase in net profit to €40 million. This impressive result was largely driven by strong growth in retail lending, card operations, payments services and sales of insurance products. An increase in net interest margins to 4.9% also helped, while a focus on efficiency kept the cost-to-income ratio down to just 38%.
Total assets increased by 7.2% in the 12 months to the end of December, in line with the growth in both lending and deposits, giving NLB Banka Skopje a 16.4% share of the local market. The lender’s non-performing loan ratio fell a further 0.5 percentage points to 5.2% over the same period, while at year-end the capital adequacy ratio had risen to a respectable 14.4%.
Digital enhancements during the awards period include the launch of mProKlik, a mobile app for legal entities, while retail equivalent mKliK continued to prove popular with individual customers.
NLB Banka Skopje is a universal bank offering a full range of retail and corporate banking services, both domestically and through its Slovenian parent group.
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MoldovaBest bank: Mobiasbanca |
With most of Moldova’s leading lenders still struggling to emerge from years of mismanagement and a banking crisis in 2014, Mobiasbanca continues to stand head and shoulders above rivals in terms of both performance and fundamentals.
Against a backdrop of sector deleveraging, the Société Générale subsidiary expanded its loan book last year by 19.5%, boosting its market share by 2.8 percentage points to 14.5% and making it the third-largest lender in the country for the first time.
A focus on consumer lending paid particularly handsome dividends in the form of portfolio growth of 32%, while the inauguration last year of Moldova’s first dedicated mortgage centre boosted outstanding housing loans by 15%. Cards also remained a fruitful business line, with the number of active cards rising by 15.5% to 140,300. Profitability was weaker than in 2016, but a return on equity of 19% still easily outstripped the rest of the Moldovan market.
New chief executive Antoine Gabizon, who took over in May last year, has ample experience of challenging markets, having previously headed up Société Générale’s operations in Kazakhstan, Ukraine and Georgia. In the coming year he may face more competition in the form of Victoriabank, which was bought by Romanian national champion Banca Transilvania earlier this year, but for now Mobiasbanca remains the clear leader in Moldova.
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MontenegroBest bank: Société Générale Montenegro |
Impressive lending growth and best-in-class profitability earn Société Générale Montenegro (SGME) the country award this year. The French subsidiary outperformed rivals to expand its gross loan book by 12.2% last year, boosting its market share by 44 basis points to 15.2%.
SGME was particularly active in the mortgage segment, taking a leading role in a government initiative to support house-buyers. The bank was one of seven to participate in the scheme but accounted for 40.3% of total disbursements by volume.
At the same time, the bank maintained its objective of being self-funding, thanks to a 2.3% increase in deposits and partnerships with new international financial institutions.
Asset quality also continued to improve, with non-performing loans falling to 5.3% by the end of December, a decline of 1.7 percentage points from a year earlier. Meanwhile a continuing focus on efficiency resulted in a sector-best cost-to-income ratio of 54% and contributed to a return on equity of 12.3%.
Nevertheless, investment in innovation remains a priority, with new initiatives last year including the introduction of a mobile banking app for retail customers and the launch of a Viber SMS service.
SGME also benefited from expanded cooperation with insurance partners after it began selling a range of standalone insurance products.
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PolandBest bank: ING Bank Slaski
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The Polish banking market has seen a lot of change over the last two years, with the departure of UniCredit, the acquisition of Deutsche Bank’s retail and private banking operations by Santander subsidiary BZ WBK and, most recently, the sale of Raiffeisen Polbank to BNP Paribas.
While other leading lenders were focused on consolidation last year, however, ING Bank Slaski proved again that a combination of cutting-edge technology, efficient processes and targeted marketing can deliver outstanding organic growth and sector-beating results.
The Dutch subsidiary grew its overall loan portfolio by 12.5% in the 12 months to December, thanks in part to highly effective online sales distribution. Nearly three quarters of cash loans made to individuals last year were sold online and 65% of loans to entrepreneurs. More modest deposit growth of 9.1% boosted the bank’s loan-to-deposit ratio for a fourth consecutive year to 83.8%.
By contrast, excess liquidity for the Polish banking sector as a whole has been increasing steadily since 2011. This helped improve ING Bank Slaski’s net interest margin by 27 basis points to 2.94%, which in turn contributed to a record annual net profit for the bank of Zl1.4 billion ($388 million). A return on equity of 12.6% and a cost-to-income ratio of 44.6% were also well above the sector average and ahead of leading peers, as was a year-end non-performing loan ratio of 2.8%.
Innovation is key to success in the competitive Polish market and ING Bank Slaski – the number five player by total assets – maintained its strong track record in this respect during the awards period. Last year, the lender became the first financial institution in Poland to use ‘agile’ methodology to shorten product development time by linking business and IT teams. The first solutions developed using this approach include mobile authorization in mobile banking, a ground-breaking multicurrency card and remote account opening for corporate clients.
ING Bank Slaski has also demonstrated a readiness to meet the challenges from new players in banking; it partnered with microfactoring startup InviPay and made Google Pay available for Visa card holders.
In investment banking, local player Trigon demonstrated the depth and increasing breadth of its franchise with a clutch of high-profile advisory and primary equity mandates, as well as its first ever corporate bond issue. The firm came in at number five in Dealogic’s M&A rankings for the period, putting it ahead of both local rivals and most bulge-bracket banks.
Notable transactions include structuring an auction process for the sale of a minority stake in leading CEE online recruitment player Grupa Pracuj that attracted interest from 30 global private equity investors, as well as acting as sole adviser to Poland’s leading wholesale distributor of fast-moving consumer goods Eurocash Group on its Zl350 million acquisition of retail chain Mila.
In equity capital markets, Trigon acted as bookrunner on one of last year’s landmark IPOs on the Warsaw Stock Exchange: the $198 million listing in July of debt collector GetBack. This year it led a rare regional listing by Baltic tour operator Novaturas as sole bookrunner and global coordinator.
The firm also won mandates on a clutch of follow-on offerings, including as sole bookrunner on a Zl102 billion accelerated bookbuild (ABB) for Boryszew, one of Poland’s largest industrial groups, and a Zl96 million ABB to facilitate the final exit of Enterprise Investors from PBKM.
Trigon also saw the first results last year of the addition of debt capital markets primary issuance to its portfolio, leading a Zl50 million five-year bond for Dom Development in December.
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RomaniaBest bank: BRD |
The ambitious expansion of Romanian number two Banca Transilvania continued apace last year with the acquisition in November of local Eurobank subsidiary Bancpost and a controlling stake in Moldova’s Victoriabank. This year, however, the country award for Romania goes to the bank now ranked number three by total assets, Société Générale subsidiary BRD, in recognition of its excellent profitability, strong organic growth and tight cost discipline.
Last year saw the bank boost net profit by 85.3% to L1.4 billion ($353 million), equivalent to a return on equity of 20.1%. This increase was largely driven by gains on sales of non-performing loan portfolios and recoveries on defaulted corporate loans, which together helped slash the NPL ratio by 3.9 percentage points to 6.6% by year-end, but it was also supported by strong core revenues. Net interest income was up by 8.4% year on year on the back of rising interest rates and strong lending growth.
A renewed focus on retail paid particularly handsome dividends, with the number of active clients increasing by around 38,000 and lending to the segment up 14%. Individual savers were also the main drivers of last year’s 3.8% expansion of the bank’s deposit base. Meanwhile the cost-to-income ratio remained at a respectable 52% despite rising labour costs and some large one-off investments in upgrades to BRD’s IT infrastructure and already advanced digital offering.
This strong performance was continued in the first quarter of this year, when healthy revenue generation and a net positive cost of risk again produced a sector-beating net profit of L414 million.
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RussiaBest bank: Bank Saint Petersburg
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Another turbulent year in the Russian banking sector saw three of the country’s leading privately owned lenders bailed out by the central bank at a cost to the state currently estimated at $27 billion. While larger rivals were wrestling with the consequences of reckless expansion and over-leverage, however, Bank Saint Petersburg (BSPB) reaped the rewards of a balanced growth strategy, conservative risk management and commitment to innovation.
In the decade since its IPO in November 2007, the lender has expanded steadily to become the 16th largest player in Russia by total assets, with a balance sheet of R607 billion ($9.7 billion). It has retained its tight regional focus, however, with 74% of loans and 90% of deposits still concentrated in the St Petersburg region. Of its remaining exposure, 23% is in Moscow, where BSPB has one branch and an office, and the rest in Kaliningrad.
Another constant has been the bank’s prudent approach to funding. Unlike many of its private-sector peers, BSPB’s loan book is almost entirely financed by deposits, more than half of which come from retail customers. This has at times prevented the bank from matching the profitability of some of its more highly leveraged competitors but has ensured its independence from the uncertainties of domestic and international debt markets.
BSPB’s commitment to recognizing and fully provisioning its impaired loans also marks it out from leading rivals, as does the healthy diversification of its loan book and its sound capital base. Despite these drags on profitability, however, the bank has managed to post positive returns through the last decade and last year recorded a record net income of R7.5 billion, up 75% on the previous year.
This was partly achieved through strong growth in retail lending, which helped to offset a reduction in margins due to falling interest rates. BSPB’s mortgage loan portfolio expanded by 27% in 2017, while consumer lending was up by 46% thanks to initiatives including fully online loan origination for retail clients and the introduction of a refinancing plan allowing customers to consolidate existing loans. Risk discipline nonetheless remained a priority, with 80% of unsecured loans made to employees of BSPB corporate payroll clients.
Efforts to boost non-interest revenues also paid off, with fee and commission income rising 13.3% year on year on the back of strong growth in settlements business. Meanwhile a focus on efficiency, supported by strong investment in cutting-edge technology, kept the cost-to-income ratio down to 41% last year despite a slight increase in operating expenses driven by staff costs.
VTB Capital once again leveraged its dominant domestic market position to top the M&A and debt capital markets league tables last year – although not in equity capital markets, where Goldman Sachs took the lead with nine primary deals, including five as sole lead. The investment banking award this year, however, goes to JPMorgan in recognition of its ability to maintain a well-diversified franchise in Russia at a time when most of its global competitors have pulled back from the market.
The US house acted on nearly every large Russian Eurobond in the 12 months to March, including additional tier-1 issues for private-sector lenders Credit Bank of Moscow and Tinkoff Bank, Rusal’s return to the dollar market and Gazprom’s tightly priced €750 million eight year, as well as a clutch of other corporate deals.
The bank was further down the rankings in equity capital markets, but nonetheless notched six mandates, including the $1.5 billion IPO of En+, a rare R9.8 billion block trade of treasury shares for Aeroflot and a $250 million convertible bond for Polyus Gold. On the advisory side, the headline transaction was the $1.4 billion merger of the Russian and CIS operations of Uber with the taxi business of Yandex, on which JPMorgan acted as sole adviser to the Russian tech giant.
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SerbiaBest bank: Raiffeisen Bank |
Solid profitability, improved asset quality and cutting-edge innovation earn Raiffeisen Bank this year’s country award for Serbia. Despite fierce competition in the technology space in recent years, the Austrian subsidiary has maintained its reputation as an innovation leader.
Headline launches during the awards period include MobileCash, a payments service that allows customers to send money via messaging apps such as Facebook and Viber using a QR code, and a digital credit card with a 15-minute issue time, as well as a contactless payments app for Android smartphones.
A big upgrade of all Raiffeisen Bank’s digital channels is also underway, focusing on simplicity and cross-channel consistency, as is an overhaul of its branch network. By the end of March, 33% of outlets across Serbia had been renovated and equipped with multifunctional devices allowing a wide range of cash, card and currency transactions.
The effectiveness of Raiffeisen Bank’s digital strategy is reflected in the take-up of its multichannel services. By total assets, the bank has an 8% share of the Serbian market, making it the country’s number five player. Its market share of digital banking users, however, reached 15% last year, driven by a 41% increase in mobile banking usage.
Lending growth of 11.6% was also above-market, thanks to a well-targeted push into the small business and microfinance segments. This in turn helped boost the bank’s return on equity to 11.6% and, combined with intensive work-out efforts and portfolio sales, Raiffeisen slashed its NPL ratio by 4.9 percentage points to 4.4% in the 12 months to the end of December.
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SlovakiaBest bank: Tatra Banka |
Picking the outperformer in the Slovak market is never easy – and this year was no exception. Despite an ongoing margin squeeze caused by ultra-low interest rates, the three top players all posted double-digit returns on equity and maintained a strong track record of innovation. Tatra Banka takes the award ahead of larger rivals VUB Banka and Slovenska Sporitelna, however, by virtue of its superior asset quality, above-market growth and best-in-class technology.
The Raiffeisen subsidiary has traditionally focused on the corporate and premium segments, in both of which it holds a market-leading position, but the need to compensate for declining interest income has prompted an increased emphasis on mass-market retail lending. The segment saw fierce competition last year, particularly in the mortgage market where banks were struggling to defend their existing portfolios against a wave of refinancing and to attract new clients ahead of expected regulatory curbs.
Tatra Banka nonetheless managed to increase its market share in housing loans, while a focus on consumer lending helped boost its share of that market by 1.3 percentage points to 12.8% by the end of December. Overall the bank’s loan portfolio expanded by 11.4% last year, contributing to a sector-beating return on equity of 12.2% and helping to reduce the non-performing loan ratio still further to 2.9% by the end of the year.
In terms of innovation, meanwhile, Tatra Banka remains a regional as well as national leader. Notable initiatives last year include the launch of a new electronic banking system for corporate clients, with features including smart preselection of payment type, online factoring and loan applications, and online card management.
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SloveniaBest bank: NLB |
Slovenia’s banking sector has yet to fully shake off the effects of the crisis it went through in 2013. Two of the country’s largest lenders are still in state hands after bailouts, lending growth remains subdued and profitability in much of the sector is low.
This makes last year’s performance by market leader NLB all the more impressive. The state-owned lender trebled net profit to €189 million and posted a return on equity of 14.4%. This was largely driven by released provisions as a result of continued work on non-performing loan restructuring. Despite a mild contraction in the bank’s overall loan portfolio, bad debts accounted for just 3.8% by the end of December, down 1.3 percentage points from a year earlier.
Lending to key corporate clients was down on the year, however this was offset by a 10% increase in outstanding loans to small and medium-size enterprises and 7% growth in the retail portfolio on the back of strong mortgage sales. Margins continued to be squeezed by ultra-low interest rates, but a rise in revenues from financial markets helped to compensate for a further slight decline in net interest income.
Last year also saw good progress on NLB’s ambitious digital transformation strategy. An array of upgrades to its mobile banking app, including express loan application and fingerprint login, helped increase the number of active users by 94.7% year on year. NLB also added insurance products to its internet banking platform, launched a 24/7 video chat service and became the first bank in Slovenia to introduce contactless ATMs.
An IPO of NLB was cancelled at a late stage in June 2017, but this was due to politics rather than any failure on the part of the bank, which is well on the way to completing a remarkable turnaround. Its achievements have been recognized by rating agencies, with all the three biggest implementing upgrades in 2017.
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TurkeyBest bank: Akbank
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A rising tide of fiscal stimulus lifted all boats in the Turkish banking sector last year. Nevertheless, Akbank stood out from the pack once again by virtue of its prudent risk management, massive investment in technology and dizzying pace of innovation. The 70-year-old bank, under the leadership of chief executive Hakan Binbasgil, clearly demonstrated during the awards period that it has lost none of its appetite for change.
Last year saw the start of work on the $250 million Akbank Data and Life Centre, a new facility designed to host the bank’s entire technology infrastructure, as well as the launch of Akbank Lab, a centre for the development of cutting-edge digital solutions in collaboration with external partners. In May 2017, the bank became the first in Turkey to use blockchain technology in overseas money transfers through a partnership with Ripple.
Other ground-breaking developments last year include the launch of a joint campaign with Google Premier Partners to accelerate digitalization by small and medium-size enterprises and the introduction of Axess Mobile, an app that uses mood-monitoring technology to deliver targeted promotions and campaigns to clients. In its first two months of operation, Axess Mobile was downloaded 1.5 million times.
Despite a total investment in technology of $150 million last year, however, Akbank managed to deliver another set of strong results. Return on equity came in at 16.2% on the back of a 17.1% increase in the bank’s loan portfolio. SME lending remained the key growth driver, thanks to support from the government’s TL250 billion ($53.8 billion) Credit Guarantee Fund, but the corporate and retail segments also saw healthy expansion.
Meanwhile an NPL ratio of 2.1% at the end of December remains well below the sector average of 3%. This strong performance was also maintained in the first quarter of this year, despite the sharp decline in the Turkish lira. By the end of March, NPLs had declined still further to 1.9% of the total and capital adequacy remained comfortable at 15.6%, while return on equity for the three months came in at 16.6%.
Strength in advisory, a leading debt capital markets franchise and a mandate on last year’s landmark IPO win Is Investment this year’s award for best investment bank in Turkey. In a slow year for M&A, the firm notched nine deals, including three cross-border transactions and two with private equity involvement. It helped Mahindra & Mahindra, India’s leading agricultural vehicle and equipment supplier, enter the Turkish market through the acquisition of Hisarlar and provided sell-side advice on two further Turkish purchases by the Indian firm for a total investment of $140 million.
Other notable mandates included advising Zulfikarlar Holding on the TL490 million acquisition of Turkish Petroleum Distribution from the state, as well as on the associated project finance discussion, helping Aksa Energy sell its wind power plants and facilitating the exit of private equity firm Turquoise Investments from its renewable energy portfolio.
In debt capital markets, Is Investment maintained its position as the leading bookrunner for local corporate bonds, bringing 112 issues last year and bagging a 16% market share. On the equity side, the firm acted on only one transaction during the awards period – but it was the one that mattered. The IPO of Mavi Jeans in June 2017 was the largest from Turkey for four years and, unlike the Global Ports listing a month earlier, took place in Istanbul. Is Investment acted as sole lead for the $86.6 million Turkish institutional tranche.
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UkraineBest bank: Raiffeisen Bank Aval |
Strengthening economic growth, the stabilization of the hryvnia and the erosion of trust in local and Russian lenders continue to benefit western banks that have stayed the course in Ukraine. All the leading players posted strong results last year, but it is Raiffeisen Bank Aval that earns the country award again by virtue of its outstanding profitability, impressive growth and continuing investment in infrastructure and innovation.
The Austrian-owned lender posted a record net profit of Hrn4.5 billion ($172 million) for 2017, 17% up on the previous year, while return on equity came in at a stunning 86%. This was partly due to the release of provisioning following a dramatic improvement in asset quality – non-performing loans fell from 50.6% of the total at end of 2016 to 18.8% a year later – but it also reflects strong lending growth. Despite stringent credit controls, Raiffeisen Bank Aval managed to issue a record volume of new loans to corporate clients last year, while lending to small and medium-size enterprises was up 42% on the back of a substantial increase in client numbers and a streamlining of the loan approval process.
Other notable achievements in 2017 include the introduction of a mobile wallet for retail customers, the opening of a second operations centre in Zhytomyr and inclusion on the list of banks eligible to provide custodial services for National Bank of Ukraine cash reserves. Last year also saw the start of an upgrade of Raiffeisen Bank Aval’s branches, which will see new processes and technology introduced across the 500-strong network by the end of this year.
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UzbekistanBest bank: Asia Alliance Bank |
Last year was one of profound change for Uzbek banks, as new president Shavkat Mirziyoyev removed stringent foreign currency restrictions, opened the door to foreign investment and stepped up government spending.
Asia Alliance Bank was well-placed to take advantage of these developments, shrugging off the effects of devaluation and achieving strong balance sheet growth. Total assets increased by 20.5%, while net lending and deposits were up 16.1% and 31.1% respectively. Profitability also improved. Return on equity was up 5.7 percentage points to 24.9% on the back of a 46% increase in net interest income. Meanwhile asset quality remained strong, with non-performing loans accounting for just 2.4% of the total at the end of 2017, and a common equity tier-1 ratio of 21.8% gave a comfortable capital cushion.
Corporate banking remains the main focus of Asia Alliance Bank, but the lender has also been making inroads into the retail segment thanks to its market-leading position in digital innovation. The bank last year became one of the first in Uzbekistan to offer internet and mobile banking, and is currently working on an upgrade of IT infrastructure across its growing branch network, as well as the improvement of internal processes and the implementation of customer relationship management systems.
