Corporate lending remains a central area of banks´ business in the region, a moderate recovery expected going forward

The structure of corporates’ sources of financing in CEE indicates a potentially greater role for debt securities

Corporate lending is going to remain a central area of banks´ business in Central and Eastern Europe (CEE) and it is expected to recover moderately going forward. This is one of the key findings of the recent “Banking in CEE – Supporting Sustainable Growth and Innovation” study compiled by CEE Strategic Analysis at UniCredit. The study was presented at the EBRD Annual Meeting held on May 11th and 12th.

Although corporate lending has been weak in most CESEE countries in the past years, which appears to be related to lower investments and, in part, to higher corporate savings, corporate loans growth has accelerated in some countries in 2015.

At the same time the role of debt securities (transferrable receivables for a predefined period of time under specific conditions) has increased over the past year. Exports and EU funds should provide additional business opportunities for banks in the region.

“The economic environment, in which banks are operating in Central and Eastern Europe, is expected to remain overall positive in both 2016 and 2017”, said Carlo Vivaldi, Head of CEE Division at UniCredit.

According to the study, economic growth is expected to spread to all CEE countries in 2016.

“Following the global financial crisis in 2008, the corporate financing gap in CESEE has turned positive reflecting low financing needs due to lower investments and, in part, higher savings ”, stated Mauro Marrano, Deputy Head of CEE Strategic Analysis at UniCredit.

For example gross corporate savings as a portion of GDP climbed to 20.2 per cent on average in Bulgaria in the 2009 – 2014 period compared to 15.5 per cent between 2004 and 2008, and to 17.6 per cent on average in Hungary compared to previously 14.1 per cent.

While lending is going to remain the main source of corporate financing in CEE, there is scope for a potentially greater role of debt securities.

“Over the past years, we have seen that the share of financing through debt securities has increased somewhat in countries such as Czech Republic, Poland and Slovakia. Nevertheless its share is still low in most countries”, noted Carlo Vivaldi. “On average the share of debt securities in total corporate financing amounts to 8 per cent in CESEE, but it is 10 per cent in Western Europe and 43 per cent in the US.”

Further business opportunities for banks´ corporate business may be initialized by growing exports and an improving absorption of EU funds.

EU Funds are an important source of financing in CEE-EU economies, with banks providing advisory services, co-financing and financial intermediation.

For the current programming period 2014 – 2020, more than EUR 200 billion has been allocated by the European Commission under the European Structural and Investment Funds for the CEE member states. Approximately EUR 117 billion is allocated to six CEE countries, being Bulgaria, the Czech Republic, Croatia, Hungary, Romania and Slovakia. Out of this, 20 per cent or EUR 23 billion, are meant to finance the private sector, where banks are mostly involved.

“Around EUR 3.5 billion will be implemented through facilities approved by UniCredit”, estimated Carlo Vivaldi.

UniCredit re-invests EUR 13 billion in organic growth of CEE business

UniCredit considers itself a long-term, strategic investor in Central and Eastern Europe, which is keen to develop its business with both corporate and private customers in the region. Since 2007 CEE Division re-invested a total of EUR 13 billion in profit before tax in the region.

In 2015 the banking group has acquired over 1.2 million new customers across all CEE countries, where it has a presence, and it intends to grow its customer base by another 1 million customers and 10,000 corporates each year until 2018.

UniCredit is going to invest EUR 1.2 billion into digitalization aiming equally at matching new trends in customer behaviour and reducing costs.

The number of internet banking users is projected to increase from currently 5 million to 10 million and the number of mobile banking users from currently 1 million to 7 million over the next three years. CEE lending volume is expected to grow by EUR 20 billion to EUR 106 billion in 2018.

“We are fully committed to the new Strategic Plan and its implementation is fully on track”, emphasized Carlo Vivaldi.

More information for media:

UniCredit Bulbank, Identity & Communications Department

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

Beatris Nikolova, Phone: +359 2 9232 528, cfbusjt/ojlpmpwbAvojdsfejuhspvq/ch