Erste Group Bank AG (EBS) Chief Executive Officer Andreas Treichl said the worst effects of Europe’s debt crisis are over for eastern Europe, where his bank is the third- biggest western lender.
“I really don’t expect it to get worse, but it is bad enough for the moment,” Treichl said in an interview in Alpbach, Austria. “Mainly because the loan growth is relatively weak for the moment -- which is understandable in the sense that the general mood that has affected Europe also has affected central and eastern Europe.”
Erste, which makes about half its retail profit in eastern Europe, cut its outlook in April and again in July after deteriorating economic performance in the former communist part of Europe hurt loan growth.
“We see positive signs -- we see that in those countries, where the country, the people and the banks have a good liquidity situation,” Treichl said in the interview with Bloomberg Television yesterday. “My personal view is that with very few exceptions the worst is over.”
Credit in the region is stagnating, according to the European Bank for Reconstruction and Development. While that’s weighing on economic expansion, it’s also closing budget and current-account deficits, trimming foreign debt, nurturing local deposit markets and safeguarding against bubbles. Foreign lenders such as Italy’s UniCredit SpA (UCG) and Austria’s Erste and Raiffeisen Bank International AG (RBI) dominate eastern Europe’s banking industry with three-quarters of total assets.
“The margins and the returns that you can achieve in central and eastern Europe are substantially better than they are in western Europe,” Treichl said. “The total return of those banks in those markets is substantially better than at home.”
Eastern Europe has “hope for growth,” Treichl said. “We have the fantastic situation of having completely underpenetrated banking markets, people who have substantially lower incomes than in western Europe, but are substantially more productive.”
OAO Sberbank (SBER)’s recent move of entering the region by buying Oesterreichische Volksbanken AG (VBPS)’s east Europe unit is a “good sign,” Treichl said, as it shows that “they must believe in the future of that region,” he said, adding that the Russian lenders financial prowess wasn’t a cause for concern.
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