UniCredit Group´s CEE Analysis: CEE banking – the way out of the crisis |
Autor: Bancherul.ro
2010-05-15 20:02 |
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- Lending stagnation due to lack of demand
- Banking sector remaining resilient through the crisis
- Countries should focus on full deployment of EU funds, to extract the maximum in terms of growth stimulus
- UniCredit well positioned and on the frontline to re-start
In the aftermath of the global crisis the economic environment in Central and Eastern Europe (CEE) is now slowly showing signs of recovery. However the growth outlook varies significantly, with some countries recovering faster and some others being more vulnerable to the ongoing market turbulences, but all clearly remaining below their long term potential. “The crisis had an impact on the banking system as well, though it remained resilient and profitable in CEE, continuing to show significant growth prospects”, so Federico Ghizzoni, Head of CEE Banking Operations, UniCredit Group.
Although banking in CEE still holds opportunities, a number of market conditions differ after the crisis. “We expect the potential in terms of banking penetration to stay, with the loans and deposit growth becoming more balanced”, so Debora Revoltella, Head of CEE Strategic Analysis of UniCredit Group, referring to the Group’s latest forecast on the banking sector. In the context of a lower economic growth, the volumes growth will remain below the pre-crisis levels, but nevertheless still stay much above the more mature markets.
The driver of the current recovery is the corporate business, emerging first from the crisis and being the engine of future growth. In the context of high unemployment and low consumption the retail sector will only slowly develop its potential. However, the economic convergence process between CEE and Western Europe is still ongoing, though at a lower pace and with a more rebalanced economic model. “The banking sector remains one of the drivers of economic convergence. At the current stage, however, we need to see recovery from the demand side before we really see an acceleration in lending”, so Revoltella. “The positive news is that we are now close to the peak in terms of credit quality problems. We already see some stabilisation in non-performing- loans and we believe the trend will clearly revert starting later this year”.
The future development in the CEE region however shows a quite diversified scenario. The market attractiveness / risk mix clearly remains in favour of Russia, Turkey and Romania. Other Central and Southern European countries show good attractiveness and a low risk profile. The strongest impact of the crisis affected the Ukraine, Kazakhstan and the Baltic countries, with a clear need for a rebalancing of the growth model.
Lack of demand for lending behind the current credit crunch
During the crisis, first liquidity crunch and then concerns for credit quality have been behind lending weakness. At the beginning of this year the situation clearly changed. As expected, today stagnating loan volumes are a matter of lack of demand, in the context of over-liquidity. “Banks are liquid, which is proved by the fact that placements with the central banks are far above the minimum requirements”, so Ghizzoni.
The key question for the around 2,450 banks operating in the CEE banking sector, with their total assets of more than EUR 2,100 billion, is how to re-start the engine. “Demand rather than supply of credit should be the key driver out of the crisis”, says Revoltella. Thus, in a future scenario of strict fiscal control, the countries should find a way of stimulating demand. Options to achieve this could be by fully deploying EU funds, by putting competitiveness and quality of the operating environment on the top of the priorities. “EU Funds, if fully utilized, have the potential to add from 1 to 2 pp of nominal GDP growth to the region in 2010, which is a remarkable figure in the current context”, explains Revoltella.
With respect to banks’ commitment, Federico Ghizzoni underscores UniCredit’s favorable position: “We have entered 2010 highly capitalized, with € 2 bn additional capital in Bank Austria available for growth in the region. We have over-liquid banks, ready to re-start lending and we have an excellent network and a good country positioning to leverage on, other than streamlined internal processes to grant speed of decision and fully exploitation of Group best practices. Thus, the CEE region remains one of our key pillars where we are in the position to fully exploit future growth opportunities.” The ranking of the top banks in CEE is led by UniCredit Group, operating through Bank Austria in CEE1, with total assets of EUR 116 billion and a net profit before tax of EUR 1,600 million in the region in 2009. With CEE weighting for 13% of the Group’s total assets, UniCredit is also a well diversified player in the region.
This text can be found on the homepage www.bankaustria.at.
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