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Greek banks have drastically reduced their presence across south-eastern Europe under the restructuring plans supervised by the European Commission’s DG Competition.

The implementation of these plans is binding for the banks’ management, even if the economic conditions for the country and the banks improve significantly. This will put an end to the ambitions for dominance of Greek finance in the region. If the banks fail to meet the schedule of activities agreed with the European Commission, then DG Competition may even take hold of some of their assets. Representatives from the sector admit that the expansion abroad, performed so impressively from the mid-1990s to 2008, has failed to achieve the anticipated results.

The underlying idea behind the expansion of Greek banks was that after the fall of the Berlin Wall and the introduction of market economies the Balkans countries would sustain high growth rates. And the banks were hopeful that, once they had invested in a big way across neighbouring countries, the maturing markets would guarantee long-term profitability for them. All major Greek banks embarked on expansion. There was no year after 2000 without a Greek bank buying a foreign bank or creating its own affiliate overseas.

Expansions peaked in 2006 when seven foreign banks were purchased in Bulgaria, the Ukraine, Romania, Serbia and Turkey, with a network of 800 branches and 13,890 employees between them. Over € 3 billion went into the shopping spree. In late 2007, Greek financial institutions controlled banks in 15 countries, with 3,500 branches, over 42,000 employees and assets exceeding € 90 billion between them. But Greek banks did not only see their boldest expectations failing to materialise, some have also been struggling to survive over the last three years.

The National Bank of Greece: retains its strong position on the Turkish market

It might seem surprising that during the crisis years the bank’s foreign market presence not only did not decline, but it significantly expanded. The group’s assets of € 26.6 billion by late 2008 swelled to 37.9 billion in September 2014 – an increase of 42.5%! This is thanks to Finansbank, NBG’s subsidiary in Turkey, which grew far beyond expectations. NBG’s management was vindicated in selecting the Turkish market as the focus for its overseas expansion.

As agreed with the European commission, NBG will retain its 60% share of Finansbank, but will shrink its portfolio in Bulgaria, Serbia, Macedonia, Romania and Albania. And this is a tough decision to make as in Macedonia and Bulgaria the bank has a substantial share of the local market. But Turkey is the strategic choice, both for the size of its market and Finansbank’s strategic foothold on it. None of the countries in the region can beat the dynamics of the Turkish financial market. The latter accounts for 83% of the group’s revenues from overseas operations. Lending in Turkey by the end of the nine months of 2014 amounted to €18.9 billion against €6.2 billion for the rest of the Balkan countries taken together.

 ALPHA BANK: strategic presence in Romania and Cyprus

Alpha Bank was the first Greek bank, which ventured into these countries. In 1994, it created Banca Bucuresti in Romania. It was the first foreign bank to enter the Romanian market after the fall of the Ceausescu regime. The group centred its overseas strategy around Romania and Cyprus, and built up its strongest presence there. It has now withdrawn from Turkey and the Ukraine, and its presence in the markets of Bulgaria, Albania, Serbia and Macedonia will be significantly truncated.

According to data for the first three quarters of 2014, Alpha Bank has extended loans amounting to € 5.15 billion in Cyprus and € 2.9 billion in Romania. Its lending in the other Balkan countries is as follows: € 668 million in Bulgaria, € 767 million in Serbia, € 373 million in Albania and € 68 million in Macedonia. That is to say, €8 billion out of a total overseas lending portfolio of € 10 billion have gone to Cyprus and Romania. In Cyprus, the bank owns 8% of the total banking market, with 29 branches and 968 employees. In Romania, Alpha Bank controls 5.8% of the market, and has 149 branches and 2011 employees.

Piraeus Bank: a three-country focus

The Piraeus Bank Group has chosen Romania, Bulgaria and Cyprus as its strategic markets, but it will retain its presence across the other Balkan countries as well. Nevertheless, the bank is intending to step back from Egypt and the Ukraine where its market share is below 1% anyway.

According to data for the first six months of 2014, the bank’s market share in terms of lending was 8.3% in Albania, 4.4% in Bulgaria, 1.4% in Cyprus, 0.8% in Egypt, 3.2% in Romania, 3% in Serbia and 0.2% in the Ukraine.

In Romania, Piraeus owns assets priced at €1.8 billion, €1.78 billion worth of assets in Bulgaria, €743 million in Albania, €181 million in the Ukraine, €514 million in Serbia, €899 million in Egypt and €1.2 billion in Cyprus.

At the end of March 2014, its network comprised 1,374 branches, 964 of which were in Greece. The bank had 22,402 employees, with 16,454 working in Greece, and the rest – overseas.

EUROBANK: a decrease in assets as an antidote against the crisis

The last few years have seen the Eurobank group withdrawing from Poland and Turkey, and the same will soon be true for the Ukraine as well.

The bank’s assets abroad have dwindled from €21.2 billion in 2008 to €12.5 billion in September 2014. The bank’s agreement with the EC envisages a further 29% shrinking of its presence abroad. By the summer of 2018, Eurobank’s assets overseas should have dipped below €8.77 billion. The bank’s management has decided to keep its presence in Bulgaria, Romania, Serbia and Cyprus, but with reduced amounts of assets.

Sources from the bank say this might be done through relieving its debt, with the weakening of local currencies against the euro coming in handy in achieving this. According to the first three quarters data, the group's assets amount to €3.7 billion in Cyprus, €3.4 billion in Romania, €3 billion in Bulgaria and €1.4 billion in Serbia. Eurobank is running a network of 460 branches in the Balkans, with a 6800-strong staff working in them.

Eurobank’s overall loan portfolio overseas amounts to €7.3 billion, with the sum going up to €44.2 billion if its lending in Greece were added on top of that. A breakdown by country would look like this: €2.6 billion in Romania, €2.5 billion in Bulgaria, €1.2 billion in Cyprus and €936 million in Serbia.