The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

CEE banking: Is the boom time on hold?

Banks in central and eastern Europe are still posting results that laugh in the face of the credit crisis. But bad – or at least worse – times might be just around the corner for some. Charles Piggott reports.

JUDGING BY THE region’s banks’ first-half profit figures, you could be forgiven for wondering if the heavy clouds of the international credit crisis might break up before they reach central and eastern Europe. Banks are still enjoying double-digit profitability and asset growth, and many forecast returns on equity of between 20% and 30% for the next few years. Thanks to strong economic growth in recent years and the entrance of several large foreign banking groups, the banking sectors of Poland, Hungary, the Czech Republic and Slovakia are in good shape.

Even so, they are unlikely to escape the international credit crisis unscathed. While Czech and Slovak banks remain liquid (see chart), their counterparts in Poland and especially Hungary are becoming increasingly reliant on external funding, making them more vulnerable to external shocks. There is also a wisp of suspicion that lending growth might not just be a sign of healthy economic growth, but could be masking lower incomes in some quarters of the economy.

Foreign ownership has strengthened the region’s banking system but it could also be a mechanism by which the credit crunch eventually spreads into these markets. Irakli Pipia, Moody’s financial institutions analyst in London, says: "If there are difficulties in the home markets of the bank’s foreign parents this could be passed down to their subsidiaries."

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree