CEE banking sector sees eleven deals in 2022, but it may be slowed by worsening macroeconomic conditions.

The CEE region recorded 11 transactions in 2022. Transaction activity was driven by exits or portfolio rationalisation of large international players (Société Générale, Sberbank, Greek banks) and acquisitions of established international or local players (OTP, KBC, Raiffeisenbank, MK Group). The CEE banking sector is still very diversified and smaller banks with less efficient business models are attractive acquisition targets for larger international banking groups. However, deteriorating macroeconomic conditions and higher funding costs could negatively affect future M&A activity. This is according to the latest edition of Deloitte's study on M&A in banking in Central and Eastern Europe.

Czech banking market

The total assets of the domestic banking sector grew significantly by 12.9% during 2021, reaching over EUR 342 billion at the end of the year, with growth continuing in the second quarter of 2022, when total assets reached EUR 394.8 billion. The war in Ukraine had a direct impact on the Czech banking sector and an unprecedented liquidity outflow led to the collapse of Sberbank CZ. The loan portfolio of Sberbank CZ was acquired by Česká spořitelna in December 2022 for approximately CZK 41bn, with the transaction expected to be completed in the first quarter of 2023.

"The financial performance of the Czech banking market has long made it one of the most interesting investment opportunities in the region. The relative ease with which local players have weathered the recent pandemic and the deterioration of the global geopolitical situation last year is proof of this.

The dramatic change in the trend of the bank acquisition market in recent years only confirms this fact. After the privatisation of the sector and the subsequent entry of low-cost players into the Czech market in 2008-2011, there were only isolated transactions, such as the sale of Citibank's retail branch in 2015. Acquisition dynamics were kick-started by the sale of the Wüstenrot Group in 2020 and the local buying spree gained momentum. Thus, the merger of Equa bank with Raiffeisenbank was completed at the beginning of last year, and Expobank was taken over by Creditas in the second half of the year.

However, the main event on the banking market in 2022 was the commencement of insolvency proceedings of Sberbank CZ, which involved the sale of a key asset - the portfolio of performing loans. This sale ranks among the largest banking transactions since the privatisation of the sector at the turn of the millennium."

-Roman Lux, Director, Financial Advisory/FSI/Valuation and Modelling

FinTech sector development in CEE

We also present a new FinTech sector analysis, which examines CEE fintech trends and lists the top fintech companies in each country. M&A activity in the banks' market is spilling over to FinTech companies. After initial hesitation, banks are realising the added value of this dynamic sector, while investors and founders of FinTech companies are looking for strong allies to take their business model one step further. Thus, in the coming years, we expect not only a continued trend of consolidation in the banking market, but especially a growing interest in acquiring complementary FinTech business models.