Solid performance of CE/SEE banking sectors has once again got analysts' pens flying. It was basic consensus that the earnings peak had been passed 2023, yet the CE/SEE RoE of 15-20% in 2024 defied expectations. CEE lenders managed to mitigate negative impacts from lower rates, benefiting from steady credit risks. A robust recovery in mortgage loans in CE markets was a highlight of 2024, and we would look for a tentative rebound in corporate lending in 2025. Further normalisation of monetary conditions will make defending margins an uphill battle. In terms of regional exposures EU markets in CE/SEE are currently in the focus of major cross-border lenders. Following drastic cuts Russian exposures are stagnating at lowish and non-systemic levels, while dedicated CEE lenders stay committed to Ukraine. In total Austrian banks remain top dogs in CE/SEE in terms of local market share and cross-border business. |
Russian banking sector has maintained visually strong performance metrics in 2024, notwithstanding the heavy turn toward tight monetary conditions prompted by persistent inflation issues. Meanwhile, the (prohibitively) high interest rates that apply to the real economy not covered by direct government assistance threatens an eventual pickup in credit risks for banks. Along the same lines, the ratcheted-up sanction measures on the financial sector and oil & gas industry may increase economic imbalances. |
Polish banks continued their strong run in 2024 maintaining sector-wide profitability (RoE) around 15%. A pause in NBP's monetary easing has been supportive to core income, though many players also managed to defend their lending margins through other means. We expect a restart of rate-cutting in 2025, which should help a greater revival of the credit cycle. Meanwhile, regulatory costs and legal provisions for CHF loan risks will remain part of the fundamental narrative, although the latter might be somewhat abating. |
Serbian banks achieved one of their strongest profitability result on record, with the sector-based return on equity topping 20% in 2024. The start of the local easing cycle and transmission of lower ECB rates into the sizable segment of euro-denominated loans helped the lending trend to turn the corner in H2 2024. In this respect, the sturdy economic growth instills optimism for the 2025 loan dynamics. The sector, meanwhile, is adjusting to further alignment of local regulations with the EU standards. |
Amid a light economic calendar, the market could enjoy a relatively tranquil session as the main event – President Trump’s address to Davos forum – took place at Europe’s close. The speech, however, did not shed much additional light on prospective tariff policies and was only somewhat consequential to longer-dated UST yields and oil price, if at all. The market will be focused on flash PMI readings today, while European issuance is expected to finish the week on a strong note once again. |