However, the impact of the crisis and recovery differs by subregion: Poland, Czech Republic and Slovakia (North Central Europe) managed to remain profitable in terms of ROE, whereas Hungary, Slovenia and Romania (Central Europe) had to cope with serious market downturns – yet there are already signs of recovery. In South Eastern Europe profitability plummeted, but due to the significantly increased NPL ratios a recovery still seems to be a long process.
After years of uncontrolled growth, the crisis forced CEE banks to realize that without more emphasis on operational efficiency and costs, profitable operations cannot be achieved with the desired result anymore. Everywhere, efficiency improvement became a key concern.
Moreover in today’s volatile, uncertain, complex and ambiguous world, a strategy where all market segments are equally targeted, cannot be maintained and a clearly set focus area is required. The entire industry is undergoing an enormous transformation process utilizing some of the best practices from other industries as well.
On the stagnating markets nearly all banks launched a huge variety of efficiency improvement programs from governance model changes to large scale process optimizations. In many cases, it was only enough to balance the negative effects of the top-line: solely 46% of the banks could achieve a real efficiency improvement in terms of their cost-to-income ratio.