Central and Eastern Europe Awards for Excellence 2011: By country

Awards for Excellence 2011
Regional Awards for Excellence 2011: Central and Eastern Europe
All regions and countries

Albania

Best bank: Raiffeisen Bank

In 2010, Raiffeisen Bank once again leveraged its dominant position in Albania to produce healthy growth and a strong set of results. Total assets were up 9.2% on the previous year to €1.99 billion and deposits increased by 13.2% to €1.7 billion, while an active approach to business lending helped grow the loan portfolio by a sector-best 13.7% to €770 million, taking Raiffeisen’s market share to 21%. Pre-tax profits of €43 million meant the bank was able to maintain a return on equity of 23.45%, while consistent vigilance on operating expenses held the cost-income ratio down below 32%. The growth story continued into the first quarter of this year, with total assets passing the €2 billion mark by the end of March and a net income figure of €14 million auguring well for the year ahead.

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Armenia

Best bank: Ameriabank

All four of Armenia’s leading banks made a strong comeback last year after a relatively disappointing 2009. Topping the list in terms of outright profitability was market leader ACBA Credit Agricole, closely followed by HSBC Armenia and VTB’s local subsidiary. However, the best bank award goes to Ameriabank in recognition of its dynamic management, successful integration of smaller rival Cascade Bank and impressive organic growth.

Since its purchase by Troika Dialog in 2006, Ameria has been steadily expanding across all sectors in a bid to become Armenia’s premier banking group, and now offers a full range of retail, corporate and investment banking services. New products for 2010/11 included classic factoring, structured deposits and gold-denominated accounts, as well as Ameria Global Trading and Web Trader, a pair of broking platforms that give Armenian clients access to more than 80 stock markets worldwide.

Ameriabank has also strengthened its relationships with multilaterals over the past two years, raising nearly $130 million from the Eurasian Development Bank, International Finance Corporation, Netherlands Development Finance Company (FMO) and EBRD to support the development of the small and medium-sized enterprise, trade and renewable-energy sectors in Armenia.

In terms of balance sheet size, Ameriabank moved up three places in 2010 to take the number-two spot behind ACBA, an achievement that is only partly accounted for by the acquisition of Cascade in June – total assets grew by a further 26% in the second half to reach Dram153 billion ($422.3 million) by year-end. Sberbank’s takeover of Troika Dialog is not expected to affect Ameriabank’s development, particularly as Russia’s largest lender has stated its intention of expanding in the Commonwealth of Independent States region.

As the rest of Azerbaijan’s banking sector struggled with escalating arrears in the face of a slowing economy in 2010, SME and microfinance specialist AccessBank turned in another round of outstanding results. Deposit growth of 85% was four times higher than the industry average and net loans grew by 14.7%, thanks to booming demand for agricultural lending, a welcome sign that AccessBank is fulfilling its remit of encouraging diversification outside the commodity sector.

At just 1% of the total at year-end, impaired loans remained negligible by comparison with levels at other leading lenders – 14.4% at state-owned International Bank of Azerbaijan and close to 40% at Unibank – and helped AccessBank achieve a return on average equity of 52%. Total profit after tax was up by 33.8% to $32.9 million, all of which was reinvested in the bank by its primarily multilateral shareholders – including the European Bank for Reconstruction and Development, the International Finance Corporation and KfW – and contributed to an enhanced capital adequacy ratio of 26.7%.

Best bank: Priorbank

Thanks to its membership of the Raiffeisen group, Priorbank punches above its weight across a range of metrics. Ranked fifth by assets, Belarus’s biggest foreign-controlled financial institution is the number two in retail lending and the market leader in credit cards, with a 33% share of all card business by volume at the end of 2010.

Last year, Priorbank also leveraged its Austrian parent’s expertise to develop a premium-banking offering and enhance its already extensive corporate banking services through an expansion of its factoring operations. Achieving volume growth in business was not a priority for the bank in 2010 but nonetheless its total assets increased by 19.5% to BR6.02 trillion ($2.03 billion), while loans to customers grew by 15.5%, corporate deposits by 17% and retail deposits by a sector-best 42%. Non-performing loans remained negligible at below 3% of the total and a cautious approach to cost control contributed to a pre-tax profit of BR284 billion, giving a return on equity of 25.7%. First-quarter 2011 results were less impressive as the effects of Belarus’s currency crisis began to bite, but Priorbank still managed a modest expansion of both its deposit and loans books, while return on equity held up well at 18.4%.

Best bank: Unicredit Mostar

UniCredit’s Bosnian operations maintained an impressive momentum in 2010/11, knocking key local rival Raiffeisen off the top spot in terms of both balance sheet size and deposit base. Despite another year of weak domestic demand, the combined assets of the Italian group’s Banja Luka and Mostar-based subsidiaries reached KM4.18 billion ($2.83 billion) by the end of December 2010, while Raiffeisen’s balance sheet shrank by 11.3% to just KM3.72 billion. Not that UniCredit was immune to the challenging operating environment – NPLs in the Bosnian Federation and Republika Srpska stood at 7.88% and 7.74% respectively at year-end, and have yet to peak in the former – but the combination of a 4% increase in total revenues with a 3% cut in operating expenses produced a respectable net profit of KM32.1 million, up nearly 6% on 2009. Similarly impressive first-quarter 2011 numbers – net profit up 85% year on year on the back of a 19% growth in net interest income – confirm UniCredit’s status as the market leader in Bosnia.

Bulgaria’s banking sector bucked regional trends last year. In most markets, the key to success was scale and an established – and preferably international – name, but in Bulgaria the winners were small local players with big ambitions. While the country’s foreign-owned top four banks’ balance sheets shrank by as much as 8.5% and fifth-ranked Eurobank EFG managed asset growth of just 4.7%, leading Bulgarian lender First Investment Bank (Fibank) boosted its asset base by 20.7% to Lev4.94 billion ($3.34 billion) and smaller rivals Cooperative Commercial Bank and Central Cooperative Bank registered rises of 32.6% and 24.2%, respectively.

As the largest of the three and the only one with a genuinely universal offering, Fibank takes this year’s award – an accolade that also recognizes the bank’s achievement in knocking Raiffeisen off the number-five spot in terms of deposits.

Traditionally a corporate lender, Fibank came relatively unscathed through the retail-focused downturn that followed the financial crisis and is well positioned for further expansion, provided capital adequacy issues can be addressed – the overall CAR stood at just 13.23% at the end of December and plans for capital-raising have been repeatedly shelved because of difficult market conditions. However, Fibank’s shareholders showed their awareness of the issue in May when they voted to capitalize net profit for another year, and a doubling in the Sofia-listed lender’s share price from a low last October to the beginning of June suggests that a rights issue over the coming months would be well received.

Croatia’s economy remained weak in 2010, with subdued domestic demand and a narrow export base contributing to a further 1.25% fall in GDP, and this was reflected in solid but unexciting results across the banking sector. The country’s top-four lenders all turned a profit but market leader Zagrebacka Banka stood out as the only one to show an improvement in its bottom-line result on the previous year.

Net income at the UniCredit subsidiary was up 5.4% to K1.28 billion ($229.8 million), driven by an 8.5% increase in the loan book and a focus on efficiency that brought the cost-income ratio down by 570 basis points to 44.3%. Zagrebacka Banka also outperformed its peers on other metrics. The headline capital adequacy ratio reached 19.55% at the end of December against a sector aggregate of 18%. An NPL rate of 7.71%, while 280bp higher than at year-end 2009, was still well below the 11% average recorded by the bank’s fellow lenders. Balance-sheet growth of 3.6% in 2010 equated to a 50bp rise in overall market share to 25.1%, reinforcing Zagrebacka Banka’s already dominant position.

The race for this year’s Czech banking award was, once again, a tightly fought contest. The country’s two leading lenders were neck and neck, but in the end KBC subsidiary Ceskoslovenska ­Obchodni Banka (CSOB) edged it over Ceska Sporitelna by virtue of its superior headline profitability, better capitalization and lower level of loan impairments. CSOB’s net profit of Kc13.5 billion ($707.9 million) was the highest in the sector, and a year-on-year decline of 22.4% – and a jump in the cost-income ratio to 44% – was primarily because the 2009 figure was flattered by the sale of the bank’s Slovak unit and repricing of its collateralized debt obligation portfolio.

A pro forma NPL ratio of 5.32% at the end of December compared favourably with Ceska Sporitelna’s 6.2% and a sector average of 6.39%, while CSOB’s core tier 1 ratio of 14.23% in the first quarter of 2011 was more than two percentage points better than that of its rival. CSOB also showed superior balance-sheet expansion over the awards period, boosting its total assets by 9.5% to Kc910 billion and closing the gap on market leader Ceska Sporitelna, which recorded growth of just 5.0%.

Best bank: TBC Bank
Best debt house: JPMorgan

Two years ago, Euromoney tipped troubled Georgian lender TBC Bank to be the next big recovery story. In the event, however, it wasn’t until 2010 that the country’s second-biggest bank justified expectations with a comeback so impressive that, despite another year of exceptionally strong results from market leader Bank of Georgia, TBC is the clear and worthy winner of this year’s Georgia banking award.

After barely scraping a profit of GeL2.96 million ($1.78 million) in 2009, TBC’s net income surged to GeL49.4 million last year as the ratio of loan impairments came off more than 800 basis points from a peak of 22.5% and total assets, loans and deposits all grew by 30% or more. First-quarter 2011 results confirmed the trend, with net profit reaching GeL24.2 million – giving a return on equity of 26% and return on assets of 4.05% – and NPLs declining still further to just 9.25% of the total. The only negative going into 2011 was a reduction in capital-adequacy metrics, but a tier 1 ratio of 11.79% at the end of the first quarter of 2011 is still well above the central-bank minimum requirement of 8%.

JPMorgan gets the nod for best debt house for its role in facilitating the first two transactions to emerge from Georgia since the war with Russia in 2008. In July last year, Georgian Railways became the country’s first corporate to access the Eurobond markets, with a $250 million five-year note, and this was followed in April 2011 by the return of the sovereign with a $500 million, 10-year bond that priced at an astonishing 346bp over swaps. With Bank of Georgia also rumoured to be eyeing the market, the coming year could see a step up in issuance as both sovereign and corporates take advantage of rock-bottom funding rates.

Best bank: OTP Bank

For Hungary’s banks, 2010 was an annus horribilis. Still reeling from the effects of the financial crisis and the devaluation of the forint on huge portfolios of foreign-exchange loans, the sector was knocked sideways by the new Fidesz government’s introduction of a swingeing tax based on balance sheet rather than profits. Four of the country’s top six banks slipped into the red, leaving the two market leaders, OTP and K&H Bank, to slug it out for the best bank award.

K&H posted stronger results for full-year 2010, boosting its asset base and total deposits by 5.1% and 9.5% respectively, and registering a net profit of Ft36.1 billion ($171.6 million), up 171% on the previous year. This came at the cost, however, of capital erosion and the KBC subsidiary was unable to maintain momentum into the new year, when total assets slipped below 2009 levels and profitability slumped to just Ft5.6 billion for the first quarter.

By contrast, national champion OTP Bank recorded relatively weak numbers for 2010 – although its net profit of Ft104.7 billion, while 43% down on the previous year, was still stellar by the standards of the sector – but came back strongly in the first quarter of 2011 with a bottom-line figure of Ft32.9 billion. An NPL ratio of 11.2% for the core Hungarian operation at the end of the first quarter was aggravated by impairment on a Ft10 billion syndicated loan that the management expects to be able to reschedule. Aside from that single exposure, asset quality deterioration appears to have stabilized – and with the recent partial lifting of the moratorium on mortgage foreclosures imposed in July last year, the way looks clear for OTP to leverage its market leading position to produce another solid set of results in 2011.

Best bank: Halyk Bank

As Euromoney predicted in last year’s awards coverage, Halyk Bank went from strength to strength in 2010/11, more than doubling its bottom-line profitability and making a triumphant return to the Eurobond market. Kazakhstan’s leading retail bank posted a net profit of KT36.2 billion ($249 million) for 2010, up 128.1% year on year, and grew its balance sheet by 3.7% to KT2.1 trillion.

Despite an extensive overhaul of Halyk’s network of 35 branches and the opening of 27 new outlets across the country, a focus on efficiency kept its cost-income ratio down to a respectable 32.4% and the bank’s enhanced reach helped drive an 11.1% increase in total deposits. Impaired loans remained a problem, with the 30-day overdue NPL ratio standing at 18% at the end of December 2010, but the decline in asset quality was reversed from the third quarter onwards and coverage was more than generous at 129.8% at year-end.

Further proof of Halyk Bank’s recovery came in January 2011, when it became the first private Kazakh lender – indeed, the first from the CIS – to access the international capital markets since the financial crisis and the subsequent state-sponsored default of two of the country’s leading banks, BTA and Alliance. Although global investors remain understandably wary of Kazakh bank paper, Halyk’s $500 million, 10-year bond was nearly five times oversubscribed and paved the way for rival lender Kazkommertzbank to raise $750 million of seven-year funding in May.

As well as signalling a return of confidence in the Kazakh banking sector, these deals – along with a handful of notes from state-backed energy companies – have encouraged regional bankers to predict a surge of issuance from the country over the coming year. In 2010/11, however, no one house dominated the relatively small amount of issuance and consequently there are no awards in investment banking categories.

Best bank: ProCredit Bank

Prudent risk management and an ultra-conservative business model continued to stand ProCredit Bank, Kosovo’s largest lender, in good stead last year. The microfinance and SME specialist, a member of Frankfurt’s ProCredit Group, ended 2010 with a non-performing loan ratio of just 2.89%, compared with 9% at second-ranked ­Raiffeisen Bank, thanks to its personalized and responsible approach to due diligence.

Virtue was not merely its own reward – ProCredit’s net income was up 12.6% on 2009 at $32.2 million, giving a return on assets of 2.86% and a return on equity of 32.3%, while total assets grew by 15.2% to top $1 billion for the first time. Other metrics were equally impressive, with overall capital adequacy up by 160 basis points to 17.9% and a 250bp reduction in the cost-income ratio to 46%, despite an expansion of the branch network to 61 outlets. ProCredit Bank also maintained its reputation as a market leader in techno­logical innovation, introducing the Kos-Gyro system to enable customers to pay utility bills via barcode scanners at its 143 ATMs.

In a year that saw the violent ousting of the president in April 2010, the subsequent disputed nationalization of leading lender Asia Universal Bank and June’s ethnic clashes in the southern city of Osh, the dominant theme of Kyrgyz banking in 2010 was a flight to quality.

As a 100% foreign-owned institution that numbers the European Bank for Reconstruction and Development and the International Finance Corporation among its shareholders, Demir Bank was ideally positioned to benefit from this trend. Both total assets and customer deposits were up nearly 50% on 2009, at Som6.04 billion ($128.5 million) and Som5.38 billion respectively, while the loan book expanded by 63.5% to Som1.42 billion (including Som405.0 million to microfinance institutions). Despite a 15.8% increase in operating expenses driven by a spike in inflation in the second half of 2010, recovery on loan provisions combined with enhanced fee and commission income to produce a 26.6% rise in net profitability. Capitalization remained high, with a tier 1 ratio of 19.3% and capital adequacy ratio of 23.3%, unchanged from 2009.

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Founded in 1955 as a specialist construction financing and mortgage lending house, Komercijalna Banka has evolved into a universal bank with the largest corporate customer base and the most extensive distribution network in Macedonia.

Despite the financial crisis, the bank has maintained steady growth across all sectors over the past six years and in 2010 again expanded its balance sheet by 16.6% to MD70.8 billion ($1.53 billion).

Total non-financial deposits increased by 16.6% to MD58 billion and loans increased by 5.1% to MD40.8 billion, boosting annual net profit to a sector-best MD1.43 billion and return on equity to 17.87%. At just 11.1%, overall capital adequacy was on the low side at the end of 2010 – although above the legally prescribed threshold – but Komercijalna Banka’s prompt action in conducting a rights issue in February and eliciting a €12 million investment from emerging-market fund manager East Capital has rebuilt the bank’s equity base.

In addition to its retail and corporate banking business, Komercijalna Banka is a partner in investment fund KB Publikum Invest and KB Prvo penzisko drustvo, Macedonia’s largest pension provider.

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Moldova’s economy shrugged off the after-effects of recession in 2010, recording GDP growth of 6.9%, and the largest bank was a beneficiary of the recovery. Total assets at Moldova Agroindbank (MAIB) stood at MLei8.57 billion ($711.9 million) by the end of the year, a 7.8% increase from December 2009, and the loan book grew more than 25% on the back of revitalized demand for mortgages and corporate lending. NPLs were down and, despite enhanced loan-loss provisioning, net profit rose 81.8% to MLei279.8 million.

The bank’s dominant position in the SME segment makes it a natural partner for multilaterals looking to invest in Moldova and in June 2010 the International Finance Corporation joined the European Bank for Reconstruction and Development, World Bank and KfW on the list of MAIB’s creditors. The IFC also enrolled MAIB in its $3 billion global trade-finance programme, an initiative designed to help institutions in markets with restricted interbank facilities to deliver a broader range of trade finance services to local firms.

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Poland’s banking sector turned in yet another strong performance over our review period, with market leaders PKO BP and Bank Pekao both posting healthy profits, but it was third-ranked player BRE Bank that proved the year’s eyecatcher and thus wins the best bank award.

After suffering substantial losses on its foreign exchange options and leasing segments in the wake of the financial crisis, the Commerzbank subsidiary made an impressive recovery last year to record a pre-tax profit of Z872.5 million ($320.6 million), more than four times the 2009 tally. This gave a full-year return on equity of 15.6%, despite a successful rights issue in June that raised Z1.98 billion and boosted the bank’s capital adequacy ratio by 440 basis points to 15.9%.

BRE Bank’s balance-sheet expansion was well above the sector average at 11.1%, taking total assets to Z90 billion, with deposits and loans both showing double-digit increases in percentage terms. BRE continued to outperform in the first quarter of 2011, when it became the only Polish bank to beat analyst expectations with a net profit of Z229.7 million, up 17.4% on the previous quarter.

The best debt house category turned up a surprise winner, with Nomura coming from ninth place in 2009/10 to top the Dealogic league tables last year, ahead of more established regional players such as Société Générale, UniCredit and Deutsche Bank. The Japanese bank acted on five deals totalling $2.46 billion during the awards period, comprising two sovereign issues – including Poland’s triumphant return to the dollar market in July with a five-times-oversubscribed $1.5 billion six-year note – and three for local media groups TVN and Polish Television Holding.

Results in the other investment banking categories went more by the form book. UniCredit has been chosen as best equity house. Its long-standing local equities expertise once again ensured that the Italian bank won more mandates than any of its more recently established rivals, with nine deals covering the full spectrum from the bumper Tauron and PGE privatizations to a clutch of private-­sector listings in sectors such as telecoms, technology and metals and mining. UniCredit’s status as the go-to equity house for the mid-cap market was also confirmed by the fact that a quarter of non-Polish companies listing in Warsaw last year – including Czech betting firm Fortuna and Ukrainian agricultural producers Astarta and Milkiland – chose UniCredit as sole lead manager.

The overall award for best investment bank, however, goes to Deutsche Bank for a second year in succession in recognition of its global reach and involvement in landmark transactions across all market sectors. In equities, the German house topped the league table by volume thanks to its participation in the record-breaking Z8.1 billion IPO of leading insurer PZU – where it outsold fellow bookrunners Credit Suisse, Morgan Stanley and Goldman Sachs – and its appointment as sole bookrunner and global coordinator on a Z4.1 billion accelerated bookbuild for the same firm and BRE Bank’s May rights issue.

Deutsche Bank is also strong in equity sales and trading – its subsidiary DB Securities is the leading international brokerage house in Poland and last year increased its secondary market share from 3.7% to 6.3%. On the debt side, Deutsche helped the sovereign tap its March 2021 issue for a further €1 billion in February and acted on a pair of local corporate high-yield deals. Its appointment as sole adviser to Raiffeisen Bank International on the Austrian lender’s acquisition of Polbank was an affirmation of its M&A credentials.

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The majority of Russia’s leading banks posted excellent results in 2010 as reduced funding costs drove a welcome recovery in profits, but the momentum story of the year was unquestionably Nomos Bank.

Previously a second-tier corporate lender, Nomos burst into the big time with the acquisition in December 2010 of a controlling stake in regional lender Bank of Khanty-Mansiysk (BKhM), a deal that created the second-largest private-sector bank in the country, with assets of R530.2 billion ($17.4 billion). The motivation for the merger was growth rather than efficiency – the two entities will continue to operate under their own brands, with BKhM’s ­Siberian network complementing Nomos’s franchise in Moscow and St Petersburg – but the integration of back-office and IT functions is expected to achieve savings of up to 4% of net income over the next three years.

The BKhM acquisition, however, is only one part of Nomos’s ­ambitious growth strategy. The group’s majority shareholders, Czech investment group PPF and local billionaire Alexander Nesis, have set their sights on Russia’s burgeoning and underbanked small-business sector. Following the creation of a standalone small-business unit in 2009, Nomos has introduced a series of innovations including dedicated relationship managers in 64 outlets across its network and a specialist risk-management system.

The initiative has already paid dividends, with small-business clients numbering 64,000 by the end of last year, and the bank is targeting lending growth of 40% for the sector in 2011. Nomos also plans to build its retail market share in both the mass-affluent and private-banking segments via cross-selling from its corporate client base.

This strategy received the seal of approval from international investors in April, when Nomos became the first Russian private bank to list on the London Stock Exchange. Despite deeply negative sentiment around Russian firms that had seen a series of IPOs flop in the first quarter, Nomos completed a $718 million offering that priced towards the higher end of its initial range and boosted the bank’s tier 1 ratio to 12.2%. Nomos is likely to return to the capital markets later this year to raise cash for the purchase of the remaining 48% of BKhM once the Khanty-Mansiysk regional government agrees the sale. Nomos’s strong track record and realistic approach to pricing should ensure another successful issue, particularly if the healthy growth and profitability shown in the results for the first quarter of 2011 are maintained in the coming months.

Barclays Capital wins the award for best debt house in Russia. It impressed with a leap up the league table from 10th position in 2009/10 to number two last year, acting on a total of 18 deals worth more than $15 billion. Highlights included the sovereign’s return to the market in April 2010 with a $5.5 billion dual-tranche issue that reset the benchmark curve and a succession of deals for state-owned entities such as VEB, Sberbank and Russian Railways, while private-sector clients covered sectors from energy to banking.

JPMorgan was not involved in the Nomos deal but nevertheless gets the nod for best equity house as the only non-Russian bank to be mandated on three IPOs in the awards period, including the record-breaking $912 million October listing of social networking site Mail.ru, which was 20 times oversubscribed and traded up more than 30% in the aftermarket. The US bank also acted on the London primary listings of Transcontainer and Hydraulic Machine Systems, as well as participating in an accelerated bookbuild for meat producer Cherkizovo Group and bringing follow-on offerings for St Petersburg property developer LSR Group and construction firm Mostotrest.

Morgan Stanley ran out a clear winner of the M&A award, notching up nearly $10 billion more in league table credits than closest rival Goldman Sachs. In addition to advising state-controlled long-distance telecom operator Rostelecom on a $10.9 billion programme of consolidation with regional providers to create a national champion in the sector, the US house represented VimpelCom in its pursuit of Naguib Sawiris’s Weather Investments, advised PepsiCo on the $5.4 billion acquisition of juice and dairy firm Wimm-Bill-Dann – the largest consumer transaction ever seen in Russia – and acted for Uralkali in its tie-up with Silvinit, a merger that created the world’s second-biggest potash producer.

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Rising inflation and the resultant series of rate hikes sparked a decline in asset quality across Serbia’s banking sector last year but failed to prevent Banca Intesa Beograd from turning in another round of excellent results. Already the country’s leading bank by total assets, the Intesa Sanpaolo subsidiary grew its balance sheet a further 16.6% to YD359.1 billion ($5.31 billion) in 2010 and posted a net profit of YD7.62 billion, a 26.8% increase on the previous year.

Strong demand for loans from both corporate and retail customers drove a 35.3% rise in total lending, while a corresponding 13.5% increase in deposits maintained the loan-to-deposit ratio at a healthy 96.5%. Impairment losses were up slightly on 2009 but the low proportion of foreign-currency loans – just 10% of the total at year-end – prevented NPLs from reaching the levels suffered by less conservative lenders. First-quarter 2011 results were similarly impressive, with a bottom-line figure of YD2.42 billion auguring well for the year ahead.

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Following a restructuring in 2009, Slovenska Sporitelna was ideally placed to benefit from Slovakia’s strong export-led recovery last year. Pre-tax profit quadrupled to €171.6 million, giving a return on equity of 31.6% and providing parent group Erste with some welcome relief from the woes of its operations in Hungary, Ukraine and Romania. Much of the growth came from the retail sector, where Slovenska Sporitelna is the established market leader, serving nearly half of Slovakia’s 5.4 million inhabitants.

Deposits were up 6.8% year on year, while retail lending increased by 12.9% as returning consumer confidence translated into booming demand for housing loans, taking Slovenska Sporitelna’s market share in the sector to 25.8% and boosting net interest income by 10.6% to €426.8 million.

Cost-cutting also played a big part in the bank’s enhanced profitability. Operating expenses were down 11% from 2009 despite the addition of 12 new outlets to the 279-strong branch network, contributing to a 870bp reduction in the cost-income ratio to 41.3%. Problem loans remained a concern, with impairments in the SME book standing at 11.5% by year-end, but an overall decline in the NPL ratio to 8% in the fourth quarter of 2010 suggests that credit conditions might finally have turned a corner.

The positive trend in profitability was continued into the start of 2011, with return on equity for the first quarter reaching 44.1% on the back of further growth in mortgage lending and higher securities commissions.

The Turkish banking market has entered a new stage of growth. With interest rates now levelling out and set to rise, banks have had to focus much more on customer business to maintain their margins. While Isbank has made great strides in this regard, ­Garanti Bank stays ahead on the overall quality of its numbers and has been awarded best bank for Turkey. It grew its assets by 17.58% in 2010 but still earned a 2.67% return on them. It also maintained its position as the most profitable bank in the country, bringing in $2.24 billion, $300 million more than Isbank, despite Isbank increasing its profits sharply over the previous year. ­Garanti’s return on equity is an industry-leading 22.35%.

Garanti has done more with less and this can be seen in how it is shifting its sources of income away from securities to fees and commissions. Over the period concerned, it grew its cash loans by 13%, brokerage fees by 17%, money transfer fees (a business that it dominates) by 26% and its bancassurance business by 44%. On the loan side, the bank continued to grow but less quickly than some of its peers, which means it was able to maintain loan margins at a higher rate than the sector. Garanti has replicated this cautious approach to business on the funding side of the balance sheet.

In the international markets, Garanti has achieved the tightest pricing on the new wave of Eurobonds that the Turkish banks have been issuing since the beginning of this year. It has the longest-dated issue at 10 years and the tightest issuance spread at 277.5 basis points over Libor for its deal sold in April. It is also the only bank to have sold a privately placed federal reserve note to the global investment management company Pimco, selling this alongside its 10-year issue in April. The deal was a reverse enquiry, showing the high regard the bank is held in by international investors.

These deals so far do not amount to a huge change in the two banks’ funding make-up, but they are slowly lengthening the maturity profile of their liabilities away from the three-month deposits they have relied on. Garanti is looking to have a maximum of 10% of its funding come from the wholesale markets; at the moment, its total international funding is only about 3.5% of its liabilities.

Over the coming year, the challenge for Turkey’s banks will be to operate in an excessively competitive market underpinned by rising interest rates. There will be both consolidation of players and expansion of business into non-securities and non-lending activities. In particular, those banks that can bank Turkey’s huge numbers of SMEs will do well. Garanti’s strong cash management and payments business will ensure that it can maximize the revenue from the relationships it has.

In Turkish investment banking, a few key themes defined the year – privatization, local-currency bonds and badly executed equity deals. Is Investment again wins our award for best investment bank as a result of its wide spread of business undertaken, avoiding some of the more catastrophic deals and being involved in some of the innovations on the debt side.

Being a full-service investment bank means having the largest equity sales and trading business in Turkey. This enabled Is Investment to take part in four IPOs during the year, including the first foreign IPO in Turkey, of Austrian catering firm Do & Co.

On the M&A side, Is Investment has not been involved in any of the failed and failing privatization mandates that are a cause of great embarrassment for the Turkish government. Rather, Is Investment’s M&A business is focused on smaller private-sector deals, which during the period under consideration came to a total value of €541 million through eight deals.

Where Is Investment distances itself from its rivals in equity and advisory is on the bond side. Its dominance of the nascent local-currency corporate bond market is seen by its performance over the year. It undertook nine deals for a total value of TL2.2 billion, giving it a 34% market share. This strength in the primary markets is matched by its solid number-one position in the secondary debt markets.

This ability to dominate flow is also seen in derivatives, in which the bank is a clear market leader in terms of the volumes it trades in Istanbul Stock Exchange ISE 30 futures, the main Turkish derivative contract.

Building on Is Investment’s skills in the bond markets is its parent’s depth in the loan markets, which together make Isbank the best debt house in Turkey. Over the course of 2010, Isbank grew its assets by almost 17% to an industry-leading TL131 billion. It has the largest deposit base and the most international network of any Turkish banking group, which it uses to lend to its corporate clients as they expand internationally.

UniCredit is awarded best equity house. It might seem disingenuous to describe as a failure a year in which there were a record number of equity deals in Turkey. But such was the stench of controversy that hung over so many deals that serious questions need to be asked about how Turkish issuers and banks play the equity market.

The one deal that single-handedly rescued the markets was the IPO of real-estate investment trust Emlak Konut. Indeed, one international investor said that without this deal, Turkey would have been excluded from the international equity markets for two years given the number of failed deals that have been seen. Leading the Emlak Konut deal was UniCredit, along with local bank TSKB. UniCredit’s slightly larger role in the transaction wins it the award for best equity house. At $703 million the deal was the largest IPO of the year.

Indeed, so powerful was the success of this deal that UniCredit was immediately appointed by the government to be its strategic adviser on a further sell-down of its holdings in Turkish Airlines.

Growth returned to the Ukrainian economy in 2010 but signs of recovery were slow to emerge in the banking sector. Asset quality continued to deteriorate, with problem loans accounting for more than 40% of the total by year-end and as much as 70% at the hardest-hit institutions. As a result, most banks’ income statements stayed firmly in the red.

So the achievement of Raiffeisen Bank Aval – which wins best bank in Ukraine – in transforming a Hrn1.8 billion ($231.7 million) loss in 2009 into a Hrn84.2 million net profit last year is all the more impressive. Ukraine’s fourth-largest bank still has a long way to go to regain its pre-crisis profitability but a combination of ruthless cost-cutting, strengthening revenues from segments such as securities trading and a burgeoning corporate deposit base should provide a springboard for growth in the year ahead.

NPLs are high at 33.7% but remained stable over the six months to April and, despite a 51% reduction in loan-loss provisioning in 2010, the coverage ratio stood at a healthy 70.3% at the end of the awards period. Tier 1 capital is also well above the sector average at 13.4%. Moody’s recognized the progress made on all metrics when it upgraded Raiffeisen Bank Aval’s rating outlook from negative to stable in May.

On the investment banking side, 2010 will be remembered as the year in which Ukraine’s Eurobond market came back to life. Following Viktor Yanukovich’s victory in presidential elections in February, several Ukrainian corporates and quasi-sovereign credits took advantage of improving investor sentiment to tap international demand, and the sovereign itself returned to the Eurobond market for the first time since 2007 with a pair of benchmark issues.

Morgan Stanley, which wins the best debt house award, was one of only three bookrunners on both sovereign bonds and also brought to market Ukraine’s Euro 2012 football tournament infrastructure fund, state-owned lender Oschadbank and corporate borrowers MHP and Ferrexpo. The total apportioned deal volume came to $2.2 billion by the end of March, compared with just $1.4 billion for Morgan Stanley’s nearest rival, earning the US bank the accolade for best debt house.

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