Emerging Europe

Government moves squeeze domestic earnings; Foreign-derived profits rise to exceed 50%

CEO signs $3.6 billion acquisition; Jumps past 5% foreign-income target

This time it's different: the general consensus is that the emerging Europe, Middle East and Africa region will stand tall in the face of the global economic slowdown, compared to 2008. But growth in Russia is slowing.

Market players are relatively-sanguine about the Russian economy, despite the oil price fall. Instead, risky loan growth, amid strong bank competition, could spark systemic problems in the years ahead.

Commentators argue that Latvian-style austerity would not work for countries such as Italy and Spain. For some, this is because Latvia is a special case; for others, Latvia isn't even the exception and the dark side of austerity is showing its head.

The country has come a long way in transforming a reputation as an opaque, corrupt state into a model open economy with aspirations to be a regional hub in trade and finance. But can its achievements survive the political upheaval threatened by elections?

Emerging market investors’ preferred sovereign borrower is now taking on its richer EU neighbours in the competition for funding. Anna Suszynska, deputy director of the public debt department in Poland, tells Euromoney about its issuance strategy.

A new $10 billion state private equity fund in Russia completed its first deal alongside private-sector investors last month, in the biggest of a string of M&A transactions in the Russian power sector. In addition to private-sector money, the deal included the largest-ever private equity investment in Russia by a Middle East fund, in this case one backed by sovereign wealth.

Lucrative stakes in Turkey’s Akbank and Finansbank have been added to the for-sale list, while Dexia approaches a deal with Russia’s Sberbank to sell Denizbank. With EFG Eurobank leaving the Turkish market to Kuwait’s Burgan Bank and Lebanon’s Bank Audi establishing a unit in Turkey, the trend is hard to ignore: Arab investors have discovered Turkish banking.

A visit to a municipal wedding hall in Istanbul nowadays would be enough to show how far Turkish banks are willing to go to get hold of the gold kept under the pillow and outside the financial system.

There are too many banks for sale in emerging Europe, and not enough buyers.

Preparations for Greek banks’ withdrawal; Romanian and Serbian currencies at record lows

The MSCI Emerging Markets index notched a 17% gain earlier this year, before nose-diving in March as worries surrounding a Greek exit from the eurozone sent global markets into a tailspin. But the jury is out on whether the asset class can outperform if markets take another leg down.

As the markets digest the impact of the eurozone woes on eastern Europe, here's a round-up on the region's debt, banking and capital market challenges.

Poland's debt-management official waxes lyrical in an interview with Euromoney about how the country is riding out the eurozone storm, and the sovereign's debt issuance plans

Russia’s state-owned bank is forging ahead with market-share gains in Kazakhstan as local competitors fail to make a comeback from the financial crisis. And Sberbank’s success seems to presage a broader Russian resurgence that might counter Chinese influence.

According to one foreign survey, Bulgaria has the most business-friendly environment on the continent. However, it is burdened by stagnant capital markets and a reliance on the debilitated economies of western Europe.

With lending booming again, Russia’s banks need recapitalizing. Ironically, partial privatization of state-owned financial institutions may be crowding out much-needed stock offerings by private-sector lenders and smaller banks.

Kuwaiti lender pays $355 million for Eurobank Tekfen; Greek seller bolsters capital levels

Unlike its regional neighbours, Poland is in the fortunate position of still having a large portfolio of state assets to sell to boost its public finances. This year’s target from privatization sales is Z10 billion ($3.1 billion), with a further Z5 billion earmarked for next year.

Since coming to power in April 2010, Viktor Orban’s Fidesz government has given Hungarian bond investors a rough ride with a succession of unorthodox and populist measures, from introducing crisis taxes on banks and other foreign-dominated sectors to cutting off ties with the IMF, nationalizing private pension funds, and forcing banks to accept heavy write-downs on foreign-currency-denominated mortgage debt.

Central and eastern European governments have exploited the flattering contrast between their headline debt numbers and those of western Europe to achieve ever lower funding costs. But there is still much work to be done to ensure the sustainability of debt levels.

Figures from Dealogic suggest that bankers covering EEMEA should not get carried away with the realities of the Middle East and Africa.

Government promises fiscal consolidation; Recapitalization of NLB looms

Despite the eurozone volatility, frontier market bonds could outperform emerging market sovereign credit in hard currency, Exotix, a frontier market boutique, has argued.

As Bulgaria struggles with its reliance on investment from the foundering economies of the eurozone and its own torpid capital markets, does the government have the firepower to combat the storm?

Hungary is unlikely to issue in cross-border markets before a deal with the IMF is concluded, the country's economy has said, while striking an upbeat note over negotiations with the policy lender.

Opposition from domestic regulators suggests the July target to fully liberalize Russia’s domestic bond market for foreign investors is unlikely to be met, said analysts.

Includes Bonds, Equities, Loans, M&A, MTN, Project Finance

Sovereign taps Eurobond market; Sberbank to reopen privatization round