Central and Eastern Europe and the Financial Crisis: The Impact on the Banking Sector and the Leasing Market Rainer Münz Erste Group Bank, Research & Development LEASEUROPE CESEE Seminar-2010, Budapest, April 23, 2010 page 1 April 23, 2010
The key question: Will the CEE region return to growth? page 2 April 23, 2010
Catch-up in CEE: In the years before the crisis, income in CEE improved significantly compared to the EU average 100 90 80 70 60 50 40 30 20 10 0 Slovenia Czech republic Slovakia Estonia GDP per cap in ppp (100 = EU27) Croatia Hungary Lithuania Poland Latvia 2000 additional GDP in 2008 Romania Bulgaria Serbia Source: Eurostat, Erste Group Research page 3 April 23, 2010
This positive development came to a halt due to the crisis page 4 April 23, 2010
Slump in CEE exports page 5 April 23, 2010
In 2009 exports collapsed in all countries of the region 30 Change of experts (in % to previous year) 20 10 0-10 -20-30 AT BG HR CZ HU RO SR SK SI UA -9.8-8.0-13.1-11.6-13.2-11.9-16.1-17.0-16.8-28.0-40 2008 2009 2010 page 6 April 23, 2010
This translates into reduced contributions of exports to GDP (per capita in nominal terms) 40000 35000 Nominal GDP per cap in Euro (the yellow part represents the decline of exports per cap in Euro in 2009 compared to 2008) 3681 30000 25000 20000 2780 15000 10000 5000 511 685 2431 1648 287 105 2654 608 0 AT BG HR CZ HU RO SR SK SI UA page 7 April 23, 2010
Dry-up of investment inflows within / to CEE page 8 April 23, 2010
Investments declined throughout the region. Only in Austria they remained relatively stable 140 120 100 80-6% Gross fixed investments in bn Euro -14% -37% -42% 0% -5% -10% -15% -20% 60 40 20-24% -14% -18% -13% -17% -26% -25% -30% -35% -40% 0 AT BG HR CZ HU RO SR SK SI UA 2008 2010-45% page 9 April 23, 2010
in CEE much of this decline is due to reduced inflows of FDI 10.0 Net FDI flows in bn Euro 5.0 0.0 AT BG HR CZ HU RO SR SK SI UA -5.0-10.0-15.0 2008 2010 page 10 April 23, 2010
National savings now cover a higher share of investments in CEE 140 Gross national savings / investments (in %) 120 100 80 60 40 20 0 AT BG HR CZ HU RO SK SI UA 2008 2010 page 11 April 23, 2010
Sharp decline of private consumption page 12 April 23, 2010
With households saving more, private consumption experienced a major slump in 2009 throughout CEE 15.0 10.0 Change in private consumption (in %) 5.0 0.0-5.0 AT BG HR CZ HU RO SR SK SI UA -10.0-15.0 2008 2009 2010f 2011f page 13 April 23, 2010
while some governments decided to increase public consumption 8 Change of government consumption (in %) 6 4 2 0-2 AT BG HR CZ HU RO SR SK SI UA -4 2008 2009 2010 2011 page 14 April 23, 2010
with little impact on GDP, as private consumption outweighs government consumption significantly Proportion of government consumption to private consumption (in %) 100% 80% 60% 40% 20% 0% AT BG HR CZ HU RO SR SK SI UA private gov't page 15 April 23, 2010
which The global will economy primarilywill be driven return to by strong growth growth in 2010-12 in emerging regions 10 % Annual change of the aggregated GDP, 1980-2014, in % 8 6 4 2 0-2 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014-4 -6-8 Advanced economies Emerging and developing World economies Central and eastern Europe page 16 April 23, 2010
In Europe the forecast for CEE clearly is above EU average Real GDP growth (in %) 5.0 0.0 4.0 4.5 2.6 2.7 3.0 2.8 1.82.1 1.9 2.1 1.0 1.5 1.8 0.3 0.0 0.0 AT CZ SK HU RO HR SR UA -5.0-3.4-4.3-4.7-6.3-7.2-5.9-4.2-10.0-15.0-13.1 2009 2010 2011 Source: Erste Group Research page 17 April 23, 2010
When will the real GDP level of 2008 be reached again? UA DE SP UK AT HU RO RU SK CZ US CN IN PL 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: own calculations on basis of EIU forecast page 18 April 23, 2010
What were factors behind the GDP slump? page 19 April 23, 2010
Some regions produce and others consume Trade balances, 2008-2010 (in bn US$) Europe: 2008: +94 bn$ 2009: -129 bn$ 2010: -180 bn$ CIS: 2008: +189 bn$ 2009: +80 bn$ 2010: +111 bn$ North America: 2008: -684 bn$ 2009: -402 bn$ 2010: -517 bn$ Asia & Pacific: 2008: +357 bn$ 2009: +429 bn$ 2010: +404 bn$ Latin America: 2008: +5 bn$ 2009: -17 bn$ 2010: -41 bn$ Middle East: 2008: +338 bn$ 2009: +162 bn$ 2010: +233 bn$ Africa: 2008: +95 bn$ 2009: +35 bn$ 2010: +53 bn$ Source: EIU page 20 April 23, 2010
Some save a lot, others much less Gross savings rate in % of GDP, 2009 UK 2008: 15.4% 2009: 13.7% CEE 2008: 19.0% 2009: 21.3% Russia 2008: 31.6% 2009: 25.9% USA 2008: 9.0% 2009: 9.9% Eurozone 2008: 21.6% 2009: 19.4% North Africa 2008: 34.8% 2009: 25.3% Saudi Arabia 2008: 41.6% 2009: 27.2% Asia/Pacific 2008: 35.6% 2009: 33.7% Latin America 2008: 22.3% 2009: 18.8% Source: EIU page 21 April 23, 2010
Europe has signficant imbalances when looking at coutries separately (C/A balances as % of GDP; 2009) above 3% between 0 and 3% between -3% and 0 below -3% Source: EIU page 22 April 23, 2010
Macro-economic imbalances will not go away any time soon page 23 April 23, 2010
Impact on banking and leasing markets page 24 April 23, 2010
Banking Markets in CEE page 25 April 23, 2010
Market volumes of corporate loans in CEE, in bn 160 140 120 Volume in bn 100 80 60 40 20 0 AT CZ HR HU SK SR RO UA Dec 07 Dec 08 Dec 09 page 26 April 23, 2010
Market volumes of retail loans in CEE, in bn 140 120 Volume in bn 100 80 60 40 20 0 AT CZ HR HU SK SR RO UA Dec 07 Dec 08 Dec 09 page 27 April 23, 2010
Market volumes in corporate deposits in CEE, in bn 50 45 40 Volume in bn 35 30 25 20 15 10 5 0 AT CZ HR HU SK SR RO UA Dec 07 Dec 08 Dec 09 page 28 April 23, 2010
Market volumes in retail deposits in CEE, in bn 250 200 Volume in bn 150 100 50 0 AT CZ HR HU SK RS RO UA Dec 07 Dec 08 Dec 09 page 29 April 23, 2010
Leasing Markets in CEE page 30 April 23, 2010
New leasing business in CEE, 2006 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Czech Republic Hungary Poland Slovak Republic Slovenia Estonia Latvia Lithuania Bulgaria Romania Croatia Turkey Equipment Real estate Source: Leaseeurope page 31 April 23, 2010
Equipment leases by type of asset in CEE, 2006 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Czech Republic Hungary Poland Slovak Republic Slovenia Estonia Latvia Lithuania Bulgaria Romania Turkey Machinery and industrial equipment Computers and business machines Road transport vehicles Motorcars Ships, aircraft, railway, rolling stock Others Source: Leaseeurope page 32 April 23, 2010
Development of leasing volumes (new business) in CEE, in mn Total Leasing 8000 7000 6000-23% 5000 4000-16% 3000 2000-44% -60% -51% -76% -51% 1000-50% -72% -85% 0 AT CZ SK HU HR RO SR BG UA SI 2007 2008 2009 page 33 April 23, 2010
In the car leasing business particularly HU and RO were declining in 2009 Car leasing market sizes 2009 (bubble = new leasing in mn ) compared to 2008 (change in %) 4000 3500 3000 2500 2000 1500 1000 500 AT CZ SK HU HR RO SR BG UA SI 0-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Source: Immorent page 34 April 23, 2010
In the equipment leasing business the largest markets performed (relatively) better Equipment leasing market sizes 2009 (bubble = new leasing in mn ) compared to 2008 (change in %) 3500 3000 2500 2000 1500 1000 500 AT CZ SK HU HR RO SR BG UA SI 0-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Source Immorent page 35 April 23, 2010
and the real estate leasing business was somewhere in the middle Real Estate leasing market sizes 2009 (bubble = new leasing in mn ) compared to 2008 (change in %) 1600 1400 1200 1000 800 600 400 200 AT CZ SK HU HR RO SR BG UA SI 0-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Source: Immorent page 36 April 23, 2010
Leasing companies by ownership in CEE, 2006 70 60 50 40 30 20 10 0 Czech Republic Hungary Poland Slovak Republic Slovenia Estonia Latvia Lithuania Bulgaria Romania Turkey leasing companies with banking status or banks leasing companies owned by banks captive leasing companies independent leasing companies Source: Leaseeurope page 37 April 23, 2010
Average leasing market share of Erste Group in 2009 (% of new business volume) 4.4% 4.0% 8.9% 14.3% 2.1% 7.1% 13.9% 19.1% 4.1% 6.1% page 38 April 23, 2010
Leasing markets and GDP page 39 April 23, 2010
How important is GDP growth for the leasing business? 1200 Nominal GDP/capita vs. new leasing volume/capita 1000 800 R 2 = 0.7436 600 400 200 0 0 5000 10000 15000 20000 25000 30000 35000 40000 Source: Erste Group Research page 40 April 23, 2010
Looking at the different leasing categories: the closest relation to GDP is in theerste car GROUP leasing business Nominal GDP/capita vs. new leasing volume per capita 500 450 400 350 300 250 200 150 100 50 0 0 5000 10000 15000 20000 25000 30000 35000 40000 page 41 April 23, 2010 Source: Erste Group Research
The relation is less clear for the equipment leasing business 450 Nominal GDP/capita vs. new leasing volume/capita 400 350 300 250 200 150 100 50 0 0 5000 10000 15000 20000 25000 30000 35000 40000 page 42 April 23, 2010 Source: Erste Group Research
but more or less holds true for the real estate leasing business 400 Nominal GDP/capita vs. new leasing volume/capita 350 300 250 200 150 100 50 0 0 5000 10000 15000 20000 25000 30000 35000 40000 page 43 April 23, 2010
In line with the general growth expectations for CEE there is reason to believe that the leasing market has a lot of potential! page 44 April 23, 2010
Thank you for your attention! rainer.muenz@erstegroup.com page 45 April 23, 2010