CEE remains a key engine of growth for UniCredit Group

CEE remains a key “engine of growth” for UniCredit Group, which is underlined by our strong commitment to the region, said the bank in a statement. rnrn”We maintain a positive view of the region’s performance in the coming years, although the CEE should remain a region of two halves with larger economies (e. g. Turkey, Russia and Poland) likely to keep growing almost at full steam whereas others (especially in SEE) may suffer from their structural weaknesses and high correlation with the performance of peripheral Europe. Western European banks’ deleveraging represents a clear downside risk with some countries more exposed than others, but according to our baseline scenario, this remains a manageable drag.rnrnWe see potential for the CEE banking sector to generate above-EU average growth in banking volumes and profitability, as the penetration gap still exists, although there remain large divergences among segments and countries. Mortgages and corporates remain the most attractive segments, while country-wise we expect Russia and Turkey to contribute the most in terms of lending growth. Overall, lending activity should converge toward a lower growth rate path compared to the pre-crisis period, but remain in the low double-digits. Under the new ‘normal’ a more balanced funding structure should also prevail, particularly in countries featuring high funding gaps. Bank margins also should progressively shrink in the wake of much harsher competition for deposits. The top line will thus need to be supported by stronger fee generation (to make the overall relationship with the customer more profitable) and the dynamic in gross operating profit will have to be underpinned by much stricter cost control than in the past.”