Central Eastern South Eastern Europe Banks report positive trends in credit demand and supply

This article is published in association with European Investment Bank.

• Both credit demand and credit supply show improvement following weak supply conditions since 2022
• Banks say profitability is higher in the region than for overall Group operations
• A large part of cross border banks aims to maintain and expand operations in the region

After a challenging period marked by tight credit conditions, banks in Central Eastern and South-Eastern Europe (CESEE) are reporting increased willingness to lend together with a stronger credit demand from both households and businesses. However, expectations for the upcoming months indicate a slightly more cautious outlook, reflecting broader economic challenges.

The CESEE Bank Lending Survey for the second half of 2024, conducted by the European Investment Bank (EIB), reveals a recovery in credit demand and credit supply across the region.

“While we are encouraged by the improvements in credit conditions over the past six months, it is essential for banks to remain vigilant as we navigate economic slowdowns of some key trading partners of the region,” said Kyriacos Kakouris, Vice President of the EIB. “This survey underscores the resilience of the CESEE banking sector, but also highlights the need for strategic planning in light of future uncertainties.”

The survey indicates a rise in credit demand. This increase is primarily driven by retail banking products, particularly mortgages and consumer credit. The findings suggest that consumers were regaining confidence in borrowing. Looking ahead, banks expect also corporates’ investments to regain strength and drive credit demand during the next months.

In a notable turn of events, credit supply has shifted to positive for the first time in two years. This positive change reflects improved lending conditions, especially for small and medium-sized enterprises (SMEs), which have historically faced challenges in accessing credit. The willingness of banks to lend is a promising sign for business growth and investment.

The market potential in the CESEE region is widely regarded as significant, with the majority of surveyed banks assessing it as high—particularly in countries like Czechia and Romania—or medium.

This is indicating a generally optimistic outlook for future growth opportunities in the region.

“The global outlook presents significant challenges, and the CESEE region is no exception. However, the banking sector remains a pillar of resilience, as banks continue to operate effectively while seeking opportunities for growth” said Debora Revoltella, EIB Chief Economist.

Access to funding for subsidiaries banks in the region remains robust, with retail deposits serving as a major driver. Banks expect continued support from both retail and corporate deposits, contributing to a favourable funding environment ahead. This strong access to funding is vital for banks to maintain their lending activities and support economic growth in the region. Additionally, credit quality has improved, with a decrease in the proportion of non-performing loans (NPLs). However, there are concerns that this trend may reverse in the next six months, necessitating careful monitoring of credit quality.

The findings of this survey will serve as a valuable resource for banks as they navigate the complexities of the market in the months ahead.

The full CESEE Bank Lending Survey report is available here.

Background information

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. It finances investments that contribute to EU policy objectives. EIB projects bolster competitiveness, drive innovation, promote sustainable development, enhance social and territorial cohesion, and support a just and swift transition to climate neutrality.  

The EIB Group, which also includes the European Investment Fund (EIF), signed a total of €88 billion in new financing for over 900 projects in 2023. These commitments are expected to mobilise around €320 billion in investment, supporting 400 000 companies and 5.4 million jobs.  

All projects financed by the EIB Group are in line with the Paris Climate Accord. The EIB Group does not fund investments in fossil fuels. We are on track to deliver on our commitment to support  €1 trillion in climate and environmental sustainability investment in the decade to 2030 as pledged in our Climate Bank Roadmap. Over half of the EIB Group’s annual financing supports projects directly contributing to climate change mitigation, adaptation, and a healthier environment.  

Approximately half of the EIB’s financing within the European Union is directed towards cohesion regions, where per capita income is lower. This underscores the Bank’s commitment to fostering inclusive growth and the convergence of living standards. 

About the CESEE Bank Lending Survey

The CESEE Bank Lending Survey was developed in the context of the Vienna Initiative 2.0 to monitor cross-border banking activities, understand credit dynamics, and gain insights into the business strategies and market expectations of banks operating in Central, Eastern and South-Eastern Europe. The survey is administered by the European Investment Bank.