The largest banks from across Central Eastern Europe have all grown in 2024. To confirm this leading position, three banks from the region were included amongst a ranking of Europe’s best performing banks for 2023. Today we look at the financial results for the first nine months of 2024. These results paint a picture and will highlight who the five largest banks in Central Eastern Europe will be in 2025.
There has been a substantial change sweeping across the CEE banking landscape over the last few decades. Big retail banking giants like HSBC and Deutsche Bank have exited much of the retail banking market. All this while Santander has been growing its presence, in Poland. And finally there is the Swiss franc mortgage exposure for many banks in Poland. Lots of things are happening in Central Eastern Europe.
We can’t write about all the top banks from the region, but a focus on the Top Five largest banks in Central Eastern Europe should give an excellent overview of the market too. Assumptions regarding ranking have been made dependant on financial income, profitability, and assets shown in Euro throughout the story. Two of the banks have a substantial regional presence. These factors are all considered.
The Largest Bank in Central Eastern Europe
The largest bank in Hungary is OTP Bank. It is not only prevalent in Hungary today. It has become an important regional player. The financial institution has a dominant position in 5 countries across the region. It has also made 11 acquisitions in 7 years. Foreign profit contribution is 69% of profits after tax at the leading Hungarian bank.
OTP Group did sell its Romanian bank in July of 2024. However, the Romanian results weren’t included in the financial result for year-to-date. This stands at approximately €4.85 billion (397.29 HUF: 1 Euro). An increase of over 25% on the same result from the first nine months of 2023. OTP reports in Hungarian forints and the date used to calculate the total income was the 1st October 2024.
Impact of Russian Business on Group Results
DSK Group, OTP’s Bulgarian subsidiary, brought in the biggest profits in 2024 outside of the Hungarian business. OTP Bank Slovenia and OTP Bank Russia were also substantial contributors to group results. OTP is also present in Croatia, Serbia, Uzbekistan, Ukraine, Montenegro, Albania, and Moldova. It’s arguable whether OTP Bank’s Russian business should count towards the overall result. This figure was approximately €229 million. This makes the result €4.62 billion. However, the profits for the first nine months of 2024 were €2.1 billion.
Another subject of note is that the OTP Group Global Securities Services division custodies over €8.9 billion (as of end of 2022). This shows the maturity and sophistication of the bank.
OTP Bank is the largest bank in Central Eastern Europe today maintaining a dominant position in multiple countries. OTP Bank is a publicly listed company in Hungary. Importantly, in its financial report the financial institution states that there is “no direct state involvement. Since the IPO in 1995 / 1997 OTP Bank has not raised capital on the market, nor received equity from the state.”
Hungarian Forint Performance in 2024
It’s worth noting here that one year ago the Hungarian forint was 379.33 HUF: 1 Euro. The Polish zloty hasn’t suffered like this. On October the first 2024 it was 397.29 HUF: 1 Euro. Today (16 January 2025) it is 411.24 HUF: 1 Euro.
The Second Largest Bank in Central Eastern Europe
The largest bank in Poland is PKO BP. It has total assets of €120 billion (4.26 PLN: 1 Euro). The financial institution has 12.1 million customers. And core revenues have grown 21.5% year-on-year. PKO BP has limited exposure to customers outside of Poland. Kredobank S.A. is one of the group companies that is part of a smaller banking portfolio in Ukraine.
The bank reported income for the first nine months of 2024 to the amount of €4.87 billion. This figure is up 19% from the same time in 2023. It’s not all good news though. As with most Polish banks, PKO BP has large exposure to Swiss franc denominated mortgages. Something that is proving a costly exercise to rectify. And is a burden that affects profitability.
PKO BP has gone some way to address concerns in the report. It added that 73% of cases regarding settlement of Swiss franc mortgages have been completed.
This is highlighted from an excerpt taken from PKO BP’s results for 3 Q 2024 announcement:
This is a difference in profitability. The mortgages remove over €770 million from PKO’s profits leaving only €1.6 billion in profits for the bank.
PKO TFI, PKO’s investment fund, custodies €13 billion for retail and institutional investors. For retail investors this is through employee pensions. It is a market leader with over 21% of the market in its portfolio.
PKO BP is set to continue to grow its revenues in the final quarter of 2024. When these results are reported the banks’ income will likely be the largest of all the leading banks in CEE. The current CEO is ready for more change, and the bank’s strategy reiterates this. The Polish government is a shareholder in PKO BP holding 29.43% of the bank’s shares directly.
The Third Largest Bank in Central Eastern Europe
Raiffeisen Bank is the second largest bank in Austria. Importantly, the bank has a large presence across Central Eastern Europe including Hungary, Czech Republic, Poland, Slovakia and Romania. As a group (including Austria) the leading Austrian bank reported revenues of €6.71 billion in the first nine months of 2024. A drop of 2.7% from the same period in 2023.
Amongst the four CEE countries where Raiffeisen Bank or RBI is present the revenues were substantially smaller. It’s important to note that Raiffeisen’s report shows only four countries in Central Eastern Europe. Namely Hungary, Czech Republic, Slovakia, and Poland. Revenues for the first nine months of 2024 from ‘RBI’s’ CEE region were €1.67 billion, a rise of 2.7% from the previous year.
However, RBI is also present in Albania, Serbia, Croatia, Bosnia and Hercegovina, and Romania. Raiffeisen clusters these countries together in ‘Southeastern Europe’. From these countries collectively the bank made income for the first nine months of 2024 collectively of €1.45 billion. From Belarus, Russia, and Ukraine the bank made further revenue of €2.38 billion during this period. The report names this region ‘Eastern Europe’. Russia is under sanctions, as is Belarus, it is not relevant for the purposes of our article to add these revenues. And RBI’s analysts have obliged by presenting easy to read details. Ukraine only comprises €0.35 billion towards income in 2024 so far.
As RBI continues to work out what to do with its Russian business, the rest of the region reported a combined income for the first nine months of 2024 of €3.47 billion.
The Fourth Largest Bank in Central Eastern Europe
Santander is one of Europe’s largest and best-known banks. It is also the second largest bank in Poland today. The bank reported income of €2.98 billion in Poland during the first nine months of 2024. Santander’s income has increased by 7.4% meaning the financial institution has taken over the title of second largest bank in Poland from Bank Pekao.
As of September 2024 Banco Santander S.A. holds a controlling state of 62.2% in Santander Bank Polska S.A. The bank has substantial exposure to Swiss franc mortgages in Poland that affect the balance sheet of the financial institution. The legal risk related to these mortgages has risen a small amount since 2023.
The bank is formed of two businesses; those are Santander Consumer Bank or SCB and Santander Bank Polska. With the latter forming the larger part by headcount and turnover, of the Poland business.
Some of the highlights from the first nine months of 2024 included good results in asset management fees which grew 41% year-on-year.
As Poland’s financial landscape struggled with inflation in 2024 the bank increased salaries, bonuses and payroll taxes by 8%. This has not affected the profitability of the bank. The CEO of Santander Poland Michal Gajewski has hinted that 100% of dividends will be paid out to shareholders. Subject to regulatory approval. This is due to a very strong capital position.
The Fifth Largest Bank in Central Eastern Europe
The third largest bank in Poland is Bank Pekao S.A. Once part of UniCredit, the bank was sold to Poland’s largest insurer, PZU, in 2016. The Polish State Treasury is a 34.19% shareholder in PZU. And it is the insurance companies’ largest shareholder. PFR, the Polish state development fund also holds a large stake in Bank Pekao.
Bank Pekao’s financial results for the first nine months of 2024 were comparable to the same period in 2023. Income grew by 3.8%. The bank had income of €2.74 billion during the period.
As with most Polish banks, Bank Pekao has exposure to Swiss franc mortgages. The bank insists it has settled 7,000 of them and has prepared to settle with 84% of all customers affected already.
As at PKO, Bank Pekao has an investment fund. The investment fund, Pekao TFI, saw growth in income compared to the first nine months of 2023 of 33.5%. Pekao TFI custodies over €7 billion.
Bank Pekao is only present in Poland today.
2025 Promises to Bring Change to the CEE Banking Landscape
It may occur to you to wonder why OTP Bank heads up this list. The bank has less income in 2024 so far than Poland’s PKO BP. Not by much, granted, and bear in mind the hammering the Hungarian forint has received in the last six to twelve months. This can only mean that Poland’s banks will continue to strengthen. OTP Bank made more profits, nonetheless. No bank from the region has made more money than the Hungarian bank has.
OTP, together with Raiffeisen Bank, are the two geographically largest financial institutions across Central Eastern Europe today. However, PKO BP is undoubtedly going to be growing quicker into 2025. Especially as the Swiss franc mortgage exposure lessens into the future. As for Bank Pekao, once part of a strong regional banking group, the bank’s star has faded somewhat. Santander’s Polish business continues to grow quicker than Bank Pekao can catch up.
Other banks to monitor include CSOB in Czech Republic and Banca Transilvania in Romania. It may be many years before they can mount an attack against the Polish banks, OTP or Raiffeisen Bank, but they have a favourable position in which to start growing their income streams.
Poland’s banks are set to grow. This will likely be confirmed when the 2024 annual results start to appear over the next few weeks. OTP and Raiffeisen Bank will both continue to maintain a strong regional presence. And the leading banks together will play a key role in shaping the banking sector across Central Eastern Europe.
Author: Andy Samu
#Hungary #Poland #Banking #CEE #OTP #PKO #Pekao #SantanderPolska #Raiffeisen #SwissFranc
Explanation:
All data has been taken from publicly available financial results. Apart from Raiffeisen Bank all the listed companies report their income in local currency. This means there may be a small discrepancy between the real Euro values and the actual Euro values mentioned above. All care has been taken to minimize any divergences from the actual figures reported.
See Also:
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Why is OTP Bank’s Romanian Subsidiary for Sale? | Disruption Banking
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How Strong Will The Russian Ruble (RUB) Be in 2025? | Disruption Banking
Is it Worth Investing in Poland in 2025? | Disruption Banking
