SEE banking sector keeps growing, Romania’s BCR cements leadership

by Radomir Ralev

As the broad restructuring of the banking sector in Southeastern Europe (SEE) nears completion, local lenders continue to enjoy rising profitability, robust lending growth and a decline in non-performing loan (NPL) ratios. The SEE banking sector remains attractive to foreign lenders amid an overall improvement of the macroeconomic situation, supported by low interest rates and optimism among businesses.

The exit of Greek-owned banks from some SEE countries was handled in an orderly manner in both 2017 and 2018, without causing shocks. As a result, the exposure of Greek banks to the SEE countries was significantly diminished, leading to strengthening of the lenders’ capital and liquidity. Despite the ownership changes, however, the presence of foreign banks in SEE remained substantial.

Bad loans declined in all SEE countries in 2017, with Romania and Slovenia posting the lowest NPL ratios as of the end of December – of 6.4% and 6%, respectively. Romania dominated the NPL market in SEE with estimated sales of 6.4 billion euro in 2015-2017, according to data by global consultancy Deloitte. A substantial reduction of NPL ratios was also recorded in Albania, where it was cut by 5.1 percentage points in 2017 to 13.2%, and in Serbia, where it was reduced by about 6 percentage points to 11.1% at the end of November. In Bulgaria, the NPL ratio remains relatively high, 10.2% at the end of 2017, but the solid capital ratios mitigate the systemic risk.

The combined net profit of the Top 100 SEE banks rose to 3.524 billion euro in 2017 from 3.03 billion euro in the previous year, reaching its highest value since 2008. Only ten out of the 100 biggest lenders in terms of assets in SEE posted a loss in 2017, versus 12 in 2016.

The combined profit of the Romanian banks that entered the top 100 ranking rose to 1.15 billion euro in 2017 from 912 million euro. Remarkably, the Serbian banks tripled their total profit in 2017 to 516.6 million euro.

The total assets of SEE’s 100 biggest banks went up 5.5% in 2017 to 275 billion euro, with 80 lenders reporting growth. The top three banks, accounting for 15% of the total assets, remained the same as in 2016, as Croatia’s Zagrebacka Banka managed to keep its second position, although its assets declined by 2.8%. Banca Transilvania saw its assets increase by 14.55% in 2017 and reduced the distance to Zagrebacka Banka. The leader, Banca Comerciala Romana, posted an asset growth of 5.7%.

OTP Banka Srbija registered the sharpest improvement in assets among the 100 largest banks in SEE, as the purchase from National Bank of Greece of a 100% shareholding in Serbia’s Vojvodjanska Banka and NBG Leasing increased its assets by 53.1% to 620 million euro. It was also among the three new entrants in this year’s SEE Top 100 ranking edition, together with the Bucharest branch of Intesa Sanpaolo and ZiraatBank BH.

Romania’s Libra Internet Bank, owned by closed-end American investment fund New Century Holdings, also had a remarkable asset growth – of 35.8%.

Among the new entrants, the Bucharest branch of Intesa Sanpaolo joined the ranking at the highest position, 77th, as it completed the transfer of certain assets and liabilities from the former Romanian branch of bankrupt Italian bank Veneto Banca, including its 19-agencies network.

Foreign ownership remains predominant in the banking market in SEE, with Italy’s UniCredit units in Croatia, Bulgaria and Romania holding nearly one-third of the assets of the top 10 lenders. France’s Societe Generale and Austria’s Erste Group had two representatives in the top 10 banks in SEE each. The units of Societe Generale in Croatia and Romania controlled about 25% of the assets of the top 10 banks in SEE, while Erste Group is the owner of the leader in the ranking, Banca Comerciala Romana.


SEE TOP 100 banks is a ranking of the largest banks in Southeast Europe in terms of total assets from non-consolidated balance sheets as of December 31, 2017. To allow comparison, all local currencies have been converted into euro, using the central banks’ official exchange rates on the last working day of 2017 and 2016, respectively. Local currency figures have been used when calculating year-on-year changes. All data is sourced from central banks, national commercial registers, financial supervision commissions, bank associations, government and corporate websites, and companies themselves. The initial pool of companies exceeds 250 banks registered in the region including branches and representative offices of foreign banks.

We asked the leading banks in the region what are their expectations regarding lending growth on the local markets,and if they see room for further consolidation. Following are their answers:

Basically, we expect a decent pick-up of lending activity on nearly all SEE markets – with the possible exception of Croatia. The lending pick-up shall be supported by the balance sheet clean-up seen in nearly all SEE banking sectors in terms of non-performing loans (NPLs), with Romania being in the lead. Also, statistically the NPL clean-up means that net new lending dynamics are increasingly shaping the nominal loan growth rates. On average we would expect loan growth rates in the range of 6-7% yoy in the coming 1-2 years. Among the SEE markets Romania and Serbia shall exhibit the strongest loan growth dynamics at around 8-9% yoy. Overall healthy loan-to-deposit ratios shall support the expected decent loan growth trajectory in the SEE markets. Moreover, we see that the SEE markets also gained in appeal for foreign-owned lenders. Overall the core profitability in most SEE banking markets is somewhat more favourable than in a lot of Central European (CE)banking markets, where interest rates are still at more depressed levels than in the SEE region. We would expect a pick-up in corporate lending in particular, as retail lending has developed more strongly in the SEE region anyways in recent years. Nevertheless, the lenders will remain focused on retail lending as we see more juicy margins there.

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Room for consolidation remains given that the overall bank size in nominal terms is still moderate in the SEE region, while in some countries still too many banks are operating with smallish market shares. Moreover, the small nominal size of the banking markets implies that an acquisition could be also feasible for Western banks that were still more cautious with regards to their M&A activity in recent years. On an interesting note we see OTP having a clear determination to become a leader in the SEE banking markets. Compared to Western Europe or the CE markets we still not see too much challengers from the international Fintech scene in the SEE markets as their focus remains on Western Europe and more mature CE banking markets up to now. However, this may change over the next 2-3 years as we also have a vibrant Fintech scene in some regional markets like Romania, Bulgaria, Serbia etc.

Gunter Deuber, Head of Economics/ Fixed Income/FX Research Raiffeisen Bank International

We expect bank lending in Romania to perform well and reach a post-crisis peak in 2018. […] We expect household loans growth rate to lose some steam by year-end, as the National Bank of Romania has expressed concerns regarding high levels of debt-service-to-income for new loans and may look to curb household loan production by implementing a DTI cap. However, the impact of such a macro-prudential measure should be limited for 2018 loan growth. In terms of loans to companies, we expect a slight acceleration in dynamics in the second half of 2018 (vs. +2.1% y/y growth for the loan stock in May 2018), supported by a pick-up in economic activity and limited NPL write-off activity in the market (write-offs weighed down on loan stock growth in the past years as the NPL clean-up process intensified).

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As of 2017, there were 35 credit institutions in Romania (vs. 37 in 2016). The top 10 banks had a market share by assets of 83%, while the bottom 10%’s market share totaled 1.6%. We consider that the consolidation process will continue in the Romanian banking market in the following years. An acquisition deal was struck between two top 10 banks in 2017 (and will be finalized in 2018), while another bank’s sale did not get the final approval from the regulator and will probably be up for sale once more. Also, ongoing trends such as bank digitalization and a reduction in the number of bank branches, as well as an expected intensifying of competition for customers (especially on the corporate segment) should create additional cost and profitability pressures for smaller players, which could make more room for sector consolidation in the future.

Vlad Chezan, analyst, BCR Research

We believe that lending in SEE markets (Bulgaria, Bosnia-Herzegovina, Croatia, Romania and Serbia) is set to remain sustained despite the fact that economic activity in SEE is expected to gradually see a cyclical slowdown. The level of growth in loans is yet to approach the growth rate of deposits in 2018, providing some optimism for shifting the economic attitude from savings to investments. Corporate lending growth remains subdued especially in Serbia and Croatia, while we see increased interest in retail banking: on average we see retail lending (consumer lending and mortgage lending) grow more than corporate lending, especially in Croatia, Bulgaria, Romania and Serbia. The overall lending volumes are affected by the relevant NPL sales that took place in the last few years. The main international banks (UniCredit, Erste, Raiffesen, OTP, Intesa SanPaolo) present in the SEE markets sold NPL volumes of around 1.1 billion euro in Romania in 2016, while Croatia was a leader in 2017 in SEE with 0.9 billion euro of NPL sales. Going forward, we expect NPL sales to be significantly lower than in 2015-17 but still remain relevant. […] At the end of 2018 the loans/deposit ratio is expected to stay at below 100% for all markets (they were all higher than 100% in 2012).

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In general looking at the sector, we see more possibilities for acquisitions of client portfolios rather than for fully fledged M&A activities involving the top banks. During the last years, and also very recently, we have seen relevant M&A activity, only partly originated by the orderly exit of Greek banks from some SEE markets. The above-mentioned opportunities in terms of banking business, together with the good health of SEE economies and their long-term potential, are definitely creating additional occasions for some players to expand their presence in SEE markets.


Our group-wide guidance foresees a loan portfolio growth rate of 12-15% this year, a forecast which we see confirmed, especially in light of the strong group-wide loan portfolio growth of 8.9% recorded for H1 2018. In this context, it is vital to stress that we are not after “growth at any cost”, but instead aim to achieve economic growth underpinned by social, environmental and ethical considerations. Our prudent risk management ensures that we also grow healthily, demonstrating remarkable portfolio quality throughout the group. […] Moreover, given the favourable overall macroeconomic development in SEE, we have solid reason to expect the positive growth trend to continue in line with our group-wide guidance for our banks in this region in 2018 – especially with a view towards our key customer target group of SMEs. This client group in particular tends to profit from a positive economic climate and appreciates responsible access to finance to fund their investments.

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The countries in SEE in which we operate do not represent one homogenous region in terms of banking facilities. However, as a general rule it is safe to say that there is always room for players whose aim it is to provide responsible, transparent financing facilities to the Mittelstand, which we consider to be the backbone of any well-functioning and sound economy as well as society at large. […] On balance, we see a consolidation as the more likely scenario.

Borislav Kostadinov, member of the Management Team of ProCredit Holding AG & Co. KGaA

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