• International banking groups maintain strong commitment and exposure to Central, Eastern and South-Eastern Europe, with 73% maintaining and 18% increasing their level of exposure in the last six months.
  • Despite the war in Ukraine, banking groups remain optimistic about the region, with 45% planning to selectively expand their operations and a further 45% aiming to maintain the same level of operations in the long term.
  • Credit demand from bank clients has remained resilient, driven by corporate liquidity needs. Credit supply conditions have deteriorated and are expected to worsen, particularly due to concerns over future credit quality, the local market outlook, and EU regulation.

International banking groups operating in Central, Eastern and South-Eastern Europe (CESEE) have demonstrated resilience and commitment to the region, according to the latest survey findings. The results highlight banks’ strategies and prospects for the coming months, indicating their sustained focus on the region’s banking markets.

The CESEE Bank Lending Survey, conducted by the European Investment Bank (EIB) in March 2023, revealed that parent banks in CESEE countries have either maintained or increased their level of exposure to the region. A significant majority (73%) of parent banks maintained their exposure, while 18% increased their presence in the last six months. Remarkably, the ongoing war in Ukraine did not affect the banking groups’ strategies and commitments in other banking markets in the region.

According to EIB Chief Economist Debora Revoltella, “The data collected by our economists confirm the continued commitment of international banking groups to the CESEE region as well as their efforts in maintaining stability. It is encouraging to see the banking sector’s confidence in the market potential, and their ability to navigate challenging economic conditions and the overall economic trajectory.”

“The CESEE region is once again demonstrating its market potential, resilience and willingness to overcome the current geopolitical constraints. Banking groups’ commitment to supporting economic growth has to be safeguarded and the EIB Group will continue to provide the necessary financing to the region to respond to future needs,” said EIB Vice-President Lilyana Pavlova.

The survey shed light on long-term strategies, with cross-border banking groups signalling their intention to either maintain the same level of operations (45%) or selectively expand (45%) in the region. These groups perceive high or medium market potential in most banking markets within the region. Furthermore, they reported higher profitability locally compared to the group level, except in Poland.

The survey, which collected data during the Silicon Valley Bank and Credit Suisse crisis, offered insights into credit demand and supply trends in the region. Despite economic challenges, credit demand from bank clients has remained resilient and is expected to improve slightly.

Firms’ liquidity needs, particularly working capital, have been identified as the primary driver of credit demand. Fixed investments and the retail segments, including the housing market, are expected to have a negative impact in the coming months.

On the supply side, credit supply remained tight and is expected to remain weak across all business segments and in most countries, except for banks in Slovakia, which anticipate positive supply conditions. However, the survey indicates a slight reduction in the supply-demand gap for the next survey period.

Banking groups remain optimistic about the funding environment, driven by retail and corporate funding. Despite the difficult economic outlook, the expected deterioration in credit quality has not materialised in the last six months. However, banks anticipate an increase in non-performing loans, particularly affecting the retail and corporate sectors, because of lower growth, high inflation and higher interest rates.

The survey findings confirm that parent banks in Central, Eastern and South-Eastern Europe have broadly maintained their positions in the region despite the war in Ukraine. No debt reduction is expected, and most banks anticipate a stable or increased loan-to-deposit ratio.

The banking groups’ exposure to the region has shown a positive trend over the last six months, with an increased number of cross-border groups (27%) planning to increase their exposure in the next six months, suggesting a positive outlook for the future.

Looking ahead, banking groups’ long-term strategies indicate a focus on stability or expansion, driven by perceived high or medium market potential and higher profitability in most banking markets within the region compared to the group level.

The collected data reflect the strong position and ongoing commitment of international banking groups in Central, Eastern and South-Eastern Europe despite economic challenges and geopolitical uncertainties.

More information here.

Background information

About the CESEE Bank Lending Survey  
The survey was conducted in March 2023 and collected data on international banking groups’ strategies and commitments in Central, Eastern and South-Eastern Europe. It collects information on credit standards, credit terms and conditions, as well as various domestic and international factors that may be responsible for changes in lending. Demand for loans is also investigated. The survey includes specific questions on credit quality and funding conditions for banks. It is designed to build a panel of observations that can provide an almost real-time assessment of the health of the banking sector in the CESEE region. The survey is developed and managed by the Economics Department of the EIB, and is part of a series of reports produced alongside the EBRD, IMF and World Bank for the Vienna Initiative.

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