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Russia leads CEE capital surge

The Tier 1 capital of the 25 largest central and eastern European banks climbed by 30% in this year's ranking, led by Russia's largest bank Sberbank. Meanwhile, consumer banking operations across the region are prominent among the most profitable and the fastest growing banks in the region.
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Top 25: Central & Eastern Europe, highest movers: CEE

Russia has long dominated the upper echelons of banking in central and eastern Europe (CEE) by size, but this year it is also a leader in terms of performance. Four out of the top five banks in the region by return on equity are Russian, as are six of the top 10 fastest movers by change in Tier 1 capital.

The total capital of the largest 25 banks in the region surged by almost 30%, mainly thanks to a 38% rise in capital at the largest CEE bank, Russia’s Sberbank. This also makes Sberbank one of the fastest movers, and the increase is driven purely by organically created capital from previous retained earnings. No surprise to find that Sberbank also recorded the second-highest return on capital, at almost 40%.

The best return on capital in the region is earned by another Russian bank with a retail speciality, credit card lender Russian Standard Bank. However, this bank slipped out of the top 25 by Tier 1 capital, despite an increase of more than 11% in its Tier 1. Also leaving the list is Bank of Khanty-Mansiysk, which was bought by Russia’s Nomos bank and so becomes a domestically owned subsidiary. The two new entrants to the top 25 are Russian regional bank Ak Bars, which did not submit data on time last year, and another Russian bank, Zenit, which increased its capital by more than 20%.

Capital increases for state-owned banks are a noticeable theme among this year’s fastest movers, with Russia’s Gazprombank and Serbia’s Komercijalna Banka both receiving government-backed cash injections during 2012. Polish public lending bank Gospodarstwa Krajowego also raised a significant sum by selling its stake in PKO Bank Polski, the country’s largest bank.

However, there are plenty of private-sector success stories as well. In Russia, consumer lender Orient Express and small business specialist Credit Bank of Moscow are on the fastest movers list for the third year running, as they sustain their expansion in the most dynamic segments of Russian banking. Bank of Georgia is also a fastest mover for the second year in a row, following a secondary share offering in London that increased its capital by more than 40%.

The success of consumer banking across the region is a major theme in Russia and beyond. Two of the top five banks for return on capital, Russian Standard and Kazakhstan’s Kaspi Bank, specialise in this area, while rapid expansion into consumer lending has boosted the profits of Sberbank and Alfa Bank as well. Poland’s Getin Noble, which climbed three places in the CEE region to 17, is another consumer lending specialist.

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