- Economic environment to remain overall positive in the region, with all CEE1 countries expected to have positive GDP growth in 2017
- CEE Banking sector was profitable2 in all countries in 2016 and is expected to continue to perform better than Western Europe3
- Past vulnerabilities related to funding model, FX lending and asset quality are being addressed, allowing for a pick-up in lending and a reduction of NPL across the region
- UniCredit's Transform 2019 Strategic Plan confirmed CEE as an engine for organic growth for the Group
The economic environment will remain overall positive in Central and Eastern Europe [1] and for the first time since the 2008-2009 crisis all countries in the region are expected to show positive GDP growth in 2017 and most of them with solid growth rates of 3% or above.
This is one of the key findings of the recent study "CEE Banking Outlook: CEE region - the place to be" produced by Strategy and Corporate Foresight at UniCredit. The study was published in connection to the EBRD 2017 Annual Meeting and Business Forum taking place in Nicosia, Cyprus (9-11 May 2017), an event of which UniCredit is a Major Forum Partner.
Reflecting a broadly favorable macro-economic environment, the banking sector in the region was profitable [2] in 2016 in all countries, for the first time since the 2008-2009 crisis, with CEE as a whole performing better than Western Europe [3], although the level of profitability varies within the region. In particular, some of the vulnerabilities of the past are being addressed, putting the region's banking sector on a sounder footing. Three positive patterns have now become visible: 1) a more sustainable funding model; 2) a lower share of FX lending in retail in countries; 3) an ongoing improvement of asset quality.
"CEE continues to be an interesting place to do business. GDP growth rates show good dynamics, while the banking sector profitability remains attractive. UniCredit's position as a strong pan-European commercial bank with leading market shares in CEE makes us well positioned for sustainable organic growth in the region, which remains a growth engine for the Group", said Carlo Vivaldi, Head of CEE Division at UniCredit.
"Recent developments, in particular in the banking sector, represent a good basis for a relatively positive outlook. In the next two years (2017-2018), almost all countries are expected to experience growth in lending, with the laggards picking up. NPL ratios are expected to decline further and profitability will remain above Western Europe(3) ", explains Mauro Giorgio Marrano, Coordinator for CEE at UniCredit's Strategy and Corporate Foresight.
Further, on the innovation side, digital banking is expected to play an important role in the region. Most CEE countries have a relative high degree of digitalization and, while lower than most advanced EU countries, they have been catching up. The region is thus a good place for banks to develop more innovative ways of providing banking services.
With Total Assets of € 2,600 bn, UniCredit is the leading bank in CEE. Its well-diversified geographical presence ensures resilient performance throughout the cycle. In terms of asset mix, the CEE Division of UniCredit has 63% of its assets in CEE-EU, 23% in Turkey and 14% in Russia.
The CEE Banking Outlook is available on the Group's webitse: https://www.unicreditgroup.eu/en/press-media/press-releases.html
Milan/Nicosia, 9 May 2017
Notes:
[1] CEE (Central Eastern Europe) includes Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Romania, Russia, Serbia, Slovakia, Slovenia, and Turkey; CESEE (Central Europe and South Eastern Europe) is CEE excluding Russia and Turkey
[2] Profitability refers to Profit Before Taxes on total assets
[3] Western Europe includes Germany, Italy and Austria
Source: UniCredit Research CEE Quarterly 2Q17, UniCredit Research Chartbook, UniCredit Strategy and Corporate Foresight
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