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Austria,Turkey : CEE Banking Sector: commitment will be rewarded.

"In terms of growth and profit, the banking sector in Central and Eastern Europe (CEE) continues to outperform its Western European counterpart, as growth opportunities and margins in CEE remain significantly higher. New banking regulations in Europe and CEE will bring new challenges for the region," stated the analysts of Raiffeisen Bank International AG (RBI) and Raiffeisen Centrobank AG (RCB) in their latest edition of Raiffeisen Research's annual CEE Banking Sector Report titled "Commitment will be rewarded". The report was presented on the occasion of the annual meeting of the European Bank for Reconstruction and Development (EBRD) in Istanbul.

Total 2012 loan growth in CEE came in at 14.8 per cent yoy in euroterms. Another year of expansions brings the cumulative 2010 to 2012 real loan growth in CEE to 21.8 per cent. In the Eurozone real loan growth was negative over the same period of time. The overall loan volume of the CEE banking sector compared to the Eurozone increased from 9.6 per cent in 2011 to 11.1 per cent in 2012. In terms of total assets the relative banking sector size in CEE compared to the Eurozone increased from 7.7 per cent in2011 to 8.9 per cent in2012. The growth of the CEE banking sector compared to the Eurozone in 2012 was the highest over the past decade, explained Gunter Deuber, Head of CEE Research at Raiffeisen Research. For 2013, Raiffeisen Research expects total banking assets to exceed 2,500 billion, which would be some 20 per cent above the total assets of Industrial & Commercial Bank of China (ICBC), the world s largest bank in 2012.

As the economic cycle is expected to turn in 2013, the Raiffeisen Research analysts see an upside potential for lending in the second half of 2013. The loan-to-GDP ratios for six or seven high-growth CEE banking markets are expected to rise. The Russian and Polish banking sectors are expected to come in at the top of the group of high-growth markets with an annual loan growth of 13 per cent and 10 per cent, respectively (in euro terms from 2013 to 2017). The Czech Republic, Slovakia, Romania, Serbia and Albania follow with total annual loan growth in the range of 7 to 10 per cent in euroterms (6 to 9 per cent in local currency terms) appearing to be sustainable in the medium-term.

Banks in CEE benefit from higher growth opportunities and margins

According to the analysts, the solid aggregated profitability in CEE banking in 2011 and 2012 is clearly outpacing global Developed Markets and Eurozone banking profitability indicators. The solid profitability readings of 2011 in terms of Return on Assets (RoA) or Return on Equity (RoE) in 2011 were even slightly topped in 2012. The average RoE in the CEE banking sectors stood at 16 per cent in 2012 (compared to15 per cent in 2011), the average RoA amounted to 1.9 per cent in 2012 (compared to 1.7 per cent in 2011).

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Publication:Mena Report
Date:May 14, 2013
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