Concerns may be rising once again that embattled western European banks could withdraw liquidity from their central and eastern European subsidiaries if the eurozone debt crisis escalates further. But the commitment to extensive, quality research of the region by the research teams at these banks remains undiminished.
Since swapping Deutsche Bank for Unicredit in 2010, Gillian Edgeworth has overseen the production of consistently thought-provoking research. She has used the Italian lender’s strong retail banking presence in the region to provide in-depth monitoring and analyses of liquidity and credit conditions in local banking markets, while tying these trends to global and pan-emerging market themes.
Similarly, Raiffeisen Research, the research division of Vienna-headquartered Raiffeisen Banking Group, which has a strong presence across the CEE region, has significantly expanded its research team and product portfolio, and now has more than 90 analysts in 15 countries across the region.
This extensive, on-the-ground presence gives it a major edge for in-depth analyses of macro and credit conditions in smaller nations in the Balkans and south-east Europe in particular, notably Albania, Bosnia-Herzegovina and Slovenia.
But while it may not have as large a research team or on-the-ground footprint in the region, RBS’s CEE coverage has stood out from the crowd by combining quality of insight and analysis with an excellent track record in terms of trading recommendations in extremely challenging conditions.
Tim Ash, who has headed up CEEMEA research at the bank since joining from Bear Stearns in 2008 and is now the bank’s global head of EM research, has won significant praise from fund managers.
Of the 65 trade ideas offered by RBS’ CEEMEA strategy team between September last year and mid-August, 48 were profitable. This is an impressive track record given the uncertainty dogging the region and the lack of policy predictability over the past 12 months.
RBS’ timing and flexibility have been particularly impressive, advising investors to short Hungarian bonds and FX in mid-October 2010, then reversing their position ahead of consensus in late January. Ash and his team have maintained a broadly constructive position on Hungary since, amid encouraging policy signs that the government and central bank may finally be working together to address the fiscal deficit and the country’s large foreign currency loans burden.
In common with almost all analysts covering the region, Ash has been surprised by the Central Bank of Turkey’s (CBoT) unorthodox monetary policy approach, cutting rates to restrain currency appreciation and using reserve requirement ratios instead to contain lending growth, and has been heavily critical of the CBoT’s ‘out of the box’ approach which, as he outlined in a note on August 5, he fears may prompt a capital flight, given the difficulty in reading the CBoT’s approach.
However, in regular trip notes that Ash has written since the CBoT’s initial rate cut in mid-December 2010, he has separated his criticism of the move with an acknowledgment that the existing unorthodox policy mix “will remain in place until it works or is proven that it does not work”.
He anticipated that the central bank would stick to its policy course when many others expected it to abandon the position earlier this year – most analysts have subsequently converged to his view.