Having strengthened balance sheets prior to the pandemic, central and eastern Europe’s banks have weathered the storm well.
Thanks to effective policy interventions by regional governments, central and eastern Europe’s (CEE’s) economies endured the worst of the Covid-19 pandemic relatively well. Apex banks and finance ministries alike stepped up to offer a suite of measures to support households and businesses across the region, minimising the pain of the dip while assisting with a swift recovery. The extent of this support reflects the policy space available to decision-makers after years of generally prudent fiscal and monetary oversight of national economies.
The Banker’s Top 100 CEE Banks ranking clearly demonstrates the effects of this support, as well as the hard work put in by most regional banks to strengthen their balance sheets in recent times. The result of these efforts is that CEE banks boasted robust capital and liquidity positions at the outset of the pandemic, and were in a much better position to deal with the ensuing health and economic crisis. Indeed, over the 2020 review period, only seven of the top 100 banks registered a year-on-year decrease to their Tier 1 capital positions. Though the picture is clearly less rosy in terms of banks’ profitability, by most soundness indicators CEE banks have much to be pleased with.
Banks from Poland and the Czech Republic dominate the top 10 lenders by Tier 1 capital
Banks from Poland and the Czech Republic dominate the top 10 lenders by Tier 1 capital in the main ranking, with the Polish banks taking five places and their Czech counterparts securing four. Hungary’s OTP Bank is the sole outlier in this cohort. Small changes among the top 10 banks occurred, though they mostly reflect marginal gains in Tier 1 capital among closely positioned competitors. Poland’s Bank Pekao, for instance, secures sixth position in the 2021 ranking, down from fourth in the 2020 edition, despite increasing its Tier 1 capital by more than 15% over the review period. The reasons for this change in position are that its compatriot lender, Bank Gospodarstwa Krajowego, and Czech bank, Česká spořitelna, saw their Tier 1 capital rise by 32.7% and 23.6%, respectively.
We applied our best-performing bank methodology to the largest bank holding companies in the Czech Republic, Hungary, Poland, Romania and Slovenia. In the Czech Republic, the best-performing bank, Česká exportní banka, achieves an overall score of 7.17. This was easily above its nearest in-country competitors. Indeed, the lender dominates most of the performance categories, including soundness, leverage, return on risk, asset quality and profitability. J&T Banka and PPF Bank, achieve second and third place with scores of 5.4 and 5.38, while Fia Bank and Moneta Money Bank round out the table.
Although several challenges continue to beset Slovenia’s banking sector, the performance of its leading lenders marks a notable turnaround from the difficult years the system endured in the aftermath of the financial crisis. Nova Kreditna Banka Maribor comes out on top among its peers, with a score of 6.39, while Nova Ljubljanska Banka comes in a close second with a score of 6.04.
In Hungary, OTP Bank is crowned the best-performing lender, with a score of 5.49. This is underpinned by its leading positions in the profitability, return on risk, soundness and leverage metrics. With consolidation among several CEE banking markets well and truly underway, off the back of the exit of large international banking groups from key markets, including Hungary, OTP Bank has announced plans to pursue inorganic growth opportunities in its home market. As such, the coming years could see the lender cement its position in the top spot even further.
Most Polish lenders performed relatively well in the 2021 ranking. The best-performing bank is Bank Gospodarstwa Krajowego with a score of 6.13, which also secures first place in terms of its growth, operational efficiency and liquidity metrics. Bank Pekao, meanwhile, achieves second position in the country based on its performance score of 5.46. Though the lender is the best in the country in terms of its soundness and leverage indicators, it does less well when it comes to its operational efficiency score. Nevertheless, the bank is pushing ahead with ambitious digitalisation and efficiency goals in the coming years, which should see this metric improve before long.
Romania’s best-performing bank is Exim Bank, with a score of 5.99. This is helped by the lender’s table-topping performance in its growth, profitability and return on risk measures. In second position is Banca Transilvania with a score of 5.87, while CEC Bank comes in a close third with a score of 5.82.
The Banker’s 2021 Top 100 CEE Banks ranking clearly shows that region’s banking sectors have absorbed the initial and hardest blow of a global health crisis relatively well. Though difficulties remain, not least in terms of likely asset quality pressures over the next 12 months, most lenders are in a good position to deal with these. As the region looks to emerge from the worst of the pandemic, its economic outlook is brightening. Over time, this should push most banks back on to the path of profitability.
