Banking Crisis
Who Are Possible CEE Winners, Losers From Greek Woes, Asks Berenberg

There losers - and some potential gainers - from the turmoil now hitting Greece's financial system, argues the Germany-headquartered private bank.
The dark clouds cast by the risk of Greece leaving the eurozone
because of the country’s crushing debt mean some banks in Central
and Eastern Europe face rising problems but there is also a
silver lining for some other players, European bank Berenberg says.
The biggest impact of Greece imposing capital controls, as has
happened this week, will be felt on Central Eastern European
countries where Greek banks operate; the economic growth of these
nations could be hit, the bank said in a note. It has a “sell”
recommendation on Erste Group Bank; a “hold” recommendation on
Raiffeisen Bank International and “buy” views on Unicredit and
KBC Group.
Despite the gloom, some banks may benefit from developments on
the ground, Berenberg went on.
“However, the funding and liquidity problems of the Greek banks
may present an opportunity for organic market share gains for the
banks in our coverage present in the same CEE countries such as
Erste (Sell), KBC (Buy) and Unicredit (Buy). Unicredit offers the
biggest valuation upside in our view. Despite this opportunity we
continue to believe Erste’s medium-term consensus revenue
expectations are too high,” analysts at Berenberg said in a
note.
The debt impasse and associated restrictions on capital may
increase the cost of funding of eurozone banks may increase in
the short term and financial instability in the currency bloc
could reduce demand for loans and force local regulators to
impose tougher rules to protect domestic banks, also restricting
the flow of capital, the analysts continued.
The CEE countries where the Greek banks have significant lending
market shares (higher than 15 per cent) include Albania,
Bulgaria, the former Yugoslavian Republic of Macedonia, Romania
and Serbia. Greek banks are also present in Cyprus with total
lending market share of 11 per cent. Aggregate loans of the Greek
banks’ subsidiaries in these countries are €29.3 billion, or 11
per cent of total loans, it said.
There are also greater risks for subsidiaries of Greek banks in
Central and Eastern Europe; although these subsidiaries are
separate legal entities and fund themselves, capital controls on
their parents restrict the flow of funds inside a broader group,
potentially leading to credit downgrades and higher funding
costs.
Berenberg added that some local CEE banks could gain market share
from incumbents, either organically, or through acquisitions,
following the compulsory shrinkage of Greek banks’ balance
sheets.
“We believe Erste and Unicredit are well positioned to gain
market share organically in Romania and KBC in Bulgaria. We
believe Raiffeisen may struggle to take advantage of this
opportunity given its deleveraging plan,” it said.