Banking chief upbeat about CEE despite concerns

Central and Eastern Europe’s banking sector is better-equipped to withstand a crisis than it was in 2008-9, the head of one of the region’s largest banks maintained

  • By Simon Pirani
  • 23 Sep 2011
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The head of one of the largest banks in central and eastern Europe has insisted that the region is far better prepared for external shocks than it was three years ago, despite grave warnings by senior regional economists and policymakers.

“We are utterly prepared for a downturn”,

Herbert Stepic, CEO of Raiffeisen International, told Emerging Markets. “There have been big changes in banks’ managements [since 2008]. We have built up substantial levels of liquidity, and, in the riskier countries, of capital.”

Since the 2008 crisis, “countries [in central and eastern Europe] have improved, economies have improved, the liquidity situation has improved ... and we have learned lessons,” he added.

Stepic was also optimistic about the region’s ability to withstand fallout from the eurozone and possible global economic stagnation.

Central and eastern Europe “share the benefits, and also the sacrifices” of their western European trading partners – primarily Germany, the main export market for many. “Even in a downturn, I don’t think Germany faces disaster,” he said.

Stepic emphasized that Raiffeisen remained fully committed to its lending business in the region, despite growing concerns about the potential for western European parent banks to withdraw liquidity from subsidiaries in central and eastern European should the European banking crisis escalate.

“Responsible investors” would do what they could, instead of adding to “the flow of negative information, that itself adds to the downturn”, he added.

Asked whether he expected Raiffeisen’s loan book to grow next year, Stepic admitted that “in the first half, if GDP growth continues as forecast, there will not be demand, and there will not be demand for loans. That will mean flat, stale growth.”

Many senior economists, policymakers and banking chiefs are much less confident about the region’s ability to withstand an escalation of the eurozone crisis than Stepic.

“We need to be realistic: if western European markets don’t recover, if the debt crisis hits further countries, then central and eastern Europe cannot be isolated from this,” said György Surányi, head of Italian bank Intesa Sanpaolo’s CEE operations. “The fundamentals are stronger, but we may not return to pre-crisis fast growth levels soon or ever.”

Furthermore, senior policymakers in the region warn that the Vienna Initiative, an agreement between policymakers and banks implemented in 2009 to prevent a withdrawal of liquidity from central and eastern European subsidiaries by parent banks, will prove ineffective should the current banking crisis escalate.

“The Vienna Initiative was a good project and it served its purpose. But today the situation is completely different,” Polish central bank governor Marek Belka told Emerging Markets. “We now need to deal with the risk of a troubled mother driving her daughters into a hole.”
  • By Simon Pirani
  • 23 Sep 2011

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 358,291.38 1348 9.06%
2 JPMorgan 320,704.66 1461 8.11%
3 Bank of America Merrill Lynch 318,128.31 1104 8.04%
4 Goldman Sachs 236,643.87 789 5.98%
5 Barclays 231,197.41 895 5.84%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 HSBC 35,007.57 165 6.53%
2 Deutsche Bank 34,880.53 120 6.51%
3 Bank of America Merrill Lynch 31,805.65 97 5.93%
4 BNP Paribas 27,920.60 169 5.21%
5 SG Corporate & Investment Banking 24,398.89 138 4.55%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 19,745.92 80 8.85%
2 Morgan Stanley 16,334.63 83 7.32%
3 Citi 15,972.34 95 7.16%
4 UBS 15,487.17 60 6.94%
5 Goldman Sachs 14,053.61 76 6.30%