The Banker Awards 2012 – Central and Eastern Europe

Central and Eastern Europe

Raiffeisen Bank International

Herbert Stepic, chief executive, Raiffeisen Bank

Being a regional player in central and eastern Europe has not been for the faint-hearted since the onset of the financial crisis, and Raiffeisen Bank International has certainly taken its share of knocks. But throughout all the turmoil, the bank has never faltered in its commitment to the region and has even increased its presence with the acquisition of Polbank in Poland.

Gradually the numbers are starting to come right, with return on equity before tax climbing from 13.7% in 2011 to 17.3% in the first half of 2012, delivering profits of E967m in 2011 and increasing core Tier 1 to more than 10%.

Raiffeisen has a presence in 17 central and eastern European markets (in 15 with banks) and is ranked among the top five for lending in 11 of these countries. Chief executive Herbert Stepic says: “We are delighted about winning The Banker’s central and eastern Europe regional award. which reflects our hard work in improving the franchise after the crisis.

“This has involved a complete change in business strategy. We have been trying to compensate for the additional regulatory burden with improved cost-effectiveness, and we have focused on cross-selling to customers rather than just selling one product to a customer. Products have become more standardised and turned into smart assets that can be used more effectively on the balance sheet, including for European Central Bank (ECB) collateral. We are investing in technology to stay a market leader and looking at new ways of offering services such as by franchising.”

The bank filled a significant hole in its regional coverage with the acquisition of Polbank. By combining this with existing operations, Raiffeisen now has a bank that is the sixth largest in Poland and serves more than 900,000 customers.

Raiffeisen has also enhanced its market presence with direct bank Zuno launching in Slovakia in December 2010 and the Czech Republic in July 2011. By June of 2012, Zuno had attracted more than 110,000 customers and more than E600m in deposits across the two markets.

The bank notched up a great performance in this year’s awards, scooping prizes in Albania, Belarus, Bosnia-Herzegovina and Romania as well as its home market of Austria. Raiffeisen Bank International posted the highest profit before tax of any Austrian bank and is naturally proud of its record of being in profit every quarter since its initial public offering back in 2005.

Albania

Raiffeisen Bank Albania

Taking first place in Albania is Raiffeisen Bank Albania, the country’s largest financial institution. Maintaining record growth since the downturn of 2009, the bank boosted its return on equity to 28.17% in 2011, from 23.45% in 2010, the highest in the Albanian banking sector. Meanwhile, net profit was up 33% to €50.54m, while non-performing loans were cut to 4.28%, from 6.13%.

“We saw a decrease in foreign remittances, taking into consideration that they are a good source of income for the families of Albanians working abroad. The economic downturn in Europe, which involved Italy and Greece, affected the Albanian economy as well, as they are the main trading partners for Albania,” says Christian Canacaris, CEO of Raiffeisen Bank Albania.

The past two years have been busy ones for the bank, which cemented its dominant position in Albania’s banking sector, taking close to 39% of all new deposits made into the banking system in 2011, according to Bank of Albania. It also remained a market leader in terms of card issuance, as well as customer access, with more than twice the number of ATMs than its nearest competitor.

New services and products were another key focus, and the bank recently launched an investment fund comprised mainly of government securities, premium banking packages, as well as mobile services and a hi-tech deposits platform. Its support of business customers, particularly entrepreneurs and small businesses was also further improved, and included the launch of agricultural business-specific lending with specialised services and products.

“We will continue to support the economy, from individuals to big corporates. We see a big opportunity in asset management, in which we have started operations, and we will continue to develop new services as we did in the past, such as e-banking, m-banking, mobile payments and so on,” says Mr Canacaris.

Armenia

HSBC Bank Armenia

Explosive growth in 2010 set the scene for another strong year for HSBC Bank Armenia, securing it the title of Armenian Bank of the Year for the second year running. Net profit growth stood at an impressive 44.5% for 2011, and even while Tier 1 capital was boosted by 22.74%, return on capital was still up 23.8%.

“Two-thousand and eleven was an extremely successful year for HSBC Armenia, since the bank registered an all-time high net profit… the highest among all local banks. HSBC is the largest bank in Armenia in terms of deposits and also the largest tax payer of the banking sector in the country,” says Thies Clemenz, chief executive officer at HSBC Bank Armenia.

This strong performance was achieved through the growth of the bank’s corporate loan portfolio, which resulted in higher interest and non-fund income. Revenues from investing in securities and the interbank market were also increased as a result of efficient balance sheet management and well-handled impairment charges. More­over, the bank began to pay dividends to its shareholders - totalling $3m over 2011 – for the first time in a number of years.

Innovations included the introduction of new card insurance services designed to protect ATM and MasterCard international card users from local and international risks, a new secured personal loan, and a suite of services aimed at higher income individuals. Meanwhile, a special proposition for international customers was developed to target groups such as Armenian expatriates who might be willing to invest in the country.

“HSBC’s competitive edge is the high-quality services and positioning as the only truly international bank in the country,” says Mr Clemenz. “In 2013, HSBC is positioned for growth. Our plans include further expansion of the branch network, capitalising on products, focusing on being customer centric, and increasing our lending portfolio and market share of international trade products and deposits.

Azerbaijan

Access Bank

There is success again in Azerbaijan for Access Bank, which took the Bank of the Year in 2011 in the midst of sector-wide losses following plunging real estate prices. It has not been an easy year for Access Bank, however, with net profits for 2011 down by 31% year on year, and a return on equity of 20.2%, compared with 2010’s 35.1%.

Nonetheless, the figures are still both healthy and industry leading. Moreover, the total number of all loans with any arrears of more than 30 days was just 0.76% for 2011, helped by healthy profits, which were re-invested into the bank and allowed it to reduce its loan interest rates by at least 300 basis points.

Meanwhile, the threat posed by the bank’s peers has increased, says Michael Hoffmann, Access Bank’s general manager and chairman of the management board, who describes the bank’s main challenges as “increasing competition in the Azerbaijani banking market, especially in the microfinance and retail business segments”, alongside “maintaining excellent portfolio quality”, both of which it has risen to.

Access Bank specialises in the provision of services to micro and small businesses, as well as low- and middle-income households. It maintains a position as the leading financier of micro and small businesses in the country, and in 2011 extended $391m in financing to 88,000 businesses across Azerbaijan, including more than 30,000 households in the agricultural sector.  

Since the bank’s foundation in 2002, it has extended more than $1.9bn across 420,000 loans, providing significant support to the country’s non-oil businesses. The bank’s profitability also allowed a significant increase in local currency lending, eliminating currency risk for tens of thousands of its borrowers.

This is a strategy which, according to Mr Hoffmann, should provide further growth in the future. 

Belarus

Priorbank

The financial crisis that gripped the Belarusian economy in 2011 did not leave its financial institutions untouched, and prompted a massive outflow of deposits and a practically frozen foreign-exchange market. Ultimately, the banking sector proved remarkably resilient throughout this financial turmoil, and turning in a profit – albeit one down 63% from 2010 – was no small achievement for Priorbank, especially while simultaneously bringing down its cost-to-income ratio and non-performing loans, the latter quite significantly (to 1.85% from 2.96% in 2010).

“Notwithstanding the distressed national economy last year, Priorbank managed to protect its established customer base. Continuous improvement of risk management systems allowed the bank to keep the excellent quality of the loan portfolio. While operating in hyperinflationary economy surroundings, the bank was able to ensure the excellent ratios of profitability and efficiency. In 2011, Priorbank has increased its capital using its own capitalisation sources,” says chairman of the board Sergey Kostyuchenko.  

In fact, Priorbank boasts some of the best levels of profitability and efficiency in the Belarusian market, a fact the bank attributes to a “lean” approach to managing its infrastructure and optimising processes, which has been gradually implemented since 2010. This resulted in initiatives such as the introduction of electronic document flow and a permanent increase in the quality and speed of payment processing thanks to the introduction of straight-through processing technology. This helped to cement Priorbank’s leading position in Belarus’s credit cards market, of which it had a 30.7% share in 2011.

Additionally, the bank continued to improve its provision of electronic banking channels, expanding internet banking services. Cash management tools were also overhauled, including the electronification document flow to improve customer service and simplify the movement of information between different parties.

Bosnia-Herzegovina

Raiffeisen Bank Bosnia-Herzegovina

In Bosnia-Herzegovina, as with just about every central and eastern European market, economic conditions are tough. Nevertheless, in a difficult year, Raiffeisen Bank Bosnia-Herzegovina made strides, outperforming the market and retaining its leading domestic position. Net profits for 2011 were up by an enormous 646.8% after falling consecutively in 2009 and 2010, while return on equity reached 10%, up from 1.6% the previous year.

“We faced many challenges in the past year. First and foremost, like always, was raising the customer service quality to a higher level. Special mention must also be made of optimising the business processes to adapt to the new business environment, then cost optimisation and improving cost efficiency, as well as managing non-performing loans,” says Michael G Müller, chief executive officer at Raiffeisen Bank Bosnia-Herzegovina.

Indeed, the bank, which has a market share of 18.49% and nearly 600,000 customers, made significant efforts in optimising its business and its business network, reducing costs across administrative, risk and refinancing arenas, all of which helped it reach its impressive profit figures.

Raiffeisen Bank Bosnia-Herzegovina also introduced new products created specifically with customer requests and needs in mind.  These included services enabling the acceptance of cards via online points of sale, the first ATM exchange machine in Bosnia-Herzegovina and enabling corporate customers to use the Swift’s ‘Score’ service. Domestic payments processes were also automated, improving speed, accuracy and efficiency.

“As before, we will endeavour to develop products and service quality geared to the needs of our customers,” says Mr Müller.

“This means providing support to the local economy and also offering traditional banking services to private individuals as an inseparable part of our overall business. In this respect, we will focus on new, modern communication channels to bring our services closer to our customers.”

Bulgaria

UniCredit Bulbank

UniCredit Bulbank has repeated its success in Bulgaria from our 2011 awards, even while a European slowdown continues to bite. The bank has improved upon most key indicators from its win in 2011, and outperformed the market as a whole.

Return on equity is up to 12% from 9.3% in 2010, while net profits were up 42.73% year on year in 2011, following 18.49% growth in 2010. Non-performing loans, however, continued to climb.

It was certainly a year where the bank cemented its pre-eminent position in the market, which includes leading positions in assets, deposits, loans, shareholder equity, and corporate and investment banking.

This growth was, in part, impelled by the full realisation of mobile banking as a customer channel, the bank says, as well as by the introduction of a new customer relationship management system designed to improve the quality and efficiency of services and business agility, and in turn ensure sustainable profit increases. Meanwhile, business users saw the roll out of dashboards, web intelligence and mobile tools to improve decision making.

“The most important fact is that UniCredit Bulbank was in a position to show continuous support to its clients,” says Levon Hampartzoumian, CEO and chairman of the management board with UniCredit Bulbank. “A lot of new projects were implemented to make this support even more tangible and valued. We introduced an individual approach to offering small and medium-sized enterprises bank products.”

Risk processes were also overhauled, implementing the Basel II internal rating-based approach for credit risk capital requirements, and gaining approval to use an improved approach for calculation of its capital requirements for operational risk.

“We are prepared to invest in the development of the electronic channels for the distribution of products and services, and to continue the development of our employees in order to increase customer satisfaction,” says Mr Hampartzoumian.

Croatia

Privredna Banka Zagreb

Despite another extremely tough year, Privredna Banka Zagreb (PBZ), part of Italy’s Intesa Sanpaolo Group, had retained its title of Bank of the Year for Croatia. The year 2011 was a challenging one for the Croatian economy in general, and the financial sector specifically. Nevertheless, PBZ increased its consolidated net profits by 24%, and boosted return on equity, and interest income somewhat, while lowering its cost-to-income ratio.

“Our achievements demonstrate the strength of our retail-focused business mix, as well as the unique client-driven model of our large corporate and small and medium-sized enterprise banking areas,” says Božo Prka, CEO and president of PBZ’s management board.

“Our business strategy, combined with the efficient management of interest expenses, allowed us to outperform despite flat economic growth and a tightened regulatory framework. PBZ continued its leading role in introducing new technologies, developing new banking products and services and offering a diverse range of specialised services.”

The bank’s solid results were in part a result of an emphasis on core banking operations, strengthening its capital and securing stable liquidity resources in reducing funding costs. Another concentration was on technology and developing new banking products and services. PBZ is the first bank in the central and eastern Europe region to gain certification for internet banking to ISO 27001 standard, and 80% of the group’s transactions are now carried out electronically through electronic banking channels.

“PBZ Group’s focus is to remain close to our clients, effectively manage our risks, and maintain this strategic momentum by capitalising on our sound balance sheet while adhering to core banking activities at favourable prices,” says Mr Prka. “We remain committed to our top priority, customer satisfaction, with the aim of strengthening it as much as possible.”

Czech Republic

Ceska Sporitelna

The woes which have befallen many financial institutions in central and eastern Europe following the onset of the eurozone crisis have not bitten quite as hard in the Czech Republic’s banking sector. After all, the country’s banks had suffered through their own crisis in the late-1990s, learnt their lessons, and adjusted accordingly to a less risky business model.

That said, not all has been rosy, and the country, and its financial sector, suffered as demand for its exports fell, and in response consumers and businesses alike considered their outgoings more carefully and were more reluctant to borrow.  

In this comparatively stable environment, Ceska sporitelna posted impressive results, netting it The Banker’s 2012 award for Bank of the Year in the Czech Republic. After slumping in 2010, net profits were up 13.2% year on year for 2011, and Tier 1 capital was boosted by 11.5%. Meanwhile, return on equity sat at a healthy 18.2% and non-performing loans were cut from 4.5% to 3.8%.

Despite relatively slight economic growth, Ceska sporitelna managed to boost deposits and maintain its leading position in the Czech retail banking market, partly, the bank says, as a result of increased focus on its customer base.

The bank has focused particularly on accessibility through alternative banking channels; 2011 saw the launch of a mobile branch to provide all of the bank’s standard services and products to clients during the renovation of existing branches, while a branch on wheels was unveiled earlier this year.

New technology has been prioritised too. The bank introduced contactless cards and terminals to the Czech Republic earlier this year, while the number of clients using its online personal and business direct banking portals has continued to grow, reaching 1.44 million active users by June 2012.

Away from consumer banking, it also successfully arranged a Kcs5bn ($251m) issue of municipal bonds for the city of Prague – one of the largest domestic bond transactions in recent years.

Estonia

SEB Pank

After capitalising on Estonia’s recovery from the grave effects wrought by the financial crisis last year with a strong return to profit in 2010, SEB Pank has had another 12 months of sturdy growth, making it the deserved winner of Bank of the Year in Estonia.

Net profits for 2011 were up 80% year on year, and Tier 1 capital was boosted by 18.57%. Meanwhile, return on equity climbed to 16.88% in 2011 from 10.81% the previous year, and cost-to-income ratios were down to 45.1% from 49.1%.

Non-performing loans were cut to 2.25% from 3.51% over the same period.

This growth was, the bank says, in part a result of Estonia’s introduction of the euro at the beginning of 2011, which increased economic activity significantly and made it easier for local companies to do business abroad, and for foreign firms to set up shop locally. SEB partnered with both domestic exporters and foreign businesses entering the country, boosting the number of exporting enterprises in its client base by almost a quarter, and of foreign firms by nearly one-third year on year.

Some of this progress is a result of preparation and planning made during the recession years of 2009 and 2010. For example, to avoid mass redundancies, SEB instead chose to enter into a large-scale educational programme to focus more on customer needs.

As a result, products and services for private and business clients were improved, while raising cost-efficiency has been a particular concentration of late. The ensuing innovations included the development of dedicated advisory tools for private and business client financial assessment.

Electronic and mobile banking services have also been significantly improved over the past 18 months, including a new mobile bank for private and business clientele. Specialised apps for smartphones have also proven popular, and mobile banking users’ numbers are doubling every three months, the bank says.

Georgia

Bank of Georgia

It has been a good year for Bank of Georgia. In 2011, it recorded a 62% increase in net profits year on year, and boosted revenues by 29%. Meanwhile, Tier 1 capital was up 234%, and non-performing loans were cut to 11.6% from 22.5% in 2010. It also dramatically outpaced sector averages on a number of indicators, recording consolidated asset growth of 38.1%, loan book growth of 105.1%, and client balances and deposits growth of 65.1% versus national averages of 20%, 27% and 22.9%, respectively.

“Bank of Georgia has been one of the exemplary success stories across the emerging markets universe since the listing of its global depositary receipts on the London Stock Exchange in 2006. However, one of the major challenges that we faced was relatively low stock liquidity and the need to diversify shareholder base,” says CEO Irakli Gilauri.

In 2011, the bank began to sell shares to third-party investors and completed a rights issue in the latter part of the year, with Liberty Capital investing La16.5m ($9.91m) and minority shareholders investing La1.1m. As a result of these capital raising efforts, the bank’s capital adequacy ratio increased to 15.4% as of December 31, 2011.

A number of new products were introduced throughout the year, including a micro-lending portfolio for the small and medium-sized enterprise market in April 2011, which has increased by 113% in the first half of this year alone. The bank also continued to expand and modernise its branch network, opening 13 new, and renovating four existing branches, throughout 2011. It also increased the number of mobile branches to reach customers in remote or sparsely populated locations to 96.

“We plan to focus on the growing the Georgian market, to continue delivering solid profitability and efficiency metrics and diversify revenue sources by concentrating on the growth of retail banking, corporate banking, core businesses, as well as non-interest income generating businesses,” says Mr Gilauri.

Hungary

OTP Bank

It has been a particularly tough time for Hungarian banks. After a sizeable one-off bank tax in 2010 and soaring non-performing loan rates, the sector has had more than its fair share of challenges. Last year was not much better; nevertheless, OTP Bank has navigated these stormy waters more astutely than many of its competitors. Net profits may have been down 29.5%, but crucially the bank did remain in profit, while Tier 1 capital and assets were both boosted

“OTP Bank is one of the few banks regionally and even globally to remain profitable since the onset of the financial crisis. Our capital strength in 2011 remained one of the strongest in Europe, coupled with a robust liquidity position. Supported by those excellent fundamentals, we even managed to improve our position in core markets,” says OTP Bank’s chairman and CEO, Sándor Csányi.

This was, in part, achieved by concentration on a number of projects designed to improve efficiency and boost customer satisfaction. These included the development of OTP’s internet banking service – making it more customisable after overhauling the interface – a significant reduction in the time needed for the disbursement of mortgage loans, and the optimisation of numerous back-office and IT processes.

Business banking remained a focus too. Following the establishment of an agriculture and small and medium-sized enterprise (SME) financing division, the bank’s corporate lending activity remained relatively strong, and it managed to improve market share up to 9.5% in the first quarter of 2012 from 8.8% in the final quarter of 2010, despite a general retraction. Its SME loan portfolio expanded by 18% year on year in 2011.

“If authorities do not over-regulate markets, a more balanced loan demand is likely to return and the central and eastern Europe region is obviously going to be a place worth being active in,” says Mr Csányi.

Kosovo

ProCredit Bank

ProCredit Bank confirmed its position as Kosovo’s leading financial institution despite a difficult year. Net profits, while down 15.71% year on year, remain healthy, while return on equity is a solid 23.45%. Non-performing loans are at 2.5% – low for the region – in part as a result of its lending operations employing stringent criteria in its focus market of financing small and medium-sized enterprises (SMEs). Client numbers and its branch and ATM network have also been extended.

“ProCredit Bank has maintained its growth and qualitative portfolios of lending and deposits, despite uncertainty in the eurozone and the challenges facing Kosovo’s economy. We have put in additional effort to expand our contribution to the economic development of Kosovo by providing tailored banking services to the core pillar of Kosovo’s economy – very small, small and medium-sized enterprises,” says Ilir Aliu, ProCredit’s CEO.

Technology has been a particular focus in recent months, helping to ensure the provision of services to customers.

Innovations included the introduction of an SMS service that allows clients to top up their mobile phone credit or digital TV package via accounts they hold with a telecom operator. Clients can also check account balances by text message. Internet banking provisions were improved too, while ATM cash recyclers were installed in all of ProCredit’s branches.  

Business banking operations, meanwhile, have been focused on SMEs to aid in job creation and support local economic development. “With good financial results in 2012, ProCredit Bank has shown how it is possible to be commercially successful while maintaining a clear development focus,” says Mr Aliu. “Our good financial results, innovative practices and qualitative services have been performed through our responsible banking model. This has been a meaningful one in the field of environmental protection as well, as we made big steps towards being Kosovo’s green-oriented bank.”

Latvia

SEB Bank Latvia

The Latvian economy began to recover strongly in 2011, and after an exceptionally tough couple of years, so did SEB Bank Latvia, boasting a 945% increase in net profits and a 28% improvement in Tier 1 capital for 2011. Meanwhile, return on equity was up 23.1% year on year, and cost-to-income and non-performing loan ratios were both reigned in.  

“No matter which economical cycle we go through, SEB in Latvia has always strived for excellence in providing services and advice as a relationship bank for its customers. To deliver the best service, to have good availability from a customer service point of view and increased governance requirements and capital markets’ development were and still are the main challenges,” says Ainars Ozols, CEO of SEB Bank Latvia

This progress has continued into 2012, with the total amount of deposits up 9% year on year as of June. Meanwhile, the value of newly issued loans was up 69% over the same period, with three-quarters of these going to companies. Efficiency was also improved, partly by leveraging SEB Group’s shared operations, resources and experience across the Baltic countries.

Technology provisions were boosted too, both for internal operations – such as electronic invoicing and improved customer service modelling – and customer tools such as mobile banking applications, improved internet banking, and a financial advisory tool for entrepreneurs, which models their company’s financial performance, identifies possible risks and forecasts future developments. Meanwhile, to improve physical availability to customers, the bank also opened two branches with extended working hours.

“Our aim is to continue the path of implementing our home bank strategy as well as focusing on developing e-channels. A couple of e-channel-related solutions are being developed at the moment, and I hope we will be able to deliver them starting from the beginning of next year,” says Mr Ozols.

Lithuania

SEB Bank Lithuania

In Lithuania, as with most central and eastern European countries, the upheaval in the eurozone has not been without effect. Nevertheless, the Lithuanian economy has proven to be relatively resilient to these external pressures, allowing SEB Bank Lithuania to continue to develop its banking business after a harrowing couple of years. Last year saw the bank earn a net profit of €110m, a significant turnaround from a net loss of €3.5m in 2010. Meanwhile, return on equity reached 21.9% and non-performing loan ratios were improved.

“Our long-term customer relations strategy enabled us to maintain a high level of customer trust, which led to a significant increase in our deposit portfolio. Our income grew and the bank’s credit portfolio remained the largest in the market, while credit portfolio quality further improved,” says Raimondas Kvedaras, CEO of SEB Bank Lithuania.

The bank has focused particularly on operational efficiency and cost control recently, improving processes and launching new services. In 2011, for example, it began to deliver debit cards by post to free up time for branch workers. It also upgraded its mobile banking services to speed customer migration towards more cost-effective channels. This resulted in a threefold increase in the number of log-ins to the bank’s mobile platform in the first half of 2012 when compared with the same period in 2011.

Self-service channels were also enhanced, allowing staff to focus on advisory duties. The small and medium-sized enterprise segment has been a priority for SEB too, particularly when it comes to client advisory; the bank helps its clients analyse their business and developing future business scenarios in order to improve decision making.

“As a long-term customer relationship bank we will continue to offer modern universal and self-service-oriented banking services,” says Mr Kvedaras. “Even though the uncertainty related to the eurozone remains, we are noticing slightly more demand from both companies and private individuals.”

Macedonia

Komercijalna Banka

Economic conditions took a turn for the worse in Macedonia over the past 12 months, and even Komercijalna Banka, once again named Bank of the Year for Macedonia, felt the effects. However, while its profitability declined by 24% in comparison with 2010, it still finished 2011 with a net profit of MKD1.09m ($22.8m), the highest in the Macedonian banking sector, and in itself a 45% share of the total profits earned by the country’s leading banks. Meanwhile, assets were boosted by 13.2% and customer loans were up 5.2%, supported by a 12.3% growth of deposits and 19% growth of capital and reserves.

“The main challenges for Komercijalna Banka in the past year were successful capitalisation for ensuring additional growth and coping with the deterioration of the domestic economy due to perpetuation of the EU crisis, resulting in a decline of external demand for Macedonian goods, a drop in industrial production and slowdown in gross domestic product growth,” says Hari Kostov, chief executive manager of Komercijalna Banka.

Komercijalna Banka has concentrated on modernising and remodelling its city branches over the past 12 months, as well as on expanding its ATM and point-of-sale networks. It has also introduced a number of products and services, including new cards and loan types. Technology has been a priority too; online banking functionality has been improved to encompass invoice payment, foreign exchange purchases, e-mail notifications and detailed order overviews. It also brought to fruition a project aimed at issuing bid bonds electronically.

“The bank’s objectives in the forthcoming period will be preserving the stability of its portfolio and deposit base in circumstances of prevailing economic crisis and strengthening its capacity for managing risks that will meet the new regulatory requirements,” says Mr Kostov. “Opportunities arise from further improvements and the modernisation of operations and spreading the branch network.”

Moldova

Agroindbank

The Moldovan banking sector remains relatively undeveloped. Regional bodies have called for an improved regulatory framework and encouraged banks to boost governance standards to avoid accumulating macroeconomic weaknesses. Meanwhile, profits and asset quality are generally low.

Nevertheless, Agroindbank, Moldova’s largest commercial institution, has continued to record exceptionally strong growth. Net profits were up 101% year on year for 2011, even after an increase of 180% in 2010. Assets and Tier 1 capital were both up 111%. The bank also posted a return on equity of 16.3%, and while its cost-to-income ratio was up slightly, non-performing loans were down to a healthy 0.9% in 2011, from 3.4% in 2010.

In a difficult economic context, Agroindbank concentrated on adapting to new market conditions and the development of new products. Its risk management capabilities were strengthened on loan, market, counterparty and operational levels with the introduction of new methodologies and instruments, while loan portfolio quality, cost supervision and the optimisation of business processes was also the subject of renewed focus.

Electronic channels were another priority, and an area in which the bank invested heavily to develop new systems to boost productivity and customer service standards. These included a ‘virtual card’, projects to enable e-commerce and e-learning, and the provision of services across multiple channels, including online, mobile, text, cash machine and telephone.

The bank also continued to diversify and adjust its products and services, introducing a service aimed at Moldovan expatriates, which includes loans for real estate, business development and a range of other services.

Small and medium-sized enterprises (SMEs), which make up 97.5% of registered Moldovan companies and employ 57.7% of the working populace, have been a continued concentration. The bank now holds a market share in this segment of about 26%, which also accounts for nearly 24% of its loan portfolio.

Montenegro

Societe Generale Banka Montenegro

Montenegro’s small, open economy has been particularly susceptible to the outside influence of the eurozone’s woes, and growth remains stagnant. Nevertheless, after a net loss in 2009 and only just remaining in the black in the following year, Societe Generale Banka Montenegro had a strong 2011, posting a 67% increase in net profits, and a 20.8% increase in Tier 1 capital. Its cost-to-income ratio was slashed by more than 20%.

“In the complex macroeconomic environment which characterised the Montenegrin economy in 2012, the main challenges for our bank were to obtain planned growth of the loan portfolio in all segments of the economy while gross domestic product growth was close to zero; to maintain a level of non-performing loans lower than 5% in a market which averages 17% for bad loans; and to finalise a big investment and transformation we started a few years ago by rebranding and inaugurating a new modern head office, without jeopardising our good net results at the same time,” says Branka Pavlovic, CEO of Societe Generale Banka Montenegro.
The investment in a new head office and the subsequent centralisation of the bank’s departments has boosted its day-to-day efficiency. It has also scaled up its market participation, boosting both retail and small and medium-sized enterprise (SME) clients, which, alongside tackling late loans, has boosted interest income. Deposits, too, have increased significantly, while new products were also introduced.
SMEs were also a continued priority for the bank, which has an agreement with the European Bank for Reconstruction and Development to provide such companies with funds for further development of their businesses. It also launched a new loan with favourable terms for this market segment.
“Our plan is to maintain the sustainable growth of our business in Montenegro, and at the same time to improve the quality of our services,” says Ms Pavlovic.

Poland

Bank Zachodni WBK

Spillover from the eurozone crisis has not made 2011 an easy year for Poland. Nevertheless, Bank Zachodni’s path of sustainable growth has continued to bear fruit. Net profits were up 17.9% year on year for 2011, its return-on-equity ratio rose to 21.2%, from 17.3% in 2010, and its cost-to-income and non-performing loan ratios were both down from 2010 figures.

“In the past year, Bank Zachodni has been continuing its policy based on two pillars: maximising growth and strengthening financial foundations. We achieved exceptional results in many business segments, such as lending to small and medium-sized enterprises, continuing to diversify revenue and remaining one of the safest institutions in the Polish banking sector,” says Bank Zachodni CEO Mateusz Morawiecki.

Over the past 12 months, the bank has focused on limiting the length of its decision-making processes and facilitating access to its services with the aim of improving customer satisfaction in the intensely competitive Polish banking sector. A key part of this has been the introduction of innovative services such as an account offered in association with local telecoms firm Plus GSM, an ‘electronic wallet’ application, and many other mobile financial products.

Online services were also expanded in the business sphere, including an internet platform that provides companies with faster and easier access to their bank accounts, as well as the ability for some business customers to buy selected banking products online.

Momentum should be further bolstered by an upcoming merger with mid-sized Kredyt Bank, creating cost synergies and increasing market penetration and incomes.

“We are awaiting the Polish regulator’s decision on the merger,” says Mr Morawiecki. “If positive, our main target in the coming year will be to execute it as best as we can. Concerning business plans, we see great potential in financing Poland’s development. We are very interested in infrastructure and energy (for example, shale gas) projects.”

Romania

Raiffeisen Romania

After two years of severe recession, Romania’s gross domestic product, which fell by 1.6% in 2010, recovered to 2.5% growth in 2011. Recovery now appears to have slowed, however, and the figure is forecast to fall below 1% by the end of this year. Meanwhile, exports continue to underperform, and industrial and farming output remains low.

Despite this, Romania’s banking sector has remained remarkably resilient. There were no defaults, bankruptcies or bailouts for the entirety of the crisis, and most markers are now positive, with the exception of non-performing loans, which stand at 17.6% of the country’s total loan portfolio.

In these mixed economic circumstances, Raiffeisen Romania put in a strong performance, making it a deserved winner of 2012’s award for Bank of the Year in Romania. Last year’s net profit was up 15.9% on 2010, while return on equity was a solid 17.4%. Perhaps most importantly, the bank’s non-performing loan ratio stood at 6.4% in 2011, down from 7.6% 12 months earlier, and less than half of the sector average.

The bank also recorded a large increase in customer numbers, which were up 31% in 2010, and in transaction volumes, which doubled for individuals. Access via electronic channels also increased significantly.

Last year also saw the introduction of a strategy designed to reduce overall operating costs, increase profitability and give Raiffeisen Romania an edge over its competition. It has focused on optimising operating system processes, management infrastructure, and a customer-centric operating model. This is expected to improve the bank’s cost-to-income ratio.

The bank’s risk management policies were also overhauled in response to market conditions. Customer portfolios are now reviewed far more frequently in order to identify potentially problematic loans and offer customers advice and solutions in response.

Russia

Sberbank

Even in the midst of global volatility and a world economy which has been as challenging as ever, 2011 was still a record year for Sberbank. This year’s Bank of the Year in Russia, Sberbank posted a net profit of Rbs316bn ($12.29bn), up 76.6% from 2010, and an all-time high for the lender. At the same time, return on equity reached 28%, and total assets were up 25.6% year on year to just shy of Rbs11,000bn. Meanwhile, Tier 1 capital adequacy was well above the required minimum at 11.6%, and non-performing loans were slashed from 7.3% in 2010 to 4.9%.

“Clearly the continued global volatility and market uncertainty were great challenges for all major international companies, especially banks,” says Herman Gref, chairman of the management board and CEO of Sberbank. “Despite this we have continued to grow our business both in Russia and internationally and enjoyed a successful secondary public offering in London,” he says. “That Sberbank enjoyed such a strong year against the challenging global environment is testament to both our resilience and our potential.”

Innovations included the full rollout of Sberbank’s ‘Loan Factory’ platform, which increased lending process efficiency and service quality for consumer, car and mortgage lending programmes without impairing the quality of its loan portfolio. In 2011, more than 4 million loans worth Rbs690bn were extended through the platform. The bank also opened Europe’s largest data centre.

A service for online tax payment was launched too, while a process of branch network modernisation was embarked upon to help engage with new customers.  

“The development of customer relationships is a key factor in achieving success in the market. The slogan of Sberbank is ‘by your side’, and we are continuously looking to improve the quality of our products and services,” says Mr Gref. “Next year we plan to expand the range of financial products offered to our corporate and retail customers.”

Serbia

Intesa Bank Beograd

The escalation of the eurozone debt crisis has made macroeconomic conditions in Serbia increasingly difficult. Nevertheless, Intesa Bank Beograd proved extremely resilient, recording a stable performance and positive movement across most major markers. Net profits improved by 25.9% year on year in 2011, while Tier 1 capital was boosted by 40.6% and assets were up 9.22%, earning the bank this award for the sixth consecutive year.

“Demonstrating resilience [in the face of] overall business and economic deterioration, we recorded a steady performance and further consolidated operations, thus ensuring our current market position,” says Draginja Djuric, president of Intesa Bank Beograd’s executive board. “We kept non-performing loans below industry averages and improved efficiency while at the same time tapping into new retail market segments.”

This drive for strict cost controls and improved efficiency and productivity allowed the bank to cut its cost-to-income ratio to 43.9%, from 46.3% in 2010. It also improved existing products and services and introduced a number of new ones. These included new electronic banking services to improve customer access. New payment cards were also launched. Similarly, the bank focused on providing a more personalised approach to its high-net-worth clients, while at the same time introducing services aimed at Serbia’s unbanked population, especially the elderly.  

Despite the unfavourable market conditions, Intesa Bank Beograd remained committed to the small and medium-sized enterprise (SME) segment, which accounts for more than 90% of the Serbian economy and employs two-thirds of the country’s working population. The bank provided SMEs with €1bn-worth of loans in 2011.

“As market volatility is certainly going to persist in the coming year, we intend to continue providing long-term contributions to the economic recovery and a reliable partnership for our clients,” says Ms Djuric.

Slovakia

Slovenská sporitel’na

Despite being highly reliant on exports, Slovakia has been one of the fastest growing economies in the eurozone for some time. Even in 2011, a tough year for many, it only slipped into second place in the eurozone in terms of economic growth, and it looks set to return to the top spot this year. Amid this environment, Slovenská sporitel’na posted strong results, including a 37% year-on-year increase in net profits in 2011, and 20.75% return on equity, up from 17.33% in 2010. Non-performing loan and cost-to-income ratios were also down marginally.

“The biggest challenge for Slovenská sporitel’na during the past year was to strengthen growth and maintain efficiency and profitability in a tough competitive environment that is negatively influenced by the financial crisis in Europe, new regulations and special taxes in Slovakia. I believe that we succeeded in facing all these challenges,” says Jozef Síkela, Slovenská sporitel’na CEO. “We continue to be one of the leading banks in Slovakia.”

The bank has recently introduced a number of technological and service innovations, including a new core information system and overhaul of back-office infrastructure, which allows a more flexible approach to designing new products, as well shortening time-to-market significantly. The bank’s retail customers now have the ability to scan bar codes and subsequently pay postal orders via a smartphone app, and will also have the option of electronic invoicing.

It also brought a number of new products to market, including long-term, fixed-rate housing loans and contactless cards.
“We will make every effort to ensure that our prudent business strategy will continue to create profit, with our bank remaining the most successful financial provider on the market, and an important pillar of the Slovak economy,” says Mr Síkela. “We will finance households and companies, and reasonably manage and appreciate their funds.”

Slovenia

SKB Banka

Economic conditions are not getting any easier in Slovenia. In the roaring pre-crisis years, many of the country’s largest banks got themselves into sticky situations, leading to soaring non-performing loan ratios. Last year’s winner, SKB Banka, has not had it easy either, but for the second year in a row the bank has posted the country’s strongest financial results.

After recording a large rise last year, net profits are down 10%, but remain solid. Meanwhile, return on equity is down slightly, but so is the bank’s cost-to-income ratio. Tier 1 capital, on the other hand, is up 9.6%.

“To constantly improve the quality of our banking products and services… is our main challenge,” says Gérald Lacaze, chief executive officer at SKB. “In doing so, we have been able to partially avoid the consequences of a difficult economic environment while increasing our market shares. SKB remains profitable and maintains a very strong Tier 1 capital base.”

One of the reasons for the bank’s solid growth is a conservative risk management strategy, which limits involvement in and exposure to real estate lending, trading operations and management buyout loans. It also managed to increase both corporate accounts and clients, alongside the volume of loans to individuals and corporations, while increasing deposit volumes. This was achieved by a customer-centric policy which included innovations such as new card services, loans at point-of-sale merchants, investment and savings products and a general overhaul of electronic banking services.

“Despite the challenging economic situation in Slovenia we confirmed our growth strategy. We stabilised our overhead expenses, maintained a reasonably sound risk policy, managed to attract new clients, individuals and corporates with quality, tailor-made products and services, and we opened new and renovated old outlets and consequently increased our market shares,” says Mr Lacaze.

Ukraine

PrivatBank

It has been a good year for PrivatBank, and one in which it further increased its position as the leading bank in Ukraine, while even foreign-owned institutions in the country suffered. It recorded a year-on-year increase in net profits of 3.68%, while boosting Tier 1 capital by 36.5% and cutting its cost-to-income ratio significantly. At the same time, the bank, which already counts more than half of Ukraine’s population as its clients, recorded a 16% increase in total customer numbers, including a 40% increase among corporates and entrepreneurs.

“Overall it was a strong year, and we continued to grow. On the one hand, it was tough since we have had all this volatility in international markets, and as a result we didn’t have access to international financing, making it more difficult for us to do business. On the other hand, because the larger banks in Ukraine are mostly European and are busy with European problems, things were in some ways easier for us, and we were pretty much the only big Ukrainian bank to gain market share,” says Alexander Dubilet, PrivatBank’s CEO.

Non-performing loan ratios were also cut significantly, from 7.31% in 2010 to 4.29% in 2011, partly as a result of a number of credit risk management innovations such as a centralised automated technology system that automated and quickened loan approval times and allowed better control over risk appetite.

Technology has been a huge focus for PrivatBank, with new services including the ability to withdraw cash from an ATM without a card, and contactless payments provisions. Business banking is another priority, with services such as current account credit facilities for small businesses, the ability to transform a smartphone into a point-of-sale terminal and fully fledged mobile and online banking platforms.

“We have lots of plans. First of all, to develop ourselves further as a transaction bank, so that more and more of our business is not just about taking deposits and giving credit, but about all varieties of payments,” says Mr Dubilet. “Another goal is to introduce a 24/7 service model for corporate clients, so that any payment, or any transaction you can imagine, is performed immediately and instantly.”