Banks are benefiting from accelerating economic growth in Central and Eastern Europe.
Against a background of increased economic activity spreading outwards from core Central Europe to the Balkans and beyond, most banks experienced rising demand for financial products, from savings through to mortgages and consumer loans. Those with advanced digital systems were best placed to benefit from this, as customers across the CEE continued to migrate toward mobile banking and other alternative channels.
While a low interest rate environment and tough competition kept margins thin, more banks expanded their loan books to generate higher revenues and increase their market share. Widespread economic growth also improved the quality of many banks’ loan portfolios, allowing for lower provisioning which fed straight through to the bottom line, while higher retained profits helped them strengthen their capital buffers.
UniCredit has long been one of the most important banking groups in Central and Eastern Europe, with an established presence in 11 countries. It has been expanding its market share over the past five years and is now the largest lender in the region. Almost all of its subsidiaries in the region are prominent players in their domestic markets, and many have been repeatedly chosen by Global Finance as country winners.
Counting most toward making UniCredit this year’s regionwide winner is the group-level turnaround pushed through by CEO Jean Pierre Mustier, whose Transform 2019 program has drastically reduced the group’s problematic debt burden and streamlined internal operations. Profits have risen and the group’s capital base is stronger, opening the way for the parent bank to extend far more effective support to its subsidiaries.
The impacts of this transformation at group level are already being felt, and in 2018 the CEE banks continued to be an important contributor to the pan-European group’s bottom line, generating a net profit of 1.7 billion euros in 2018, an improvement of 17.3% over the previous year. New lending across the region grew by nearly 23% to €22.4 billion, fee generation was up by 5% and overall revenues rose by 6.3% to €4.3 billion. There was a marked improvement in loan quality across the board, which allowed for a 19% reduction in provisioning and helped further lower the cost of risk.
Over the past year, UniCredit’s CEE banks gained another 1.3 million clients, many of them drawn by the group’s innovative digital offerings, and especially variants of mobile banking which open up more frequent customer interface with their bank. UniCredit’s array of effective apps and targeted offerings has been a major factor in the rapid take-up of mobile banking across CEE markets, with overall mobile user penetration rising above the 40% level for the first time.
Bank Millennium is our winner in Poland, having increased its net profit in 2018 by 12% to 761 million Polish złoty, the best result in the bank’s history. Both retail deposits and consumer loans jumped by 18%, while Polish currency mortgages were 21% up over the year. The bank’s cost/income ratio improved, as did key capital adequacy and solvency ratios. Using the latest technologies to personalize online services has helped boost active mobile app users by nearly a third. Chairman Joao Bras Jorge notes, “Yet again, Bank Millennium recorded above-average earnings and gained a record-high number of new customers. Our products are now actively used by over 1.8 million retail customers, and double-digit growth has been experienced by most key business lines.”
Ceska Sporitelna’s strong financial performance in 2018, and its success in drawing new customers through its mobile offering, makes it our Best Bank in the Czech Republic. The bank, now wholly owned by Austria’s Erste Group, increased its net profit by 5.1% to 15.4 billion Czech korunas. The operating result was even stronger, rising by 9.3% on the back of higher net interest income combined with a stable cost base. New lending grew in pace, reflecting the country’s improving economy, with both private mortgages and corporate loans up by more than 11% over the year. Chairman Tomáš Salomon underlined the importance of the bank’s innovations and new digital solutions during 2018, especially strong client migration to its new digital platform, George. “At the end of the year,” he says, “George had 1.3 million users. This was the largest-ever client migration on the Czech banking market.”
Tatra banka continued to win new customers and boosted its mortgage and consumer lending by 7.6% over the year, earning the nod as Best Bank in Slovakia. While net income fell slightly, the bank generated a healthy 12% return on equity. Widely recognized as a leader in innovation, in 2018 Tatra banka was the first to introduce remote authentication of new-to-bank customers seeking to open current accounts, while its Digital Consumer Loan allowed remote authorization of lending. “In this way,” says CEO Michel Liday, “we succeeded in acquiring thousands of new clients” The bank also extended its already wide range of online products and services for existing customers. As part of its drive to develop innovative banking solutions, it opened a new center, Elevator Lab, powered by Tatra banka, to assist startups.
This year’s winner in Slovenia, SKB Group, turned in its best performance ever. During 2018, the bank increased it profits, both before- and after-tax, by 32.7% thanks to larger business volumes and lower costs. SKB increased its share of the key mortgage market to above 10% for the first time and attracted strong inflows of deposits, thereby enhancing the bank’s short-term liquidity. Operating income rose by 16% on the back of higher net interest income and a lower cost of risk. Overall loan quality improved, and the bank’s capital buffers were further strengthened following higher provisioning against impaired or doubtful loans.
Our winner in Croatia, Zagrebacka banka, is a member of UniCredit Group, and during 2018 it leveraged all the advantages of that relationship to further develop its digital capabilities, grow its lending and enhance profitability. CEO Miljenko Živaljić says, “Following positive trends in the economic environment, loans to the retail, corporate and public sectors have increased—a development that Zagrebačka banka has been able to capitalize on, thanks to its leading market position in all segments.” The bank’s operating income jumped by 54% on the back of higher fee and commission income and a rapid inflow of customer deposits. During 2018, it also increased its leading market share in lending to SMEs. The launch of new mobile apps and upgrades helped boost mobile banking by 41%, while the bank’s leading position in trade finance and private banking was further strengthened. Živaljić adds, “Thanks to a balanced business model and good management of risks, the bank has been able to achieve very good results, with its capital adequacy ratio currently standing at 21.3%.”
Hungary’s largest bank, OTP Group, is currently expanding its presence across the CEE region, mainly through bolt-on acquisitions. But it was another strong performance from its core banking operations in its home market that marks it out as our Best Bank in Hungary. OTP’s market leadership across most retail banking segments in the country was further extended, and during 2018 it also gained market share in lending to corporates. Higher mortgage lending contributed to a 5% increase in net interest income. Operating costs rose over the year, but a combination of higher loan volumes and improved margins fed through to a 7% increase in the Hungarian bank’s post-tax profit.
Romania’s largest home-grown financial group, Banca Transilvania, is our winner this year, having boosted pre-tax profits by 19%, successfully concluded its merger with Bancpost, and seen through its integration within the combined group. The bank increased its lending to companies and individual customers by nearly a quarter, and this along with improved margins contributed to a 37% surge in net interest income. Further enhancements to its BT24 Internet Banking offering saw the number of users rise by 24% over the year, while mobile app users jumped by 54%. During 2018, Banca Transilvania also launched the first wallet app in Romania, BT Pay.
During 2018, Bulgaria’s largest lender, UniCredit Bulbank, maintained its market leadership in lending, deposits and increased its profitability. The bank’s net profit rose by 3% to €215 million, but it is chiefly for its leadership in digital innovation in Bulgaria that UniCredit Bulbank wins the award. CEO Teodora Petkova says, “By focusing not just on product-based growth, but on digital innovation, we are able to continuously improve the client experience.” She adds, “Last year nearly 80% of all client cash operations were carried out via alternative channels, either at an ATM or via electronic or mobile banking.”
Having turned in another strong performance in 2018, our winner in Serbia is Banca Intesa Beograd. The bank extended its lending by 12.5%, taking market leadership in both retail lending and deposits, while enhanced internal efficiencies contributed to a 6.4% improvement in post-tax profit. As part of its ongoing digital transformation, 2018 saw the launch of its first “virtual branch,” which combines the speed and convenience of digital banking with human interaction in terms of advice and support.
Raiffeisen Bank dd Bosnia i Hercegovina retains the award for Bosnia & Hercegovina thanks to its consistent profitability and growth across key banking sectors. “In addition to very successful business in 2018, we continuously work on new technologies that lead to a new level of digitization of our services which make banking easier for clients,” says Karlheinz Dobnigg, chairman of the management board. “We see digitization as a challenge and an opportunity to adjust to the clients’ needs. New, innovative solutions for internet and mobile banking provide our bank with a competitive advantage by delivering improved user experience.”
Our winner in Albania is the country’s oldest and largest commercial bank, Banka KombetareTregtare. During 2018, BKT consolidated its leadership position, increasing its market share in terms of total assets to 28%, while at the same time generating profits of nearly €40 million, the highest of any Albanian bank.
In neighboring Kosovo, the award again goes to TEB Bank, which continued to grow its loan book as the country’s economic recovery gathered pace. The bank’s control over operating costs fed through into increased profitability, with the average return on equity rising to 18%. TEB continued its prudent provisioning against non-performing loans and reinforced capital buffers, and its capital adequacy ratio rose to 19.36% at year-end.
Our winner in Montenegro, Crnogorska Komercijalna Banka (CKB), is already the country’s largest by assets and has clear market leadership in lending and deposit-taking. Its latest reported profits were the highest of any Montenegrin bank, and its 12% return on equity is way above the average. Now that its parent, the Hungarian OTP banking group, has agreed to the €40 million acquisition of fourth-place Societé Genérale Banka Montenegro, CKB is set to become an even more dominant player in future.
In recently renamed North Macedonia, our winner is Ohridska Banka Societe Generale, which increased it pre-tax profit by a remarkable 62% and generated a return on equity of 13.5%. While net interest income was stable, the bank benefited from a 12.6% increase in fees and commission income. But the largest boost to profitability came from a sharp improvement in loan quality, achieved mainly by the bank’s reducuction of its non-performing exposures through proactive measures.
Former Soviet Union
SEB is this year’s winner in all three of the Baltic republics—Estonia, Latvia and Lithuania–—following the withdrawal from these markets of two of the largest Scandinavian banks and the ongoing money-laundering scandal. During 2018, SEB’s Baltic operations, which are more focused on corporate clients, raised their combined operating profit to 2.6 billion Swedish krona, thanks to higher net interest income and effective cost controls.
SEB Bank Group in Lithuania made a strong contribution, raising its net profit by 15% on the back of mortgage and consumer lending and a sharp rise in deposits. As part of its drive to encourage entrepreneurship and an innovative culture, SEB Bank’s Innovations Centre opened in 2018, offering guidance to SMEs and startups. “Mobile banking solutions will remain a key focus,” CEO Raimondas Kvedaras says, “and our current priority is the development of instant and mobile payment services. We started implementing the Open Banking initiative and made further progress in improving and integrating new functionalities in our mobile application.”
SEB Latvia did even better, increasing its earnings by 21% while at the same time driving its digital transformation forward. CEO Ieva Tetere says, “We made positive changes in our internet bank and mobile application for individuals and businesses. Our authentication tool for smartphones, Smart-ID, is gaining more and more acceptance among our customers.” In neighboring Estonia, SEB Pank turned in a solid performance, with higher interest and fee income helping to raise pre-tax profits to €97.8 million.
Credit Bank of Moscow is again our winner in Russia, having turned in another sparkling performance. The privately owned bank’s strong focus on the Greater Moscow region—the wealthiest and most developed market for financial services—and its specialization in meeting the needs of corporate clients have enabled it to outperform larger state-owned competitors. During 2018, the bank’s net income increased by 31.5% to 27.2 billion Russian rubles on the back of higher business volumes, with retail lending up by more than 10% over the previous year. The overall stock of corporate loans declined slightly as a result of the bank reaching settlement with several large corporate borrowers. A pronounced improvement in the quality of the loan portfolio contributed to a sharp decline in the cost of risk, thereby enhancing the bank’s profitability, while strong inflows of customer deposits, especially from large companies, fed through into increased liquidity. Capital buffers were strengthened through multiple bond issues over the year.
Priorbank is this year’s winner in Belarus. Although ranking fifth in terms of total assets, the Raiffeisen-owned bank is growing its market share and has consistently been more profitable than larger state-owned competitors. During 2018, Priorbank expanded its asset base by 22%, advancing 16% more loans to customers and attracting 32% more deposits. CEO Sergey Kostyuchenko comments, “For many years we have occupied a leading position in revenues, and 2018 was not an exception, despite the decrease of market interest rates and interest income.”
A pioneer in implementing modern technologies, Priorbank’s new Host Card Emulation, which allows customers to use contactless payments via phone, was an industry first in Belarus, as was its offering customers wristbands enabling contactless retail transactions. “Our online banking is one of the best and most multi-functional in Belarus,” says Kostyuchenko. “In 2018, we offered the P2P transfer to 45 countries worldwide via the mobile application.”
Our winner in Moldova is again Moldova Agroindbank, the country’s largest bank by assets and market leader across most business segments. During 2018, the bank increased its post-tax profit significantly and pushed ahead with its internal transformation, thereby bringing it closer in line with European standards. In October, the European Bank for Reconstruction and Development and two private capital groups acquired a 41% stake in MAIB, a development which its CEO Serghei Cebotari described as “one of the most important moments in its history.” Against a background of political and economic uncertainty in Ukraine, Raiffeisen Bank Aval’s record of consistent profitability, combined with a strong capital base, made it our winner again. “All in all, 2018 was the most successful financial year for the bank since joining the Raiffeisen Group in 2005,” says CEO Volodymyr Lavrenchuk. The bank continued its growth in both corporate and SME segments, with loan volumes for legal entities increasing by 30% and those for small and micro business by 52 % over the year. Overall assets increased by 38% and loan quality improved significantly. Its focused application of IT in 2018 included opening seven “digital hub” branches.
Last but not least, Turkey’s best-capitalized and consistently most profitable bank, Akbank, is our winner once more. Against a background of high inflation and currency volatility, Akbank succeeded in growing its asset base while attracting higher inflows of deposits. Net interest income rose by 38% on the back of improved margins, fee income increased by 25%, and higher operational efficiencies fed through into a 2.7% improvement in the bank’s cost-to-income ratio. The bank strengthened its capital buffers, its Tier 1 capital ratio rising to 14.3% at the year end.
BEST BANKS IN CENTRAL & EASTERN EUROPE 2019
|Albania||Banka Kombetare Tregtare|
|Bosnia & Hercegovina||Raiffeisen Bank dd Bosnia i Hercegovina|
|Czech Republic||Ceska Sporitelna|
|Latvia||SEB banka Latvia|
|Montenegro||Crnogorska Komercijalna Banka|
|North Macedonia||Ohridska Banka Societe Generale|
|Russia||Credit Bank of Moscow|
|Serbia||Banca Intesa Beograd|
|Ukraine||Raiffeisen Bank Aval|