First, some good news – eastern European banks are relatively profitable. Austrian bank Raiffeisen, which is heavily involved in the region, published a report at the weekend which showed:
In terms of growth and profit, the banking sectors in the CEE (central and eastern Europe) region continue to outperform their Western European counterparts.
Real loan growth in the region’s banks, which includes Russia and Ukraine, was 21.8 percent between 2010 and 2012, Raiffeisen says, while euro zone banks’ real loan growth was negative over the same period.
The IMF said something similar this month, pointing out that for the five largest banking groups in the region, their businesses in eastern Europe were substantially more profitable than those in the West.
That might go some way to explaining why banking stocks in emerging Europe have outperformed broader indices, in contrast to the euro zone where they have been underperforming.