CEE Banking M&A Study 2022

About the study

The transaction activity in the banking market slowed slightly in 2022, and the
lower valuations resulting from the high-yield environment may temporarily
create a pricing gap and thus reduce the motivation of sellers, however further
consolidation is expected in fragmented markets where leading banking groups do not hold a strategic market position. Nonetheless, in this uncertain
macroeconomic environment, robustness and economies of scale become even more critical, making it difficult for banks with low market share, lower profitability, and weaker capital base to compete, necessitating transactions in the future.

Deloitte’s 5th edition of the CEE Banking M&A Study offers a comprehensive overview of the current state of the banking sector in the region, highlighting the most pressing challenges and opportunities facing the industry which drive deal activity. The study encompasses macro and banking market dynamics, transaction activity, and a new addition to our study is an in-depth analysis of the Fintech sector. The Fintech section of our study is assessing the regional Fintech trends and listing the CEE region’s main Fintech companies. We included this new section in our study to react to our clients’ feedback, that nowadays besides the overview of the CEE banking market landscape the Fintechs are also became a topic of discussion.

We trust that this study will be of immense benefit to banks, financial institutions, investors, and other stakeholders with an interest in the CEE banking sector.

Key findings:

• The growth of the CEE banking market was halted by the COVID-19 pandemic, the war in Ukraine and the current high inflationary environment, however the region proved to be more resilient to these challenges compared to the 2008 financial crisis.
• Despite the challenging times, the consolidated balance sheet of the banking sector has continued to grow in the region, but the current high interest rate environment may limit future growth through a decrease in asset valuations and demand for loans.
• The profitability of the banking sector has been recovered with the release of of COVID-19 related additional provisions, and the current high interest rates environment may improve the sector's profitability in the short term. In the long term, however, it is uncertain how the high inflation and interest rate environment will affect the asset quality and whether a negative turn will occur in level of non-performing loans.
• Although bank market transaction activity slowed slightly in 2022, and the lower valuations due to the high yield environment may decrease the motivation of the sellers, banks with weaker capital positions may be forced to sell their operation if the asset quality and profitability plummets.
• The most active banking M&A markets of the CEE region in terms of number of  transactions during 2021 and 2022 were the Baltics (6 transactions), Serbia (5 transactions), Czech Republic (4 transactions), Bosnia and Herzegovina (4 transactions), Hungary (3 transactions) and Romania (3 transactions) between January 2021 and December 2022.

“We have been actively supporting our clients in the recent consolidation momentum in 2021 and 2022. Therefore, having seen a number of deals from the inside, and having liaised with banking executives we expect consolidation of the CEE banking market to remain a hot topic in the forthcoming years as well. In addition, although it is limited yet, we see some revival in the NPL markets as well.”

— said Balázs Bíró, Partner, CEO of Deloitte Hungary.

„Despite former expectations the COVID-19 pandemic did not have a significant negative effect on the banking sector’s asset quality, however the current inflation and interest rate shock posts a new challenge to the sector. How banks can tackle this challenge will be a significant driver of transaction activity in the forthcoming period both for banking and loan portfolio transactions.”

— said Csaba Csomor, Director, Deloitte Financial Advisory.

The full study is availabe by clicking here.