Fitch Cee Banks 2012

7/31/2019 Fitch Cee Banks 2012

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www.fitchratings.com 14 December 2011

Central and Eastern Europe

2012 Outlook: CEE BanksDownside Risks from Eurozone Crisis, Asset QualityOutlook Report

Rating OutlookRisks on the Downside: The combined outlook for banks in central and eastern Europe (CEE)remains stable, but is deteriorating against a backdrop of weakening GDP growth, worse assetquality and potential funding constraints. The balance of risks remains negative in Slovenia andHungary. Adverse trends have also continued in Bulgaria, Romania and Croatia, althoughbanks in these markets retain some flexibility to absorb shocks. For Polish, Czech and Slovakbanks, the stable outlook reflects stronger asset quality, funding and performance.

Asset Quality Issues Mounting: Fitch Ratings expects negative asset quality trends in mostCEE banking sectors in 2012, even where there has been some stabilisation or marginalimprovement in 2011. This will put additional pressure on banks in Slovenia and Hungary,where capital cushions are relatively thin and pre-impairment profit is weak. Other systemsshould be able to absorb significant additional risk charges without the need to replenish capital.

Funding Becoming More Constrained: Fitch expects parent banks to gradually withdrawfunding where subsidiary liquidity positions allow and active growth is not targeted. Funding willalso probably become more expensive as parents pass on their own higher refinancing costs,access to wholesale markets remains limited, and competition for local deposits rises. This willrestrict loan growth and pressure margins, particularly in markets more reliant on foreign funding,such as Hungary, Romania and Slovenia.

Strategies Reassessed, Exits Unlikely: Fitch expects most major players in the region notably UniCredit S.p.A. ('A'/Watch Negative), Raiffeisen Bank International AG ('A'/Stable), ErsteGroup Bank AG ('A'/Stable), Intesa Sanpaolo ('A'/Negative) and Socit Gnrale ('A+'/Stable) to largely retain their presence and support subsidiaries, where required, but believes they willmore tightly ration funding and capital. More peripheral players may be keener to exit, but banksales, even in more attractive markets, will be difficult without easing of the eurozone crisis.

Parents and Sovereigns: The Long-Term IDRs of CEE banks mostly reflect potential supportfrom parent institutions, with Outlooks aligned accordingly. However, in Bulgaria, Romania,Hungary and Croatia, lower sovereign ratings ('BBB ' in each case) mean that bank IDRs areoften at Country Ceilings, and bank Outlooks reflect those on sovereigns.

What Could Change the OutlookEscalation of Eurozone Crisis: A sharp escalation of the eurozone crisis, accompanied byrecession, could result in downgrades of the IDRs of CEE banks, as parent banks' ratingswould likely come under pressure. CEE banks' VRs could also be downgraded in such ascenario, as CEE economies would suffer from reduced export demand, banks' funding accesswould likely be impaired, and CEE currencies could depreciate.

Further Asset Quality Deterioration: The negative outlooks on the Slovenian and Hungarianbanking sectors already reflect the potential for further asset quality deterioration to erodecapital. Continued weakening of asset quality in Bulgaria, Romania and Croatia, withoutstrengthening of banks' capital, could result in sector outlooks turning negative. Fitch viewssharp loan deterioration in Poland, the Czech Republic and Slovakia as unlikely at present.

Sovereign Rating Actions: Bank IDRs and Outlooks in Bulgaria, Romania, Hungary andCroatia could be revised in case of changes in sovereign ratings. Bulgaria and Romania arecurrently on Stable Outlook, and Hungary and Croatia on Negative.

Figure 1 VRs and Sector Outlooks

Country BSI a VRcategory b

SectorOutlook

POL C bbb StableCZE C bbb StableSLK C bbb StableHUN D bb NegativeBUL D bb StableROM D bb StableSLN D bb NegativeCRO D bb Stablea The Banking System Indicator (BSI)measures intrinsic banking system qualityon a scale from A (very high) to E (verylow)b Based on weighted average of ViabilityRatings (VRs) assigned in the sectorSource: Fitch

Figure 2

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Rating Outlooks on IDRs

Status at 12 Dec ember 2011Source: Fitch

P ositive Stable Negative

Related ResearchEurozone Crisis: Funding Risks for EmergingEurope (November 2011)EM Banking System Datawatch(November 2011)

Global Bank Rating Trends Q311(October 2011)Global Economic Outlook (December 2011)Macro-Prudential Risk Monitor(December 2011)

AnalystsArtur Szeski+48 22 338 [email protected]

Gulcin Orgun+90 212 2847 [email protected]

Michal Bryks+48 22 338 [email protected]

James Watson, CFA+7 495 956 6657

[email protected]

Rating Outlook

SS TT AA BB LL EE
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656619http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656619http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656618http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656618http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654209http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654209http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659329http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654581http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654581http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654581http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654581http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659329http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654209http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654209http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656618http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656618http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656619http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656619


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2012 Outlook: CEE BanksDecember 2011

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Key IssuesContagion from Eurozone CrisisCEE banking sectors have very little direct exposure to the eurozone periphery. Fitch istherefore more concerned with the potential impact of second-order effects of the eurozone

crisis on CEE banks. In Fitch's view, two of these (asset quality and funding availability) standout as potentially having the biggest impact already in 2012.

Asset Quality Trends in asset quality were mostly negative across CEE in 2011, driven by slow economicgrowth and rising unemployment (Bulgaria, Romania, Poland, the Czech Republic, Slovakia),and exacerbated in Hungary, Romania and to some extent Poland by weaker local currencies.Exposures to commercial real estate were also a problem virtually everywhere in the region,but appeared most acute in Slovenia, Hungary and Bulgaria.

Non-performing loan (NPL) trends in this cycle have so far reflected the lagged effect of thepre-2008 credit expansion and crisis-driven turbulence in real estate, labour and currency

markets. Against this backdrop, Fitch expected NPL ratios across CEE to peak in 2012 at thelatest.

However, the weakening of economic growth in the eurozone, and hence across CEE, meansthat Fitch's base case is now for NPLs to continue their upward creep across the region in 2012.Moreover, a further escalation of the eurozone crisis would result in a sharper deterioration ofCEE asset quality trends in 2012 and beyond, due to a combination of still weaker economicperformance, potential depreciation of local currencies and likely credit contraction.

Funding Availability Fitch expects parent banks to gradually withdraw funding from CEE subsidiaries where theliquidity positions of the latter allow, and active growth in a particular market is not being

targeted. Parent banks are facing capital and funding constraints of their own, and remediesinclude deleveraging of foreign subsidiaries, especially in less strategic markets. The recentmove by the Austrian authorities to limit further funding by the country's banks of CEE lendinggrowth reflects regulatory concern on this issue although the Austrian measures are unlikelyto represent a biting constraint in the near term, in Fitch's view, given Austrian banks' alreadycautious approach to further expansion.

Evidence of parent banks withdrawing funding has so far been limited, however, and has beenconfined to Greek banks taking some money out of their Bulgarian subsidiaries, and moderateadjustment in Hungary. This reflects the challenge of raising deposits locally at an acceptableprice to replace parent funding, a challenge that could increase if competition for customerfunding intensifies. In the near to medium term, funding constraints will probably restrict loangrowth and pressure margins, particularly in markets more reliant on foreign funding, such asHungary, Romania and Slovenia. However, in the long term, stronger focus on domesticfunding sources and less reliance on external borrowings would be positive for the stability ofCEE banking sectors.

Access to non-parent wholesale funding is likely to remain limited in 2012. In this context, theSlovenian banking sector stands out as most vulnerable, having high reliance on foreignfunding (32% of total liabilities) and being predominantly domestically owned. However, assetquality and capital, rather than liquidity, still represent the most likely potential triggers of furtherweakness in the Slovenian system.

M&A Activity Another potential result of the pressures on parent banks could be exits from certain CEEinvestments. Fitch continues to believe the greatest potential for M&A activity exists in Poland(due to low consolidation and weaknesses at some parent banks), Bulgaria and Romania (if

Figure 3

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C Z E

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Foreign Ownership(%)

% of assets at end-2010; OTP not includedfor HUN, as not held by strategic ownerSources: National banks , Fitch

Related CriteriaGlobal Financial Institutions Rating Criteria(August 2011)
http://research/creditdesk/reports/report_frame.cfm?rpt_id=649171http://research/creditdesk/reports/report_frame.cfm?rpt_id=649171http://research/creditdesk/reports/report_frame.cfm?rpt_id=649171http://research/creditdesk/reports/report_frame.cfm?rpt_id=649171


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Greek banks seek to exit) and Slovenia (given limited foreign ownership at present and themoderate ability of some owners to provide support).

However, recent evidence suggests that it is becoming increasingly difficult to find buyers forbanks in CEE. In Slovenia, there appears to have been little progress with the sales of majority

stakes in Banka Celje d.d. ('BB'/Negative) and Abanka Vipa d.d. ('BB '/Stable), and even in thestronger Polish market, disposals of Kredyt Bank ('A '/Watch Evolving) by KBC Bank('A'/Stable) and of Bank Millennium ('BBB '/Watch Evolving) by Banco Comercial Portugues,S.A. ('BB+'/Negative) have yet to be completed. In Poland, this contrasts somewhat with thesituation in 2010, when Banco Santander ('AA '/Negative) acquired Bank Zachodni WBK S.A.('A+'/Negative) and Raiffeisen purchased the local business of EFG Eurobank Ergasias S.A.('B '/Negative Watch).

In Fitch's view, bank sales in the region will be challenging to complete until there is moreclarity regarding the resolution of the eurozone crisis. Potential buyers are less willing toexpand their balance sheets and stretch their capital ratios given current market conditions.Fitch also believes that CEE regulators have in some cases become more stringent in theirrequirements for bank acquirers, given concerns about the eurozone crisis and the potentialimpact of foreign ownership on CEE banking systems.

CEE Banking Systems: Key Credit Metrics

Figure 4

Fitch's AssessmentsPOL CZE SLK HUN BUL ROM SLN CRO

Asset quality Average Average Average Weak Weak Weak Weak WeakTrend

Profitability Average Average Average Weak Average Weak Weak AverageTrend

Capitalisation Average Strong Average Average Average Average Weak AverageTrend Funding Average Strong Strong Weak Average Average Weak AverageTrend Source: Fitch

Lending and Asset Quality

Figure 5 Figure 6

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CRO SLK BUL POL CZE SLN ROM HUN

2010 9M11

Loan Growth

(%)

Nominal growth. 9M11 not annualisedSource: National banks and bank regulators, Fitch

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Corporate Retail

Loans/GDP

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End-Q311 loans divided by 2011F GDPSource: National banks and bank regulators, Fitch


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Figure 7 Figure 8

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CRO HUN ROM BUL POL CZE SLN SLK

Foreign Currency Loans/Total Loans

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End-Q311 data except SLN (end-2010)Source: National banks and bank regulators, Fitch

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SLN BUL ROM CRO HUN CZE SLK POL

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Trends in NPL Ratios

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90 days overdue for all markets except CZE (bottom 3of 5 regulatory categories)Source: National banks and bank regulators, Fitch

Profitability

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2010 9M11

Pre-Impairment Profit/Avg. Assets

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SLK CZE POL CRO BUL HUN SLN ROM

2010 9M11

Return on Average Assets

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9M11 data is annualised; 9M11 not available for ROMSource: National banks and bank regulators, Fitch

Capitalisation

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CRO BUL CZE POL SLK HUN SLN

Reported Adjusted

Tier 1 Capital/Risk-Weighted Asst.

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End-Q311 data. Adjusted ratio indicates impact of80% NPL reserve coverageSource: National banks and bank regulators, Fitch

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CRO BUL CZE POL SLK HUN SLN

Loss absorption capacityAdjusted loss absorption capacityCost of risk in 9M11 (annualised)

Loss Absorption Capacity

(% of loans)

a Additional provisions which system could sustain atend-Q311 before tier 1 ratio falls to 8%b Adjusted for 80% coverage of NPLs at end-Q311Sources: National banks and bank regulators, Fitch

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FundingFigure 13 Figure 14

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HUN SLN CRO ROM POL BUL SLK CZE

Gross Loans/Customer Funding(%)

End-Q311 dataSource: National banks and bank regulators, Fitch

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Foreign Funding/Liabilities(%)

End-Q311 data except ROM (end-H111), BUL,CRO (end-2010)Source: National banks and bank regulators, Fitchcalculations and estimates

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BUL CRO CZE HUN POL ROM SLK SLN

Austria Belgium France

Germany Greece ItalyNetherlands Sweden Other

Foreign Bank Ownership in CEE

(% Assets)

Source: Fitch, National Central Banks. Data excludes banks with very small market shares


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Annex: Banking System Data

Figure 15 Bulgaria (BGNm)Date End-Q311 End-2010 End-2009 End-2008 End-2007Assets and loansAssets 76,495.9 73,725.7 70,867.9 69,560.5 59,089.5Assets (USDbn) 56.8 50.4 53.7 50.1 44.4Gross loans 54,205.2 53,353.6 52,449.0 50,189.6 37,950.8

O/w non-retail 35,581.0 34,774.9 33,784.9 32,832.5 24,978.4O/w retail 18,624.2 18,578.7 18,664.1 17,357.1 12,972.4O/w foreign currency 34,278.1 32,958.3 30,757.8 28,698.4 19,190.0

Loan impairment reserve 3,838.4 3,092.6 2,073.8 1,169.8 992.7Net loans 50,366.8 50,261.0 50,375.2 49,019.8 36,958.1

Funding and capitalCustomer deposits 51,852.1 46,932.6 43,533.3 42,055.0 39,137.7


Equity 10,198.8 10,032.3 9,456.6 7,930.9 6,208.5Tier 1 regulatory capital 8,115.0 7,762.5 7,674.5 5,914.6 4,518.5Total regulatory capital 9,207.5 8,906.9 9,318.2 7,874.3 5,775.9Risk-weighted assets 51,882.1 50,896.6 54,700.0 53,007.0 41,760.0

Income statementNet interest income 2,172.9 2,917.2 2,847.0 2,787.6 2,171.6Total operating revenues 2,924.7 3,932.3 3,785.4 3,737.8 3,103.9Operating expenses 1,449.6 1,929.3 1,923.2 1,878.1 1,496.6Pre-impairment operating profit 1,475.1 2,003.0 1,862.2 1,859.7 1,607.3Impairment charges 952.7 1,316.7 1,040.4 330.4 344.5Net income 461.6 616.7 780.2 1,386.7 1,143.6

Ratios: Lending and asset qualityAssets/GDP 101.5 104.6 110.2 104.2 104.5Gross loans/GDP 71.9 75.7 81.6 75.2 67.1Net loans/assets 65.8 68.2 71.1 70.5 62.5Retail loans/gross loans 34.4 34.8 35.6 34.6 34.2Foreign-currency loans/gross loans 63.2 61.8 58.6 57.2 50.6Impaired loans/gross loans 14.7 11.9 6.3 3.2 2.4Reserve coverage of impaired loans 48.3 48.3 63.1 73.6 106.9

Ratios: FundingCustomer deposits/GDP 68.8 66.6 67.7 63.0 69.2Gross loans/customer deposits 104.5 113.7 120.5 119.3 97.0Customer deposits/liabilities 78.2 73.7 70.9 68.2 74.0Retail/total customer deposits 58.9 59.7 57.1 52.7 48.5Foreign funding/total liabilities - 23.3 27.7 30.3 23.3

Ratios: CapitalisationEquity/assets 13.3 13.6 13.3 11.4 10.5Tier 1 capital/risk-weighted assets 15.6 15.2 14.0 11.2 10.8Total capital/risk-weighted assets 17.7 17.5 17.0 14.9 13.8

Ratios: Income statementNet interest income/average earning assets 4.7 4.9 4.6 5.0 -Operating expenses/operating revenues 49.6 49.1 50.8 50.2 48.2Pre-impairment profit/average assets 2.6 2.8 2.7 2.9 -Loan impairment charges/average loans 1.7 1.8 1.5 0.5 0.6Return on average assets 0.8 0.9 1.1 2.2 -Return on average equity 6.1 6.3 9.0 19.6 -

Ratios: Sector structureNumber of banks 30 30 30 30 30State-owned banks/sector 3.3 3.2 2.4 2.1 2.1Foreign-owned banks/sector 77.9 80.7 84.2 83.9 82.3Privately owned banks/sector 18.9 16.1 13.4 14.0 15.6Five largest banks/sector 52.1 54.5 58.0 57.1 56.5Source: National banks and bank regulators, Fitch calculations


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Figure 16 Croatia (HRKm)Date End-Q311 End-2010 End-2009 End-2008Assets and loansAssets 403,914.0 391,088.1 378,215.9 369,955.1Assets (USDbn) 73.5 70.8 74.1 71.1Gross loans 287,856.4 274,942.8 261,018.0 252,575.3

O/w non-retail 159,480.2 153,540.9 143,214.6 129,934.9O/w retail 128,376.2 121,401.9 117,803.4 122,640.4O/w foreign currency 212,413.1 196,541.6 183,514.4 161,128.2

Loan impairment reserve 14,151.8 11,959.7 8,620.0 6,076.0Net loans 273,704.6 267,100.8 252,308.4 246,499.3

Funding and capitalCustomer deposits 213,250.2 206,956.3 193,484.8 194,628.0

O/w non-retail 54,290.2 54,397.6 52,391.6 58,696.7O/w retail 158,960.0 152,558.7 141,092.2 135,931.3O/w foreign currency - 186,031.5 173,824.3 147,926.0

Equity 56,134.4 54,375.0 52,554.1 49,913.1Tier 1 regulatory capital 49,924.5 50,764.9 48,456.7 48,126.3Total regulatory capital 54,517.2 54,434.1 52,556.6 48,928.5Risk-weighted assets 280,798.8 289,697.2 315,936.6 316,904.1

Income statementNet interest income 8,825.5 10,963.5 9,545.1 9,952.8Total operating revenues 12,115.7 15,651.7 15,286.0 14,363.8Operating expenses 5,724.4 7,574.4 7,546.9 7,525.8Pre-impairment operating profit 6,391.3 8,077.3 7,739.1 6,838.0Impairment charges 2,615.5 3,713.6 3,514.6 1,095.7Net income 3,110.4 3,510.9 3,286.7 4,618.3

Ratios: Lending and asset qualityAssets/GDP 119.1 118.8 120.4 108.1Gross loans/GDP 84.9 83.5 83.1 73.8Net loans/assets 67.8 68.3 66.7 66.6Retail loans/gross loans 44.6 44.2 45.1 48.6Foreign-currency loans/gross loans 73.8 71.5 70.3 63.8Impaired loans/gross loans 12.2 11.2 7.8 4.9Reserve coverage of impaired loans 40.2 38.8 42.5 48.7

Ratios: FundingCustomer deposits/GDP 62.9 62.9 61,6 56.9Gross loans/customer deposits 135.0 132.9 134.9 129.8Customer deposits/liabilities 61.3 61.5 59.4 60.8Retail/total customer deposits 74.5 73.7 72.9 69.8Foreign funding/total liabilities - 23.4 24.0 23.3

Ratios: CapitalisationEquity/assets 13.9 13.9 13.9 13.5Tier 1 capital/risk-weighted assets 17.8 17.5 15.3 15.2Total capital/risk-weighted assets 19.4 18.8 16.6 15.4

Ratios: Income statementNet interest income/average earning assets 4.1 4.0 3.6 4.1

Operating expenses/operating revenues 47.2 48.4 49.4 52.4Pre-impairment profit/average assets 2.1 2.1 2.1 1.9Loan impairment charges/average loans 0.9 0.9 0.9 0.3Return on average assets 1.0 0.9 0.9 1.3Return on average equity 7.5 6.6 6.4 9.9

Ratios: Sector structureNumber of banks 34 34 34 34State-owned banks/sector - 4.3 4.2 4.5Foreign-owned banks/sector - 90.3 90.3 90.6Privately owned banks/sector - 5.4 4.9 4.9Five largest banks/sector 75.6 75.3 - -Source: National banks and bank regulators, Fitch calculations


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Figure 17 Czech Republic (CZKm)Date End-Q311 End-2010 End-2009 End-2008 End-2007Assets and loansAssets 4,426,317.0 4,184,933.3 4,086,318.7 4,041,585.9 3,612,137.2Assets (USDbn) 241.5 223.3 219.3 208.9 199.6Gross loans 2,257,379.8 2,174,751.1 2,102,083.8 2,075,687.4 1,783,987.7

O/w non-retail 1,161,711.2 1,114,190.4 1,111,744.0 1,188,645.4 1,054,213.3O/w retail 1,095,668.6 1,060,560.7 990,339.8 887,042.0 729,774.4O/w foreign currency 309,765.5 299,228.6 281,983.1 291,816.2 230,291.7

Loan impairment reserve 88,440.4 83,563.0 69,206.9 48,322.3 35,824.3Net loans 2,168,939.4 2,091,188.1 2,032,876.9 2,027,365.1 1,748,163.4

Funding and capitalCustomer deposits 2,865,202.6 2,788,697.8 2,698,236.0 2,566,916.0 2,369,009.0

O/w non-retail 1,142,319.2 1,123,805.3 1,108,823.8 1,092,723.8 1,048,031.5O/w retail 1,722,883.4 1,664,892.5 1,589,412.2 1,474,192.2 1,320,977.5O/w foreign currency 248,893.9 243,048.5 240,751.0 265,803.6 259,245.8

Equity 359,731.0 355,021.2 327,878.6 300,858.6 265,675.6Tier 1 regulatory capital 281,103.0 263,422.0 237,595.0 219,859.0 190,429.0Total regulatory capital 303,334.0 289,352.0 264,736.0 230,852.0 211,961.0Risk-weighted assets 1,931,850.0 1,865,175.0 1,875,625.0 1,873,425.0 1,835,175.0

Income statementNet interest income 82,038.0 105,457.0 103,299.0 98,043.0 84,698.0Total operating revenues 123,200.0 157,410.0 168,375.0 138,023.0 134,392.0Operating expenses 53,184.0 69,262.0 67,856.0 69,021.0 67,577.0Pre-impairment operating profit 70,016.0 88,148.0 100,519.0 69,002.0 66,815.0Impairment charges 19,839.0 22,377.0 29,825.0 15,221.0 6,525.0Net income 42,432.0 55,666.0 59,715.0 45,703.0 46,987.0


Ratios: FundingCustomer deposits/GDP 75.0 74.1 74.4 69.5 67.0Gross loans/customer deposits 78.8 78.0 77.9 80.9 75.3Customer deposits/liabilities 70.5 72.8 71.8 68.6 70.8Retail/total customer deposits 60.1 59.7 58.9 57.4 55.8Foreign funding/total liabilities 12.3 13.3 13.0 16.2 13.0


Ratios: Income statementNet interest income/average earning assets 2.8 2.8 2.8 2.9 2.8

Operating expenses/operating revenues 43.2 44.0 40.3 50.0 50.3Pre-impairment profit/average assets 2.2 2.1 2.5 1.8 2.0Loan impairment charges/average loans 0.6 0.5 0.7 0.4 0.2Return on average assets 1.3 1.3 1.5 1.2 1.4Return on average equity 15.8 16.3 19.0 16.1 18.6

Ratios: Sector structureNumber of banks 44 41 39 37 37State-owned banks/sector - - 1.7 1.9 -Foreign-owned banks/sector 97.0 97.0 97.3 97.1 97.6Privately owned banks/sector - - 1.0 1.0 -Five largest banks/sector 62.1 62.5 62.5 62.1 -Sources: National banks and bank regulators, Fitch calculations


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Figure 18 Hungary (HUFbn)Date End-Q311 End-2010 End-2009 End-2008 End-2007Assets and loansAssets 29,215.9 28,157.3 28,996.4 29,177.9 24,375.7Assets (USDbn) 135.5 135.3 154.2 155.3 141.2Gross loans 17,869.2 18,073.2 17,657.5 18,880.4 15,398.0


Loan impairment reserve 1,276.6 1,019.7 678.9 355.8 251.7Net loans 16,592.6 17,053.5 16,978.6 18,524.6 15,146.3


O/w non-retail 5,493.8 5,417.0 5,396.8 5,919.3 5,325.6O/w retail 6,429.9 6,186.9 6,539.3 6,294.7 5,420.3O/w foreign currency 2,849.3 2,964.1 3,081.4 3,051.3 -


Income statementNet interest income 721.1 938.7 823.1 877.4 765.6Total operating revenues 770.7 1,085.5 1,298.3 1,053.1 1,085.9Operating expenses 415.5 598.6 621.9 657.7 590.7Pre-impairment operating profit 355.2 486.9 676.4 395.4 495.2Impairment charges 257.9 393.6 408.7 129.0 102.2Net income 56.7 38.5 209.1 236.6 324.6

Ratios: Lending and asset qualityAssets/GDP 102.9 103.8 111.1 109.6 95.7Gross loans/GDP 63.0 66.6 67.7 70.9 60.4Net loans/assets 56.8 60.6 58.6 63.5 62.1Retail loans/gross loans 43.2 42.2 39.6 38.6 35.6Foreign-currency loans/gross loans 68.1 68.9 69.5 70.2 61.5Impaired loans/gross loans 11.1 8.5 6.3 2.6 -Reserve coverage of impaired loans 64.3 66.0 61.3 71.4 -





Ratios: Sector structureNumber of banks 35 35 35 36 38State-owned banks/sector - - - - -Foreign-owned banks/sector a 62.6 - - - -Privately owned banks/sector 37.4 - - - -Five largest banks/sector 60.7 62.6 63.6 59.8 -a Includes ownership by foreign banks; ie, does not include OTPSource: Hungarian FSA (data for credit institutions operating as joint-stock companies), Fitch calculations


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Figure 19 Poland (PLNm)Date End-Q311 End-2010 End-2009 End-2008 End-2007Assets and loansAssets 1,275,578.7 1,153,964.9 1,053,213.6 1,024,939.1 776,737.6Assets (USDbn) 391.6 389.9 369.5 346.1 319.0Gross loans 877,421.5 783,446.7 712,925.3 645,176.4 473,795.3


Loan impairment reserve 41,200.2 37,553.9 25,875.8 16,488.9 15,621.1Net loans 836,221.3 745,892.8 687,049.5 628,687.5 458,174.2




Income statementNet interest income 25,642.5 30,837.6 26,376.1 29,946.0 24,339.5Total operating revenues 42,708.8 53,468.2 50,305.3 50,492.2 43,282.6Operating expenses 22,063.9 28,770.3 28,092.5 28,075.8 24,868.8Pre-impairment operating profit 20,644.9 24,697.9 22,212.8 22,416.4 18,413.8Impairment charges 5,801.7 10,218.6 12,096.5 5,230.5 1,713.0Net income 11,976.0 11,672.6 8,282.4 13,934.1 13,642.0

Ratios: Lending and asset qualityAssets/GDP 84.5 81.6 78.5 80.5 66.0Gross loans/GDP 58.1 55.4 53.1 50.7 40.3Net loans/assets 65.6 64.6 65.2 61.3 59.0Retail loans/gross loans 59.9 60.7 58.6 57.7 54.5Foreign-currency loans/gross loans 31.4 30.0 29.8 32.6 23.7Impaired loans/gross loans a 7.5 7.8 7.1 4.1 4.8Reserve coverage of impaired loans

a62.7 61.3 51.1 61.7 68.9





Ratios: Sector structureNumber of banks 643 645 643 649 645State-owned banks/sector 23.5 - 20.9 17.6 18.7Foreign-owned banks/sector 64.3 66.8 68.6 73.5 72.4Privately owned banks/sector 12.2 - 10.5 8.9 9.0Five largest banks/sector 45.5 43.9 44.2 45.3 47.6a Since Q110, the Polish FSA has reported 90-day overdue loans (NPLs) for the sector. In this report, Fitch uses NPL numbers to compare asset quality to other markets atend-Q311. However, the impaired loan numbers above are based on a broader definition of problem exposuresSource: National banks and bank regulators, Fitch calculations


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Figure 20 Romania (RONm)Date End-Q311 End-2010 End-2009 End-2008 End-2007Assets and loansAssets 319,309.9 317,361.3 305,200.2 296,182.6 238,237.2Assets (USDbn) 99.0 99.0 103.9 104.6 97.2Gross loans 221,431.2 209,298.2 199,887.1 198,055.7 148,180.8


Loan impairment reserve 30,003.8 23,558.9 14,952.6 7,586.8 3,635.7Net loans 191,427.4 185,739.3 184,934.5 190,468.9 144,545.1



Equity - 29,121.3 26,970.3 27,375.6 25,791.6Tier 1 regulatory capital 23,878.6 24,497.8 21,379.2 21,724.2 14,657.4Total regulatory capital - - - - -Risk-weighted assets - - - - -

Income statementNet interest income - 13,301.6 10,259.5 8,825.4 6,325.4Total operating revenues - 22,622.6 22,935.3 20,443.5 21,901.9Operating expenses - 14,373.0 14,395.3 11,220.6 16,734.9Pre-impairment operating profit - 8,249.6 8,540.0 9,222.9 5,167.0Impairment charges - 8,415.8 7,362.4 3,856.5 2,208.5Net income - -480.3 801.8 4,450.5 2,423.3


Ratios: FundingCustomer deposits/GDP 33.2 33.9 34.1 30.0 31.3Gross loans/customer deposits 122.3 118.0 119.2 130.8 114.8Customer deposits/liabilities 56.7 61.6 60.3 56.3 60.7Retail/total customer deposits 60.7 58.6 58.0 54.8 52.2Foreign funding/total liabilities 27.2 a 29.6 28.8 33.8 31.7

Ratios: CapitalisationEquity/assets - 9.2 8.8 9.2 10.8Tier 1 capital/risk-weighted assets - - - - -Total capital/risk-weighted assets - 14.7 14.0 13.8 13.8

Ratios: Income statementNet interest income/average earning assets - 5.8 4.8 4.9 5.0

Operating expenses/operating revenues - 63.5 62.8 54.9 76.4Pre-impairment profit/average assets - 2.7 2.8 3.5 2.6Loan impairment charges/average loans - 2.7 2.4 1.3 0.9Return on average assets - -0.2 0.3 1.7 1.2Return on average equity - -1.7 3.0 16.7 10.5

Ratios: Sector structureNumber of banks 33 32 31 32 31State-owned banks/sector - 7.9 7.9 5.6 5.7Foreign-owned banks/sector - 84.1 84.3 87.6 87.3Privately owned banks/sector - 7.9 7.8 6.8 7.0Five largest banks/sector - 56.8 56.7 57.7 59.4a Foreign funding data is at end-H111Sources: National banks and bank regulators, Fitch calculations


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Figure 21 Slovakia (EURm)Date End-Q311 End-2010 End-2009Assets and loansAssets 56,926.6 54,695.0 53,011.0Assets (USDbn) 78.4 73.1 76.4Gross loans 36,087.7 32,631.0 31,090.0

O/w non-retail 19,210.9 16,279.2 16,340.1O/w retail 16,876.8 16,351.8 14,749.9O/w foreign currency 538.3 542.4 619.1

Loan impairment reserve 1,529.6 1,463.4 1,317.9Net loans 34,558.1 31,167.6 29,772.1

Funding and capitalCustomer deposits 40,871.0 39,401.2 37,587.7

O/w non-retail 16,087.0 15,650.5 15,070.9O/w retail 24,784.0 23,750.7 22,516.8O/w foreign currency 2,076.0 1,557.5 23,029.9

Equity 5,863.6 5,314.5 5,077.4Tier 1 regulatory capital - - -Total regulatory capital 4,400.3 a 4,355.1 4,186.0Risk-weighted assets 34,515.9 a 33,080.3 33,300.0

Income statementNet interest income 1,351.0 1,680.0 1,562.4Total operating revenues 1,690.7 2,071.1 1,910.2Operating expenses 854.0 1,129.9 1,143.1Pre-impairment operating profit 836.6 941.2 767.1Impairment charges 113.4 277.7 426.5Net income 590.7 513.9 250.1

Ratios: Lending and asset qualityAssets/GDP 80.9 83.0 83.7Gross loans/GDP 51.3 49.5 49.1Net loans/assets 60.7 57.0 56.2Retail loans/gross loans 46.8 50.1 47.4Foreign-currency loans/gross loans 1.5 1.7 2.0Impaired loans/gross loans 5.8 6.1 5.5Reserve coverage of impaired loans 72.8 73.8 77.3

Ratios: FundingCustomer deposits/GDP 58.1 59.8 59.4Gross loans/customer deposits 88.3 82.8 82.7Customer deposits/liabilities 80.0 79.8 78.4Retail/total customer deposits 60.6 60.3 59.9Foreign funding/total liabilities 15.7 13.6 12.2

Ratios: CapitalisationEquity/assets 10.3 9.7 9.6Tier 1 capital/risk-weighted assets - - -Total capital/risk-weighted assets 12.7 a 13.2 12.6

Ratios: Income statementNet interest income/average earning assets 3.4 3.3 -

Operating expenses/operating revenues 50.5 54.6 59.8Pre-impairment profit/average assets 2.0 1.7 -Loan impairment charges/average loans 0.3 0.5 0.8Return on average assets 1.4 1.0 n/aReturn on average equity 14.1 9.9 -

Ratios: Sector structureNumber of banks - 14 15State-owned banks/sector - - -Foreign-owned banks/sector - - -Privately owned banks/sector - - -Five largest banks/sector - - -a Total capital data is at end-H111Source: National banks and bank regulators, Fitch calculations. Slovakia adopted the euro as of 2009.


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Figure 22 Slovenia (EURm)Date End-Q311 End-2010 End-2009 End-2008Assets and loansAssets 49,431.0 50,323.8 51,612.0 47,628.0Assets (USDbn) 66.7 67.3 74.3 67.0Gross loans 36,395.3 36,612.5 35,469.4 34,700.4

O/w non-retail 27,210.5 27,607.3 27,294.5 27,068.2O/w retail 9,184.8 9,005.2 8,174.8 7,632.2O/w foreign currency - 1,481.0 1,635.6 2,023.8

Loan impairment reserve 2,606.3 2,166.9 1,559.6 1,170.7Net loans 33,789.0 34,445.5 33,909.7 33,529.8

Funding and capitalCustomer deposits 24,331.0 23,507.0 23,570.0 20,612.0

O/w non-retail 9,810.0 9,215.0 9,769.0 7,402.0O/w retail 14,521.0 14,292.0 13,801.0 13,210.0O/w foreign currency 508.4 485.3 450.2 485.1

Equity 4,299.0 4,121.8 4,295.0 3,996.0Tier 1 regulatory capital 3,846.2 3,586.9 3,704.1 3,484.8Total regulatory capital 4,695.8 4,498.8 4,590.5 4,453.0Risk-weighted assets 38,845.0 39,821.8 39,700.4 38,051.0

Income statementNet interest income 774.8 1,038.2 932.2 944.6Total operating revenues 1,061.2 1,476.2 1,425.3 1,360.2Operating expenses 558.8 765.9 765.2 776.0Pre-impairment operating profit 502.4 710.3 660.1 584.2Impairment charges 609.6 809.7 499.6 277.9Net income -89.4 -98.1 121.8 247.7

Ratios: Lending and asset qualityAssets/GDP 133.9 140.6 145.9 127.7Gross loans/GDP 98.6 102.3 100.2 93.0Net loans/assets 68.4 68.4 65.7 70.4Retail loans/gross loans 25.2 24.6 23.0 22.0Foreign-currency loans/gross loans - 4.0 4.6 5.8Impaired loans/gross loans 15.6 10.0 6.6 4.6Reserve coverage of impaired loans 46.0 59.0 66.3 73.9

Ratios: FundingCustomer deposits/GDP 65.9 65.7 66.6 55.3Gross loans/customer deposits 149.6 155.8 150.5 168.4Customer deposits/liabilities 53.9 50.9 49.8 47.2Retail/total customer deposits 59.7 60.8 58.6 64.1Foreign funding/total liabilities 32.4 37.9 35.1 41.1

Ratios: CapitalisationEquity/assets 8.7 8.2 8.3 8.4Tier 1 capital/risk-weighted assets 9.9 9.0 9.3 9.2Total capital/risk-weighted assets 12.1 11.3 11.6 11.7

Ratios: Income statementNet interest income/average earning assets 2.2 2.1 2.1 8.9

Operating expenses/operating revenues 52.7 51.9 53.7 57.1Pre-impairment profit/average assets 1.3 1.4 1.4 5.2Loan impairment charges/average loans 1.6 1.6 1.0 2.5Return on average assets -0.2 -0.2 0.3 2.2Return on average equity -2.8 -2.3 3.1 26.2

Ratios: Sector structureNumber of banks 20 20 - -State-owned banks/sector - 46.4 - -Foreign-owned banks/sector - 28.7 - -Privately owned banks/sector - 24.9 - -Five largest banks/sector - 58.7 59.7 59.5Source: National banks and bank regulators, Fitch calculations


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Fitch Cee Banks 2012