Banking: Is size the solution in CEE?

It is easy to forget how far banking in central and eastern Europe has come in the last 30 years.

In December 1989, Euromoney published a list of the first 196 commercial and cooperative banks licensed in the Soviet Union. To the best of our knowledge, not one of them made it through to the end of the millennium as a going concern.

Even in central Europe, where market reforms were pushed through early, most big banks remained in state hands for the best part of a decade after the fall of the Berlin Wall. As late as November 1999, the parlous state of the Czech banking sector – today a blueprint for stability and prosperity – prompted a Euromoney writer to describe the country as “a case study in how not to handle transition”.

Some of the early success stories, meanwhile, have long since lost their lustre. The days when Western financial publications, including Euromoney, ran regular features on Kazakhstan’s economic and banking miracle seem far distant.

CEE’s only non-socialist country has seen almost as big a transformation. At the start of the century, Turkey’s banks – with a few honourable exceptions – were corrupt, badly managed and on the brink of collapse. It was only after the shock of 2000/01, when twin banking and currency crises led to a $30 billion IMF bailout and a radical restructuring of most of the country’s leading lenders, that the first hints of today’s resilient and well-run sector emerged.

Foreign dominance of banking sectors across CEE has also become such a given that it can come as a surprise to be reminded of just how late many Western banking groups arrived in the region. While the first flags were planted by hardy pioneers in the more accessible markets in the late 1980s and early 1990s, the race to buy up CEE banking assets didn’t begin in earnest until a decade later as Western groups began an increasingly desperate scramble to capitalize on the region’s growth and convergence story. 

And what a growth story it was. In the run-up to the collapse of Lehman Brothers, loan books across the region were expanding by as much as 50% a year as parent groups poured funding into CEE in pursuit of market share and mouth-watering profitability.

Just over a decade later, those heady pre-crisis days can also seem very distant. The turmoil that engulfed the world’s financial markets was echoed in emerging Europe and prompted a profound reshaping of banks’ business models.

Most obviously, it highlighted the dangers of depending on external funding, whether from parent groups or portfolio investors. As recession began to bite in economies across the region, currencies collapsed and bad debts began to mount up.

By early 2009, there were widespread fears that Western banks, under pressure in their home markets, would abandon their CEE subsidiaries. Given that, at the time, these groups accounted for more than two-thirds of banking assets in central and southeastern Europe, this would clearly have put paid to any hopes of a speedy economic recovery in the region.

The day was saved by Herbert Stepic, the legendary founder of Raiffeisen’s CEE empire, who persuaded his fellow Western chief executives to sign a letter guaranteeing to stand by their subsidiaries in return for support from the likes of the European Investment Bank, the European Bank for Reconstruction and Development and the IMF.

This laid the foundations for the Vienna Initiative, which over the next decade worked with banks and regulators to stabilize and later restructure financial sectors across the region.

“Stepic deserves a lot of credit for what he did,” says Andreas Treichl, chief executive of Erste Group. “It was a remarkable achievement. People who wouldn’t normally work together pulled on one string to solve the problem. It required a lot of trust – it was almost romantic.”

Zdenek Turek, chief executive of Citibank Europe, agrees.

“It was a very valuable initiative,” he says. “It was the right message at the right moment.”

At the same time, policymakers and banks took independent action to prevent any repeat of the situation. Regulators across the region raised capital requirements and imposed limits on foreign funding, while banks rushed to raise local deposits.

Loan-to-deposit ratios, which in countries such as Hungary and Romania were well over 200% in 2008, plummeted over the next five years thanks to a combination of deposit growth and deleveraging. By 2013 the big Western banking groups in CEE – Erste, Raiffeisen, UniCredit, Société Générale and Intesa Sanpaolo – had all made their regional networks essentially self-funding.

“The big lesson of the financial crisis was that intra-group funding is basically contingent capital,” says Treichl. “That will remain with us as a rule for the next 200 years, never to get into excessive cross-border funding.”

The financial crisis also taught banks and policymakers painful lessons about the formation of credit bubbles. The collapse of real estate prices across southeastern Europe after 2009 caused a spike in bad debts that took the best part of a decade to resolve and cost regional groups billions of euros.

At Société Générale, which suffered substantial losses in Romania, deputy chief executive Philippe Heim says the group has learned from the lessons of the past.

“In a context where the cost of risk is reaching a low point, we need to be mindful of what we are originating,” he says.

In some markets, the message took longer to get through. Russia, which came through the global financial crisis relatively unscathed, had its own consumer credit crisis in 2013, the impact of which was exacerbated the following year by the imposition of Western sanctions and the collapse of oil prices.

This helped pave the way for an overdue clean-up of the banking sector by incoming central bank governor Elvira Nabiullina, as well as a shift to a more stringent approach to bank regulation.

The increasing willingness of CEE regulators to wield their powers to prevent the build-up of credit bubbles has been broadly welcomed by bankers.

“Regulators have learned a lot, and when they put in place restrictions to ensure that banks don’t get involved in irrational risk-taking, banks need to accept and support that,” says László Wolf, OTP’s deputy chief executive.

Perhaps the most obvious regulatory lesson from the financial crisis in CEE, however, was the inadvisability of allowing banks to issue mortgages in foreign currency to retail customers.

Originally an Austrian speciality, the practice spread rapidly across the region in the mid 2000s.

Warnings of the downside risks were issued at the time by many within the industry but were largely ignored as sales soared and hold-outs lost market share.

“We didn’t need the crisis to find out that this was a really bad idea,” says Treichl. “In the early 2000s, I was saying it was stupid to lend in yen or Swiss franc to Austrian grandmothers – but we did it because everyone else did. It was the same in central and eastern Europe.”

In 2009, the naysayers’ worst fears were realized as currencies across the region collapsed, prompting a sharp spike in defaults on Swiss franc- and euro-denominated mortgages. The impact was felt in markets from Poland to Serbia, but the hardest hit was Hungary, where households had built up a staggering Ft5.5 trillion ($26 billion) of FX debt.

Unsurprisingly, this fuelled anti-bank sentiment and paved the way for repeated attacks on the sector by Viktor Orban’s Fidesz government, which took power in 2010. Not only were lenders forced to convert their FX mortgages to forint at below-market rates, but public outrage over the issue was used to justify the introduction of CEE’s first bank tax.

Ironically, given how expensive it proved for Erste, Treichl notes that the concept originated in Austria.

“Most people regard Orban as the creator of the banking levy,” he says. “That’s completely wrong. The first politician to introduce it was [Austrian chancellor] Werner Faymann. [Arnold] Schwarzenegger, Mozart, Sachertorte and banking levy: those are the four things Austria is famous for.”

Hungary’s banking levy originally cost the sector around €500 million a year. It has since been reduced to around half that, a level that Wolf describes as “high but manageable”.

He sees little chance of it being removed, however, as he notes: “The trend is going the other way.”

Slovakia was the first to follow Orban’s lead. The baton was then taken up by the Law and Justice Party (PiS) in Poland in 2016 and most recently by Romania’s Social Democratic Party at the end of December. The latter has since had to row back on its initial proposals, cutting the tax rate and abandoning a bizarre attempt to link it to the local interbank rate.

While the income from these levies has proved extremely handy for filling budget holes, the justification for their introduction has in every case been alleged greed and misconduct by banks. The job of the populists has been made easier by the continuing heavy presence of foreign groups in the region, which has fuelled accusations of exploitation and profiteering.

Raiffeisen chief executive Johann Strobl argues that, for this reason, foreign groups should welcome the rise of strong local banks.

“It avoids situations where politicians can play the game of accusing foreign banks of being selfish,” he says. “It also means that the benefits of foreign ownership can be appreciated, because people can compare foreign banks with locals and see that the service they provide is the same or even better.”

Of course, the picture is not the same across the whole of emerging Europe. Indeed, one of the most striking side-effects of the financial crisis was that it highlighted the diversity of what many had begun to view as a region that, if not already homogeneous, was at least on a steady convergence path.

Some countries’ banking sectors got off relatively lightly. Turkish lenders barely saw a blip in their impressive profitability thanks to strong economic growth and the fact that the sector had already been through a stringent clean-up at the start of the decade.

“The 2001 crisis was a huge cost to the economy, but it left Turkey much stronger,” says Hakan Binbasgil, chief executive of Akbank. “At the macro level it brought reforms and fiscal discipline, while the restructuring of the banks and the creation of a new banking regulator resulted in major improvements in supervision, governance and capitalization.

“As a result Turkey experienced the global financial crisis with very little pain, while its banks proved equally resilient.”

With the exception of Hungary, the economies of central Europe also proved fairly resilient – Poland, indeed, was famously the only country in the European Union to avoid recession in 2009. By contrast, southeastern Europe became mired in low growth, bad debts and deleveraging for nearly a decade.

In the former Soviet Union, the picture was equally mixed. The Baltic economies bounced back rapidly from severe recession, but credit demand took longer to return. Further east, Kazakhstan’s banking boom came to an abrupt end as bad debts ballooned, prompting the sector to default on $20 billion of foreign debt.

Lenders in other countries in the Caucasus and central Asia coped fairly well with the global financial crisis but came unstuck following the oil price crash and rouble devaluation in 2014. More open economies, less state control and better management helped leading banks in Georgia and Armenia avoid the worst effects of both crises.

In neighbouring Azerbaijan, by contrast, the rouble devaluation exposed the weaknesses of both the government’s monetary policy and banks’ balance sheets, prompting a sectoral crisis and a $3.3 billion restructuring of the debt of market leader International Bank of Azerbaijan.

With the realization that not every country in CEE was on a convergence course with the European Union, Western banks beat a hasty retreat from the region’s further flung markets. UniCredit cut its losses in Kazakhstan, selling ATF Bank for less than a quarter of the $2.1 billion it had paid at the height of the market in 2007, while Erste made a loss-making but timely exit from Ukraine in 2013.

The aftermath of the financial crisis also saw exits by the only two US firms with commercial banking networks in CEE, in both cases as a result of a change in strategic direction. General Electric dumped lenders in Russia, Hungary, Poland and Czech Republic as part of a broader retreat from the financial sector, while Citi sold out of retail banking across most of the region.

Not all the post-crisis disposals were as voluntary. The likes of Allied Irish Banks and Belgium’s KBC were forced to sell profitable CEE subsidiaries by the European authorities following parent bailouts, while the implosion of Volksbank and Hypo Alpe Adria put the Austrian lenders’ SEE networks on the market.

Before this first round of M&A had been completed, the eurozone crisis put further pressure on banks’ balance sheets and another clutch of CEE lenders came up for sale. Again, some were mandated by the European Commission – Greek banks’ networks in the Balkans and Slovenia’s state-owned banks – while in central Europe regional groups dumped more valuable assets in a bid to rebuild their capital bases.

Raiffeisen put its subsidiaries in Poland and Slovenia up for sale, just three years after buying the former from EFG Eurobank, while UniCredit sold its controlling stake in Polish number two lender Bank Pekao to state-controlled insurer PZU in late 2016.

Meanwhile on the buy side, new players emerged in the form of Russia’s Sberbank, global private equity firms (where permitted by local regulators) and local players such as OTP and Banca Transilvania, which jumped from 10th in Romania in 2009 to number one in less than a decade through a combination of acquisition and organic growth.

Alongside the fallout from the financial crisis, the other factor that has played the biggest role in reshaping banking in emerging Europe over the past decade has been the advent of technology.

Again, this is clearly not unique to the region. However, banks in CEE have been particularly well-positioned to take advantage of digital opportunities thanks to a combination of tech-savvy populations, a lack of cumbersome legacy systems and a strong tradition of technical education in the former communist bloc.

As a result, digital maturity across the region is extremely high. Turkey, Russia and Poland have earned a reputation as world leaders in banking technology, but even smaller markets have seen impressive digital development.

“Kazakhstan is on a par with Russia and ahead of European countries in areas such as card development, mobile payments and introducing new technology products,” says Umut Shayakhmetova, chief executive of Kazakh market leader Halyk Bank.

This digital sophistication has made CEE markets ideal technology testing grounds for regional groups, as well as a natural base for development hubs. Indeed, in a striking reversal of the early transition years when know how flowed from West to East, a number of European banks are now importing innovation from their CEE subsidiaries.

Société Générale, for example, has set up its group centre of expertise for agile methodology in the Czech Republic.

“The level of digital maturity we have developed in Russia and the Czech Republic can often be higher than we have in Western Europe,” says Heim.

At the same time, CEE banks are also facing a raft of challenges, some global and some specific to the region. In the former category, regulation unsurprisingly looms large for bank executives. Not only have local regulators been flexing their muscles since the financial crisis, the western part of the region also comes under the aegis of the EU.

The biggest bugbears for bankers are the EU’s recast Markets in Financial Instruments Directive (Mifid II) – which Treichl describes as “shamefully stupid, because it disintermediates the advisory path between client and bank” – and the ECB’s refusal to assign a zero risk weighting to the sovereign debt of non-eurozone countries.

“This is totally unreasonable,” says Strobl. “If the macro and KPI [key performance indicators] factors for a country in CEE are comparable with or better than those of a country in the eurozone, then this approach makes no sense. It has to be changed.”

Some see this as symptomatic of a lingering mistrust of the newer EU member states.

“There is still a bit of the attitude in Western Europe that everybody who is wealthy in CEE is a filthy oligarch, everybody who is doing well in that region must be corrupt, and if Czech Republic has a double-A rating it’s different from Belgium’s double-A rating,” says Treichl.

“Sometimes, from the way people talk, you’d be surprised to find that eastern Europeans know how to use a knife and fork. That’s very upsetting for locals in the region.”

This attitude can also colour views of compliance in the region, particularly in the wake of the money-laundering scandals that have engulfed the Scandinavian banks in the Baltics over the last year – yet most bankers in CEE say there is nothing unique about their region in this respect.

Indeed, it is notable that the groups with a big commercial presence in Russia and CIS have rarely, if ever, been mentioned in this context. As Heim points out, banks that operate in those jurisdictions are well aware of the risks.

“We are very mindful of meeting the highest possible requirements on compliance in Russia,” he says.

Strobl notes, however, that authorities could do more to help.

“I accept that banks as the core providers of payment transactions play an important role in this process and take responsibility, but we need to get clarity on what the standards are and what is expected of us,” he says. “There shouldn’t be any room for interpretation.

“There also needs to be more cooperation on transaction monitoring so that banks have access to all the information they need. If authorities get a signal that a customer is suspicious, then this should be shared with all banks.”

One compliance issue that is more specific to CEE relates to Western sanctions on Russia. Clearly those most affected are the banks directly targeted. Being blacklisted by the US and EU failed to put a dampener on Sberbank’s profitability but put paid to the bank’s ambitions to become a European regional champion.

For VTB, by contrast, the need to bolster lackluster returns on equity has become increasing urgent in the sanctions era.

“Now that we can no longer raise new capital on the international market, profitability is key,” says VTB chairman Andrey Kostin. “It’s our only source of capital for growth and expansion.”

The impact of Western sanctions has also been felt more widely in the region. Mindful of the hefty fines levied by the US on transgressors, banks dealing with Russia and the former-Soviet republics have ramped up sanctions-related compliance and, in many cases, slashed corporate client lists – particularly since the targeting of individual Kremlin-friendly oligarchs in April 2018.

Many bankers, however, say local politics pose a bigger risk to CEE economies and financial sectors than any external factor. The increasingly prevalent populist rhetoric against foreign banks has not only been used to justify swingeing bank taxes but also a rise in state ownership of bank assets.

Once again, the trend started in Hungary, with Orban’s insistence on bringing 50% of the banking sector under local ownership – which, in the absence of private-sector buyers, has meant state control. In Poland, PiS politicians went even further, promoting the purchase of Bank Pekao and smaller rival Alior Bank by state-controlled firms as part of a drive to “repolonize” the banking sector.

In Russia, the process has been less politically driven, but the results have been just as striking. In 2017, three of the largest private-sector banks – Otkritie, B&N Bank and Promsvyazbank – had to be taken into state hands after coming to the brink of collapse.

Elsewhere, enthusiasm for privatization has noticeably waned in recent years. It has long since been dropped from the agenda in Turkey; the Serbian government is hanging on to number two lender Komercijalna Bank, despite intense pressure from the international development community; and in Belarus, long-promised sales of state banks still seem as remote as ever.

Another CEE-specific issue that has been highlighted with increasing frequency over the last decade is the extreme fragmentation of the region. One of the biggest revelations of the post-crisis period for many Western investors seems to have been just how small and diverse most of its markets are.

Of the 30 countries in the region, only five – Russia, Turkey, Ukraine, Poland and Uzbekistan – have a population of more than 20 million. Twenty-two have fewer than 10 million citizens. Montenegro has just 620,000.

As these numbers have sunk in, banking groups have begun to reassess the regulatory, legal and reputational risks of operating in CEE’s smaller markets. So far, the only big player to make a mass retreat has been Société Générale, which over the last three years has sold subsidiaries in eight markets from Georgia to the Balkans.

“In the aftermath of the financial crisis we have seen a shift in paradigm,” says Heim. “Before that it was seen as positive to plant a flag in every possible jurisdiction. Since then it has become clear that when you’re located in multiple and fragmented markets, you pile up complexity and cost.”

As yet, the other big CEE groups have shown no signs of following Société Générale’s lead and have reiterated their commitment to their networks. All agree, however, that scale is essential.

Wolf sums up the philosophy among regional bank chief executives: “Our goal is to be one of the top banks in all our markets. I don’t believe small banks can be efficient and profitable.”

The perceived need for scale, combined with improved valuations and the emergence of larger regional groups from bouts of restructuring, is expected to drive a long-awaited wave of consolidation in several CEE markets over the coming years.

Erste and Raiffeisen have each expressed an interest in inorganic expansion, particularly in markets where their presence is currently sub-scale, while OTP has indicated that it still has appetite for further acquisition, even after a buying spree that has seen the group snap up no fewer than eight banks in five years.

Meanwhile, CEE’s smaller markets are still heavily overbanked. Serbia has 28 banks for a population of just seven million, Croatia has 25 licensed lenders and even Montenegro boasts around a dozen. “Banking sectors will definitely become more concentrated, particularly in the Balkans,” says Wolf.

Turek at Citi notes that in some cases consolidation could be a two-stage process.

“Smaller banks could be acquired and consolidated by local groups or private equity firms, and then sold on to one of the regional banks or a new strategic investor,” he says.

There have already been signs of this approach in the Balkans. US private equity firm Apollo Global Management bought a pair of banks in Slovenia in 2015 and 2016 and is merging them into a single entity, while locally-owned MK Group has been acquiring smaller bank assets in Serbia.

Further bank M&A is also expected in Russia, where the closure of around 400 banks over the last six years has still left nearly 500 in business. VTB has already done its bit for consolidation, buying three regional banks last year; Kostin says further acquisitions could be feasible.

“Our presence in some regions is comparatively not as expansive, so we probably need to buy some small banks,” he says.

He rejects the suggestion of some analysts that the advent of digital platforms has negated the need for inorganic expansion.

“When you buy banks, you are still buying clients,” he says. “Retail clients in particular are quite conservative. It’s not easy to get them to change from one bank to another.”

At the same time, he is fully aware of the opportunities offered by technology, particularly when it comes to efficiency: indeed, he is counting on it to improve VTB’s lackluster profitability.

“I believe the bank could earn twice as much as it does now despite the unfavourable environment of sanctions and the domestic economy not growing as fast as we would like,” he says. “Digitalization will be key to achieving that.”

Others are more mindful of the cost of keeping pace with technological change. In Turkey, Akbank invested $250 million last year in innovation and expects to spend nearly the same again in 2019.

“If you want to serve the mass market, this is not optional,” says Binbasgil. “Having state-of-the-art technology across the board from mobile banking to machine learning is a must.” 

Inevitably, the increasing pressure to invest in innovation weighs heaviest on smaller institutions.

“Regional or global banks have an incredible advantage in terms of being able to keep pace with digitalization,” says Tomas Spurny, chief executive of Czech lender Moneta Money Bank.

Formerly GE Money Bank, Moneta is Czech Republic’s largest independent consumer lender but ranks only sixth in the country, with total assets of Kc207 billion ($9.7 billion).

“We have allocated a significant amount of our investment budget to digital development,” adds Spurny, “but we are at a huge disadvantage because as a local player we can’t generate economies of scale as international groups do.”fmes the size of Moneta’s, the need to keep pace with technology can be a challenge.

“Digital development is expensive everywhere, but it’s relatively more expensive in CEE because of the size of the banks,” says Wolf.

Lack of scale can also make banks more vulnerable to new-generation competitors. Spurny notes that, as well as competing with the subsidiaries of big regional groups, Moneta also has to defend itself against the raft of digital challengers that have sprung up in the Czech Republic in recent years.

“These banks have provided very strong competition to the traditional players by offering retail banking that is virtually free on the transaction and liability side,” he says. “They have also gone quite aggressively into consumer lending, which has made the market very tough for smaller players at a time when we are already under pressure to improve cost efficiency.”

Larger banks are generally less concerned about competition from new players. For one thing, as Turek points out, many CEE markets are too small to be of interest to ambitious fintechs.

“Anyone with a new idea obviously wants to take it to markets of scale,” he says. “That rules out a lot of the region.”

Regional bankers also tend to be confident that they can neutralize the threat from fintechs. Heim says Société Générale sees them as “partners and potential targets”.

Wolf agrees.

“Banks will use the innovation of fintechs, but I don’t believe they will be so disruptive that they will take over the role of banks or even take a lot of business from them,” he says.

Binbasgil, however, warns against complacency, particularly when it comes to allowing fintechs to capture market share in payments.

“As a bank you need to control the flow, so payments systems are particularly critical,” he says.

He adds that the area is a focus for Akbank, which expects to launch a new high-tech payments initiative targeting Turkey’s younger customers later this year.

Meanwhile, CEE’s digital banking leaders are increasingly looking to expand into new sectors. While most banks in the region have no ambitions to follow Sberbank’s lead in creating giant Asian-style ecosystems for retail and small and medium-sized enterprise customers, many are already offering a plethora of non-banking products and services from parking tickets to tax returns.

Others are looking to boost take-up of their traditional banking services through technology partnerships with players from other sectors. VTB, for example, is working on B2B solutions that integrate its systems with those of Russian Railways, Russian Post, telecoms companies and Russian developers.

“I believe that, through initiatives like these, we can use technology to take new ground rather than ceding it to others,” says Kostin.

Some banks are also eyeing the opportunities created by digitalization for cross-border expansion. Erste has mooted the idea of taking George, CEE’s first multi-country digital platform, into Western Europe, while Georgia’s TBC has announced plans to launch its digital-only bank, Space, in Azerbaijan and Uzbekistan.

This highlights another of the potential benefits of digitalization, namely that it offers a cost-efficient way to reach CEE’s sizeable unbanked populations. According to the latest Global Findex survey, just 29% of adults in Azerbaijan and 37% of Uzbeks have a bank account. Banking penetration is slightly higher in other Caucasus and central Asian markets but still low even by emerging market standards.

Similarly, after nearly two decades of aggressive, tech-driven growth, Turkey remains underbanked. Despite an average annual increase in banking assets of 20% since 2002, total lending in the country still stands at just 70% of GDP; nearly half of Turkey’s population counts as unbanked.

“Banks in Turkey are supporting the real economy much better than they used to, but there is still huge untapped potential in the market,” says Binbasgil.

Even the developed markets of central Europe still lag their Western counterparts when it comes to financial penetration. In the Czech Republic, the region’s most advanced economy, the loan-to-GDP ratio stands at just over 60%, less than half the rate of neighbouring Germany.

Some question whether or not lending in CEE will be allowed to reach western levels.

“Regulators will be cautious,” says Wolf. “Too high loan penetration is not healthy.”

At the same time, he sees substantial room for growth in savings and investment products.

“Fund management is still underdeveloped in most markets in the region,” he says.

Add to this economic growth that, while not outstanding in developing world terms, easily tops anything on offer in core Europe, and it is easy to see why CEE retains its appeal for Western groups. Even allowing for a slight slowdown, the EBRD expects GDP to expand by 3.5% in central Europe and the Baltics this year, and 3.2% in SEE, eastern Europe and the Caucasus.

Rising interest rates across the region have also brought welcome relief from margin pressure for banks, while returns in countries such as Romania and the Balkans have recently been boosted by the release of provisions, following the sale and restructuring of large legacy portfolios of bad debts.

As a result, while the days of 40% to 50% returns on equity may be a pre-crisis memory, there are few markets in CEE where the sector figure is below 10% and many where it is well above that. For Western bankers this provides an unanswerable case for remaining in the region.

“Whether they come from Italy, Belgium, France or Austria, the large international players all make better returns in CEE than they do at home,” says Treichl.

As Turek notes, this represents a remarkable achievement for the transition economies of emerging Europe.

“If you look at where banking was in the region in the early 1990s and where it is today, we’ve seen an improvement that few people would have expected,” he says.

“There have been challenges, setbacks and missteps, but what we have today is a strong sector that has learned lessons from the past and is able to effectively support the economy. It has been a tremendous journey and there is every reason to be optimistic about the future.”