Emerging Europe

Raiffeisen Bank maintains its position at the top of the banking pile in Bosnia & Herzegovina. It is able to serve all sections of the community throughout both the Srpska Republika and the Croat-Muslim Federation and is the largest individual bank in the entire country. In 2007, it increased its corporate customer base by 13%, and retail clients rose by 17%. These increases allowed Raiffeisen to grow its assets by 18.8% in 2007, thanks to strong loan growth, especially in the corporate sector, where it increased by 43%, far above the market average. Thanks to its 99 branches the bank also performed strongly on the retail side, accounting for 21.43% of lending, while it maintained its number one position in the card issuance business on the back of the expansion of its ATM and point-of-sales network.

Central and eastern Europe’s newest country can count on one of the region’s most experienced banks to deliver high-quality financial services. Raiffeisen Bank has established a strong market position: it leads in retail, corporate and SME lending volumes. In 2007, total lending at Raiffeisen rose almost 50% from €222 million to reach €330 million. The bank is also playing a leading role in attracting money into the official economy, with total deposits rising to €396 million from €310 million. The bank is profitable as well as important to economic and social development, with net profit rising from €10.79 million in 2006 to €14.68 million in 2007.

After suffering from several departures to local rivals, especially VTB, Deutsche Bank has sought to bolster its Moscow office with new hires. Alex Bronin is appointed head of emerging markets structuring for Russia/CIS, Valeri Pouchni, head of rates and FX trading, Andrey Yumatov, head of corporate derivative sales, Alex Danylenko, head of local-currency bond trading, and Diana Nikolova as a senior structurer focusing on Russian structured credit.

7 the average percentage return of US IPOs one month after listing so far this year.

Tatra banka continues to gain market share in Slovakia, achieving 15.4% in 2007, up from 14.8% and 13.1% in 2006 and 2005 respectively. Total assets and net income both grew by 39% in 2007, driven in particular by strong growth in retail banking. For example, mortgage and home equity lending volumes rose by 100% last year. The bank’s increased focus on small-business lending also paid dividends, with loans to the sector growing by 300%. Tatra banka also scored a notable success in the asset management field, with the bank leveraging its 128-strong branch network to boost net deposits into its mutual funds by more than 200%, with overall assets rising by 44.7%. Tatra Asset Management continues to launch innovative products covering such areas as real estate investment. It is the leading asset manager, with a 35.5% market share.

Political relations between Greece and former Yugoslav Republic of Macedonia are strained but the strong financial and management support from owner National Bank of Greece has helped to ensure that Stopanska Banka Skopje remains the leading force in FYROM’s banking sector. In 2007, the bank posted a 24% return on equity on the back of gross profit of €19.6 million equivalent, according to International Accounting Standards. The bank’s total assets rose to €897.2 million at year-end 2007, up 31% on 2006. Total deposits reached €707.1 million, up 31.2% on 2006. At the end of 2007, about a million Macedonian citizens had accounts with Stopanska Banka Skopje, more than half of the country’s population.

BRD remains the bank to watch in Romania, having reported the highest net profit of any Romanian bank in 2007. Net profit rose by 43% to €279 million-equivalent. Despite sizeable investments in technology, network expansion and staff recruitment and training, which helped it to attract 300,000 new customers in 2007, BRD still maintained its position as the most profitable bank in Romania, with a return on equity of 35.4%. On the retail side, the bank boosted lending by 45% as well as launching a new life insurance arm, BRD Fond de Pensii. In corporate banking, the bank provides a comprehensive range of products and services spanning small businesses through to multinational corporations. With regard to investment banking, BRD has continued to build its corporate finance, brokerage and asset management operations, which should ensure that fee income helps mitigate any slowdown in interest income resulting from a drop.

After winning this award in 2006 and 2007, Bank of Georgia continues to affirm its position as Georgia’s leading financial institution with yet another year of stellar performance. Deposits grew 142.2% to $851.6 million, and outstanding mortgages rose 103.5% to 4,230, an increase in the value of those mortgages of 187.2%, to nearly $150 million. In the retail division, revenue per employee rose by a half.

In a year when the virtues of retail and corporate banking have come to the fore, Ceska Sporitelna secures the best bank title again in the Czech Republic. With support from its parent, Erste Bank, it has transformed itself into a banking powerhouse. Through 640 branches Ceska Sporitelna serves more than 5.3 million customers. In the past year it put in another strong performance with net interest income growing from Kc18.37 billion in 2006 to reach Kc21.2 billion ($1.37 billion), while operating profit rose to Kc18.37 billion in 2007 from Kc15.15 billion in 2006. As a result the bank’s return on equity edged up from 23% to 23.8% and the cost-income ratio improved from 53% in 2006 to 50% in 2007.

Citi has promoted Tom King to a new position of head of EMEA banking. His role encompasses investment banking and the corporate and commercial bank. He will also oversee the newly created capital markets origination group for the region.

Nova Ljubljanska Banka remains streets ahead of the competition, with the bank maintaining its number one position thanks to a 30%-plus market share in terms of total banking assets, loans and deposits in Slovenia.

The tricky completion of a triple merger in 2007 failed to dim the financial performance of UniCredit Bulbank, which was the number one bank in Bulgaria as measured by assets, loans and profits last year. With more than a million customers, the new entity is the leading universal bank in Bulgaria, with strong positions in corporate, investment and retail banking. The overall strength of the franchise was recognized by Standard & Poor’s last year, when it reaffirmed its BBB+ credit rating – the highest for any bank in Bulgaria. Despite the demands of merging Bulbank, HVB Bank and Hebros Bank, the new improved UniCredit Bulbank outperformed the rest of the banking sector, with net income rising by 25% and operating profit by 89.9%. Total assets grew by 21.1% to reach Lev9.06 billion ($7.2 billion) by year end 2007.

HSBC

DNB Nord Bankas has enjoyed another stunning year in Lithuania, with total assets increasing by 47.55% – well in advance of the growth of the broader market – giving it a market share in terms of assets of 13.2%. Loan growth was a dizzying 50.4%, with retail loans up 66.1% and corporate loans increasing by 36.4%. Deposits have not quite kept pace with loan growth but still rose 36.1%, with corporate deposits increasing by 51%.

Based on Bank Pekao’s 2007 results, parent UniCredit has succeeded in turning it into the leading bank in Poland by total assets, client savings and equity. It was also the second-biggest lender. Despite the distraction of a merger with part of Bank BPH, Bank Pekao reported strong financial figures for 2007, proving it is both big and clever. Net income rose by 20.9% compared with 2006, while return on equity was a creditable 23.7%. The bank also cut its cost-income ratio to 47.1%. Despite market pressure on the mutual funds industry in the fourth quarter of 2007, Bank Pekao still managed to boost its net fee and commission income by 12.7% year on year.

The biggest retailers will regret having been blind to opportunities in emerging Europe.

Despite a challenging political and economic environment in Hungary, OTP Bank continues to perform well, registering a net profit of Ft141.7 billion ($907.5 million) in 2007, up more than 11% on 2006. OTP dominates all segments of the Hungarian banking market, accounting for more than 50% of municipal loans and deposits, more than 30% of retail deposits and loans as well as 10% of the corporate segment. With more than 400 branches, it is by far the largest retail bank in Hungary, with almost 4.6 million customers, but also services more than 200,000 corporate clients. The bank has invested heavily in technology with the result that its award-winning OTPdirekt internet banking channel was used by more than 1.5 million customers in 2007, giving it a best-in-class 38% market share. Its telephone banking services have also proved a hit, servicing more than 50% of all Hungarians using mobile phones. In corporate banking, the bank offers an extensive range of services spanning leasing, forfaiting, factoring, project finance and syndicated loans in both forint and foreign currencies. The bank also has a highly successful asset management arm, OTP Fund Management, that manages building society, health fund and insurance portfolios as the portfolio of the National Deposit Insurance Fund, Investor Protection Fund and Guarantee Fund of Pension Funds, which were established by the Hungarian state to protect investors’ interests. OTP Fund Management has a 32.4% market share, with assets under management growing by 25% in 2007 to Ft815.1 billion.

Azerbaijan is one of the more productive of the smaller central Asian countries, with a population of 8.4 million and a GDP of $31 billion. Comfortably leading the country’s banking industry is International Bank of Azerbaijan, with about half of the country’s banking assets and loans. This year, following a $15 million loan for Bank Respublica and a $30 million loan for Unibank, IBA came to market in May for its own loan, to the amount of $173.5 million, the largest in the country’s history and a graphic reminder of the levels IBA operates at compared with its domestic peers. The deal was originally planned for $80 million but was increased on the back of strong investor interest.

Hansabank – which is set for a name change to Swedbank in the autumn – dominates every sector of the retail and corporate banking market in Estonia and continues to grow rapidly. Total income in the 2007 financial year rose 39% and net profit hit €227 million – an increase of 28% on the previous year.

Citi

Société Générale

With a population of just 5.21 million people producing a GDP of a mere $3.7 billion, Kyrgyzstan is not going to be home to any really large financial institutions. The biggest bank in Kyrgyzstan, with $130 million in deposits accounting for a 22.1 % market share, is Asia Universal. It is also the best performer. It is Kyrgyzstan’s fastest-growing mortgage provider and is the only Kyrgyz entity to have received an international credit rating. Total shareholders’ equity rose 212% to $36.5 million in the past year, while net income climbed 246% to $2.7 million. In both of those measures, as in total assets and customer accounts, Asia Universal is by far the country’s leader. It is also the first bank to offer internet banking services, and the only one to establish a dedicated control and compliance department. It is also competitive regionally, with branches in the Ukraine, Kazakhstan and Latvia, as well as a representative office planned for China later this year.

JPMorgan Consistency and ability to execute landmark transactions makes it a clear winner in emerging markets.

Goldman Sachs

Goldman Sachs

Raiffeisen Bank managed to extend its market leadership in Albania, despite increased competition from such rivals as Banka Kombetare Tregtare and American Bank of Albania. Raiffeisen Bank Albania is firmly ranked as the number one bank by assets, deposits and loans, on both a corporate and retail basis. The bank continues to extend its client coverage and now has 97 branches, almost three times those of its nearest rival; 154 ATMs, double its closest competitor’s; and more than 400 point-of-sales terminals. The bank also extended its mobile banking team, reaching out to previously unbanked sections of the population. Thanks to this expansion, Raiffeisen Bank managed to grow its customer base by 14% in 2007, which helped it double its retail lending, while corporate loans rose by 45%. Growth did not come at the cost of profitability, however. The bank reported a cost-income ratio of 40% and a pre-tax return on equity of 58%.

After years of plenty, there are leaner times ahead in central and eastern Europe. That’s the stark prospect facing bankers in the wake of the continuing sub-prime mortgage woes in the US and western Europe and the associated global credit crunch. But while the banking markets in central and eastern Europe have become more challenging, they still remain highly profitable.

The strong run in emerging market equities and the relative outperformance of non-US developed market stocks appears to have ended as a weak US housing market weighs down on consumers and credit markets and high commodity prices stoke inflation worldwide.