Fast-paced economic growth underpinned by a property boom and rising private consumption have combined to result in bumper profits for banks across Central Europe. ( dpa )
But while the record earnings run up by Central and Eastern European banks last year have helped them to withstand the economic tensions unleashed by the global credit crunch, it is unlikely that the region will escape some of the fallout from the tremors triggered by the US mortgage market meltdown.
As a result, the Central European banks could be facing the prospects of a tougher business climate in the coming year as economists mark down their 2008 economic growth forecasts for the region.
However, this week Central Europe's biggest foreign bank, Italy's UniCredit SpA said it expects double-digit growth in its central and eastern Europe business and outlined plans to boost the number of branches it operates in the region by more than 500 to almost 4,200.
"In 2008 our revenues in the Central and Eastern European region will grow significantly while our net income should see solid double- digit growth," UniCredit chief Alessandro Profumo told analysts.
UniCredit reported a 9-per-cent rise in net earnings last year with the Milan-based bank's Bank Austria Creditanstalt offshoot saying that despite market turmoil its 2007 pre-tax profits raced ahead by 96.4 per cent to 2.7 billion euros with operating profit hitting a record high of 3.1 billion euros.
Milan-based UniCredit's acquisition of Germany's HVB and its Bank Austria Creditanstalt offshoot in November 2005 transformed the Italian financial house into Central and Eastern Europe's biggest foreign-owned bank.
In the meantime, the largely foreign-owned Central European bank sector has rolled out a solid round of earnings.
A strong performance of Raiffeisen International's CEE business operations helped the Austrian bank to post last month a forecast-beating 38-per-cent surge in fourth-quarter net earnings.
"Despite the turbulences on the global credit and capital markets we have had an outstanding year 2007," said Raiffeisen chief Herbert Stepic announcing the results.
The Vienna-based banking group predicts continuing strong credit growth of between 17 and 18 per cent and has set a 2008 profit target of 1 billion euros compared with the 841.3 million euros it reported last year.
Raiffeisen International's earnings in Central Europe rose last year by 36 per cent with profits from its south-eastern European operations racing ahead by 55 per cent.
It was a picture that emerged from other banks across the Central and Eastern European region.
Belgian financial services group KBC NV, which has also carved out a large banking and finance empire across the CEE region said the group had emerged relatively unscathed from the US subprime crisis to report a jump in earnings.
KBC said fourth-quarter underlying profit rose to 676 million euros from 564 million, as a result also beating analysts' forecasts.
Vienna-based Erste Bank, which operates in eight CEE nations, said 2007 operating profit climbed by 27.2 per cent to 2.548 million euros with the Austrian banks emerging as the key winners of the economic and business change underway in the Central and Eastern European region.
"Consistently strong operating profits in 2007 were also recorded by our subsidiaries in Central and Eastern Europe," said Erste Bank chief Andreas Treichl releasing the results.
To be sure, national-based banks across the region also turned in solid rises in earnings with the Czech Republic's so-called big three banks all recording impressive gains in earnings.
While Ceska sporitelna reported a 17-per-cent rise in earnings to hit new record profits, Komercni banka said its profits climbed 22 per cent and CSOB reported a 14-per-cent increase.
Polish media reports say PKO Bank Polski SA is on course to announce record first-quarter profits after Poland's biggest bank achieved its highest quarterly profit of 870 million zloty (394 million dollars) in the fourth quarter of 2007 after a rise in consumer lending.