Banking Revenues In Emerging Europe To Increase By 13 Percent Per Year, Report Speculates

Banking revenues in emerging Europe are set to increase by around 13 percent per annum from €55 billion now to €170 billion in 2015, according to Mercer Oliver Wyman, the financial services consulting firm. However, a dwindling number of potential

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Banking revenues in emerging Europe are set to increase by around 13 percent per annum from €55 billion now to €170 billion in 2015, according to Mercer Oliver Wyman, the financial services consulting firm.

However, a dwindling number of potential acquisition targets combined with high valuation multiples will force local and international banks to rethink their previous “buy and build” approach to the region. Instead of a country-by-country approach, banks will increasingly adopt regional business strategies where portfolios of businesses can benefit from shared branding and infrastructure.

Mercer Oliver Wyman’s report argues that a combination of rapid economic growth (5 percent GDP growth per annum); significantly reduced risk levels (brought about by improved regulation and new accounting standards); and markets under-penetrated by banking products have all led to rapid growth in Emerging Europe’s financial services industry.

The market has become increasingly attractive to international banks to the point that over half the banking markets in the region are 80 percent foreign owned.

“Despite the expected strong growth ratio, market share and presence is no longer enough for banks to succeed in Emerging Europe,” said Thomas Raab, director of Mercer Oliver Wyman. “Heavy competition and fewer acquisition targets should prompt a major strategic rethink for incumbents and new entrants alike. The region still offers many rewards for those prepared to take a more regional approach, creating portfolios of businesses which are scalable across disparate countries.”

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