The three leading banks of Austria: Erste, Raiffeisen and Bank Austria (the latter belongs to Italian UniCredit) are market leaders in the Visegrad countries and also in our immediate region, with only the Belgian KBC keeping pace with them. OTP from Hungary, Santander from Spain and Intesa from Italy are also important players, and even local companies play a part in these markets, although their number is scarce.
If we look at the banking markets of six countries (Austria, the Czech Republic, Poland, Hungary, Romania and Slovakia), Erste is the strongest player in three of them (Austria, Romania, Slovakia).
The market leaders of the other three countries are less active in the whole region, as the Spanish Banco Santander, although market leader in Poland, is not present in the other countries; OTP is present in Romania, but has just left the Slovak market and has never entered the Czech and Polish sector. It is only KBC from Belgium, market leader in the Czech Republic, which is also among the top three in other countries.
Lots of banks bustling about
Indeed, the banking sector in Central and Eastern Europe is like a crowded marketplace, where simply everyone who is important enough needs to be present. Then sometimes sellers and buyers change places, with some sellers needing more space for their goods, while others have spare space to give over to others.
It is characterized by companies constantly coming and going, i.e. there are many sales and acquisitions in the bank sector.
Local ownershipIf we look at the proportion of domestic and foreign banks in the various countries, Austria and Hungary stand out with majority domestic ownership, while in all other countries the banking sector is almost completely in foreign hands.
If we tell somebody in Austria that there are other nations having a significant role in the banking sector, they will probably take offence, as Erste, Raiffeisen and Bank Austria are all considered to be genuinely Austrian; we mustn’t forget, though, that Bank Austria has been part of the Italian UniCredit Group since 2005.
The other two banks do belong to Austrian decision-makers, but it’s interesting to know that Erste also has significant Catalan ownership.
In Hungary, 59.5% of the banking sector's balance sheet total is in Hungarian hands. From the largest players, OTP, MKB, Budapest Bank and Takarékbank are Hungarian-owned, but there are also a few Hungarian-owned banks among the smaller ones (such as Magnetbank or Gránit Bank).
The banking sector in the Czech Republic, Slovakia and Romania is completely dominated by foreign banks, with more than 85% foreign ownership in the first two countries and 75% in the third.
On the positive side, this ensures greater capital strength and international experience, i.e. knowledge transfer, but on the negative side, parent companies never regard the countries of the subsidiaries as number one priority.
In the Czech Republic the six largest banks are all foreign-owned and altogether cover two-thirds of the market.
In Slovakia, apart from the dominant foreign banks, only a few Slovak oligarchs own banks: Penta Group, which is involved in the meat industry, has two, and the Slovak Tkac brothers, who are emerging brokers, own one.
The banking system in Romania is also entirely foreign, although locally owned Banca Transilvania is an important player, and the state also has a smaller bank called CEC.
Finally, Poland is in a special situation with a relatively large domestic share of 44%, but these are almost exclusively state-owned banks (PKO, Pekao, BGK, Alior).
Erste, KBC, UniCredit
What we mean by the Central and Eastern European (CEE) region is rather inconsistent: there is one commonly used concept including 15 countries (Albania, Bosnia and Herzegovina, Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Croatia, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia, Ukraine), but this is not the only one, as Montenegro, Macedonia, Kosovo, Moldova, Belarus, and occasionally even Turkey and Russia are also included.
Deloitte's latest regional bank analysis, carried out before the coronavirus epidemic, revealed that in the overall market of the 15 countries, none of the banking groups reached 10% market share:
Erste was the market leader with 9%,
Belgian KBC had 8%,
and UniCredit had 7% market share.
Another 3 banking groups had a market share of around 5% (Raiffeisen, SocGen and OTP).
Raiffeisen, UniCredit, Intesa Sanpaolo, OTP and Erste were present in the most markets.
KBC followed a different strategy, as it was only present in four countries but was a major player in all four of them.
Our immediate region
It is interesting to compare and contrast the banking systems of the six countries in the immediate region of Hungary - Hungary, the Czech Republic, Poland, Slovakia, Romania and Austria.
Incidentally, Austria is not typically considered to be part of this region because with its huge and extremely strong banks it is normally compared to Western European countries. And yet, the great trio of Erste, Raiffeisen and UniCredit (which kept the brand name Bank Austria in Austria) is also strong in the whole region, so it is no surprise that the rank order of the banks in Austria (plus KBC) is the same as the rank order in this region.
The domestic business of every Austrian bank is much larger than its position in any nearby country, no matter how favourable its market position may be in those countries.
Another difference between the Austrian banking system and ours is that what is just a banking group here, are actually several different banks there. However, for reasons of simplicity, we have now counted the “Raiffeisens” as one.
The ‘extended V4’ countries
If we look at this ‘extended Visegrád Group’, it is interesting that in five of the countries we find nearly the same names, while in Poland the market looks completely different.
In addition to the overall winners Erste, KBC, UniCredit, Raiffeisen, OTP, SocGen, Santander, Intesa, in one or two countries even “local forces” have a role to play:
PPF Banka in the Czech Republic, named after the Czech multi-billionaire Petr Kellner;
J&T in Slovakia, with the Slovak Tkac brothers as key figures;
or Banca Transsilvania in Romania, which has its headquarters interestingly not in Bucharest but in Cluj.
The largest is Erste
Austrian market leader Erste is the number one player, owning both the largest Slovak (Slovenska Sporitelna) and the largest Romanian bank (BCR), and is second-placed in the Czech Republic. According to Deloitte's latest analysis, Erste was the fourth largest bank in Hungary in terms of balance sheet total, and it is present in each country in the region except Poland (UniCredit, Raiffeisen, OTP and KBC aren’t present there either).
Belgian KBC has a strong position as it is market leader in the Czech Republic (Ceska Sporitelna), second-placed in Hungary (KH) and fourth in the Slovak market.
Second and third placed UniCredit and Raiffeisen are present in many countries, but in most places they are in 3rd-5th position. They are not so big in these markets, although they are stronger in other markets of the region: Raiffeisen is the number one bank in Ukraine, while UniCredit is market leader in Croatia).
Poland is different
It is an interesting fact that historically everything is a little different in the Polish market. Although both UniCredit and Raiffeisen appeared in the Polish market at one point, now, apart from Polish state banks, the Spanish Santander, the German Commerzbank, the Dutch ING, the French BNP Paribas and the American Citi are the dominant players in the market.
This is partly explicable by the sometimes different regulations of the Polish market, but what is most obvious is that a market with a population of 40 million is attractive enough by itself for global players, who do not have such an intensive CEE strategy as the other banks who are actively involved in the region.