Recovery of the economy in the region will lead to a moderate growth of lending and gradual reduction of non-performing loans;

The significance of the alternatives to traditional banking services, i.e. loans and deposits, will continue to grow in the future.

The banking sector in Central and Eastern Europe has changed significantly as a result of the 2008-2009 global financial crisis. At present, banks in the region are reverting to the stable levels of their pre-crisis profitability indicators. In addition, alternatives to traditional banking services, i.e. loans and deposits, will be more and more significant in the future. It is expected that among these alternatives there will be a significant increase of interest towards asset management services.

These are some of the main conclusions of the last UniCredit analysis of the CEE region, which was presented during the Annual meeting of the European Bank for Reconstruction and Development in Tbilisi, Georgia. Lending remains the most important banking product, nevertheless it is a fact that customers and clients are seeking alternative products more and more often.

Banks’ indicators hold more and more sustainable levels

While the return on assets in the years of the lending boom prior to the crisis (from 2006 to 2008) was 2% on average, between 2010 and 2014 it reached only 1.4%. This year, and the year after, because of the situation in Russia, it is expected that the return on assets of the banks in the region will be around 0.8%. According to UniCredit economists, the ROA for the credit institutions in Central and Southeastern Europe (excl. Russia, Turkey and Ukraine) is respectively 1.6% before the crisis, 0.8% - at the time of the crisis and in 2015 and 2016 it is expected to be 1%.

“In Central and Eastern Europe, nearly 2/3 of all revenues in the sector are due to the traditional banking business i.e. lending. Against a background of continuing pressure upon margins, banks will be oriented towards offering services as an alternative way to generate bank revenues“, said Carlo Vivaldi, Head of UniCredit for Central and Eastern Europe.

Household and business financing will remain the most important banking product also in the future. “Moderate lending growth is expected, in accordance with the recovery of the economy in the region“, explained Mauro Marrano, Deputy Director of UniCredit CEE Strategic Analyses. The forecast in CEE is for a growth of 3.9% this year and 4.6% in 2016. In Central and Southeastern Europe interest rates will move around levels of 5.1% in 2015 and 7.8% in the year after. Nonetheless, the pace of growth of lending will vary in different countries. The share of non-performing loans will remain relatively high also this year. It will diminish gradually, together with the economic recovery.

The search for various kinds of products is expected to grow

“The alternatives to traditional banking services will become more and more important in the future“, Carlo Vivaldi said. According to the UniCredit analysis, the business will be seeking yet more often a financing different from the banking one, while households will strengthen their interest towards services related to asset management.

In fact, intercompany loans have a much bigger share in the overall business financing in Central and Southeastern Europe in comparison with the developed industrial countries of Western Europe. Meanwhile, CEE household assets are way below the average levels in Germany, Italy and Austria. The growth of the household assets in the region is expected to open up new investment opportunities in more complex financial instruments.

The use of online banking in CEE still lags behind in comparison with Western Europe.

“The clients of banks in the region are technically literal to a great extent. This is confirmed by the strong growth of the use of online banking in the last few years”, Mauro Marrano commented. Development and the use of banking services based on new technologies are a key factor to the success of CEE banks.

Extending the CEE market share with new solutions

Despite some challenges in the region, UniCredit is a long-term strategic investor in CEE and it will continue expanding its business. The Banking Group works with a wide network of nearly 3500 branch offices in 14 countries, which generate around ¼ of its total revenues. In CEE, UniCredit serves more than 20 000 international corporate clients by means of its international centers. The leading Banking Group supports the development and growth of its international clients on local markets via services and consultations with a high added value.

“Stable local banks in CEE with good reputation are the engine of UniCredit. In the last four years we increased our market shares both in lending and in attracting new deposits for the account of our competitors”, said Carlo Vivaldi, Head of UniCredit for CEE. He also stated that this positive trend will continue, both with a high quality of the offered traditional banking products and services and with a consistent policy on development and implementation of innovations for the benefit of the clients.

UniCredit

UniCredit is one of the leading European commercial banks with strong presence in 17 countries. Our network, which covers around 50 markets, includes more than 8600 branch offices and more than 145 000 employees (as at 31 December 2014).

In the CEE region, the Group has the biggest international banking network with nearly 3 500 branch offices (including Poland and Turkey).

The Group operates in Austria, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech republic, Germany, Hungary, Italy, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine (as at 30 September 2014).

UniCredit is active in the Baltic States through a leasing company (as of 31 December 2014).

Note: CEE (Central and Eastern Europe) includes Bosnia, Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey, Ukraine;

CESEE (Central and Southeastern Europe) is CEE without Russia, Turkey and Ukraine; Central Europe includes the Czech Republic, Hungary, Slovakia, Slovenia and Poland;

Southeastern Europe (SEE) includes Bulgaria, Bosnia, Croatia, Romania and Serbia.

More information for media:

UniCredit Bulbank, Identity & Communications Department

Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch

Magdalena Ivanova, Phone: + 359 2 9232 528, nbhebmfob/jwbopwbAvojdsfejuhspvq/ch