Much has been written about the shift in the balance of global financial muscle away from the ailing eurozone and US toward the likes of China and Brazil. But even within the EU itself, the same trends are discernible.

Raiffeisen Bank International (RBI) announced in February 2011 that it will pay about €490m to acquire 70% of Polbank, the Polish branch (actually 300 branches without a full subsidiary licence) of Greece’s EFG Eurobank. While Raiffeisen may be headquartered in Vienna, the bank earns most of its profits in the central and eastern Europe (CEE) region. The importance of that region for its business model was confirmed by merging the former Raiffeisen International with the Austrian corporate and investment banking activities of Raiffeisen Zentralbank last year to create RBI – effectively a single entity to operate all the group’s activities except those tied directly to the network of Raiffeisen savings banks in Austria.

This deal comes on the heels of Santander’s €3bn purchase of Bank Zachodni WBK from Ireland’s distressed Allied Irish Bank. Meanwhile, Unicredit’s new CEO, Federico Ghizzoni, appointed last October, was previously the head of the group’s CEE operations coordinated via its subsidiary Bank Austria.

It is all a far cry from 2009, when US academic Paul Krugman satirised Vienna as “Iceland on the Danube”, claiming that the exposure of Austrian banks to the CEE region was about to destroy them. Instead, the big three players in Vienna – Bank Austria, Raiffeisen and Erste Bank – all stayed in profit, thanks in large measure to good earnings in most of their CEE markets. Today, eurozone banks are surging to diversify exposure toward the CEE region, as Iceland turns out to be closer to Dublin or Athens than it is to Vienna.

But it may not be so easy for individual eurozone banks to shift geography, as Poland clearly demonstrates. The more traditional banking models of CEE markets ensured that local banks had little exposure to toxic securitised assets originated in the US. And the healthier economic growth rate in Poland means profitable Polish banks have little need for foreign capital injections from Western European banks with potentially weaker balance sheets.

In fact, things are moving in the opposite direction. Getin Noble Bank, listed in Warsaw with a strategic stake held by Polish billionaire Lezcek Czarnecki, has already swallowed the local operations of GMAC Bank and Allianz Bank. The Polish branch of deeply troubled WestLB was acquired by a consortium consisting of a Polish private equity fund and a Warsaw brokerage house. The country’s largest bank, PKO Bank Polski, has a BIS capital adequacy ratio of almost 13%. The bank lost out in the bidding for BZ WBK, but is still very much on the acquisition path with plenty of financial firepower at its disposal. Eurozone banks in the CEE are more likely to be sellers than buyers right now.

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