Top 100 CEE EU Banks ranking: Poland strengthens grip

Polish lenders once more dominate the ranking of financial institutions in EU member states within central and eastern Europe (CEE).

The top two spots in The Banker’s ranking of the Top 100 Central and Eastern European (CEE) EU Banks by Tier 1 capital in the region are taken by PKO Bank Polski and Bank Pekao, with another three Polish lenders also making the top 10.

The ranking is based on the banks’ full-year 2016 results, and all financials are converted to US dollar as of the International Monetary Fund exchange rate on the date of the banks’ results release, to allow for better comparison across countries.

Consolidation in the Polish banking sector has seen some assets of Deutsche Bank Poland acquired by the country’s largest foreign-owned lender by capitalisation, Bank Zachodni WBK – a subsidiary of Spain’s Santander Group. This acquisition, which was agreed and finalised in December 2017, will see an increase in the combined group’s capitalisation level and likely push Zachodni into second among EU CEE banks in terms of assets.

Deutsche Bank in Poland reported $9.5bn equivalent of assets at year-end 2016, some of which have not been part of the agreement with Zachodni, which at year-end 2016 reported $35.9bn equivalent of assets.

Bulgarian consolidation?

Apart from the large presence of Polish banks, the ranking also highlights the fragmentation in the Bulgarian banking sector. Accounting for only 5.45% of the pre-tax profits in the region and 4.7% of assets, Bulgaria still registers the second highest number of banks within the ranking. Among the Top 100, 12 banks are from Bulgaria, although one of them is the country’s development bank.

Of the lenders in the country, UniCredit Bulbank is the highest ranked, at 20. The financial institution, owned by Italy’s largest bank, increased its Tier 1 capital by 6.43% on the previous year to $1.34bn, and has more than double the capital of DSK Bank, the next largest Bulgarian institution.

Compared with the last ranking of The Banker’s Top 100 EU CEE banks, profits have increased across all banks by about 38%. Of that, the highest pre-tax profit growth was in Hungary, where the largest bank, OTP, increased its profits by 284%. OTP, the fifth largest bank in the overall ranking by Tier 1 capital, is also among the banks with the highest profit growth in the region (ranked seventh).

Of the other nine Hungarian banks in the ranking, only Takarekbank recorded a loss and one other saw profits drop (Budapest Bank), while three lenders returned to profitability (Erste Bank Hungary, CIB Bank and MKB).

However, the strong financial performance for Hungarian banks was widely related to one-off gains, including a sizeable reversal of loan-loss reserves and a reduced bank levy, according to credit rating agency Moody’s, which expects full-year 2017 profits to be lower.

Foreign dominance

Of the 100 banks in the ranking, 67 are foreign-owned subsidiaries, holding about 67% of the assets and accounting for about 70% of pre-tax profits. Estonia has the highest share of foreign-owned lenders, with all of its three banks in the ranking being subsidiaries of Nordic banking groups.

Within the Baltic region, the market share of DnB Bank subsidiaries will increase in the near term, once the banks’ mergers with the local branches of Nordea have been finalised. As of year-end 2016 data, DnB’s subsidiaries are ranked third in Lithuania, third in Estonia and fourth in Latvia.

ABLV Bank, the Latvian lender named as an institution of “primary money laundering concern” by the US Treasury’s Financial Crimes Enforcement Network in February, would have been ranked 77th among banks in CEE’s EU member states based on its full-year 2016 Tier 1 capital of $249m equivalent. However, with the accusations causing a run on the bank's deposits and the subsequent start of the liquidation process of Latvia’s sixth largest bank by capital, The Banker has omitted it from the ranking.