Deloitte has published its annual study, which provides a comprehensive picture of the region’s banking sector, for the seventh time. The analysis for 2024 generally shows that strong profitability in a high interest rate environment, a still fragmented CEE banking market and the solid capital position of acquisitive banks create favorable conditions for further market consolidation.
Last year, the CEE banking sector showed declining M&A transaction activity. The high interest rates and the sector’s superior profitability reduced the selling pressure for smaller, less efficient players, while tightening market liquidity significantly limited the availability of cheap funds, making it challenging to finance and attractively price acquisitions, Deloitte noted.
Despite this, consolidation in the regional banking market is expected, as players’ pursuit of economies of scale and further strengthening of market positions remains a key strategic objective.
Last year, M&A activity in Hungary’s banking sector slowed down as the economic environment, as elsewhere, characterized by high interest rates and strong profitability, did not provide significant incentives for either buyers or sellers. The only major transaction of the year was MBH Bank’s acquisition of a 14.9% stake in Fundamenta-Lakáskassza from Generali, reflecting a cautious but strategic approach to consolidation in the financial sector.
“While 2024 saw slightly fewer banking M&A transactions at the regional level than 2023, it was still a busy year. Through our transactions, we have a good understanding of seller and buyer motivations, which we expect to continue the consolidation of banks in the region in the coming period,” summarized Albert Márton, partner at Deloitte Financial Advisory and head of CEE portfolio transaction advisory services.
Regional banking consolidation is expected to continue in the coming years as financial institutions focus on improving scale efficiency and strengthening market positions, according to Deloitte partner Albert Márton.
Over the past six years, the number of banking institutions across the region has declined significantly due to consolidation trends. Between 2017 and 2023, the total number of banks in the region dropped by nearly 20%, from 237 to 187. In Hungary, the number of operating financial institutions fell from 33 to 19, while Poland and the Czech Republic also saw a moderate decrease.
One of the main drivers of this trend has been the changing valuation of banking transactions. Before the financial crisis, it was not uncommon for banks to be acquired at a price-to-book value (P/BV) multiple of six or seven. However, last year, the average P/BV ratio for banking transactions had dropped to just 1.1, making selective acquisitions of regional banks increasingly attractive.
In addition, their de-inflationary liquidity sterilization measures of central banks have significantly tightened market liquidity, limiting the availability of cheap funds to price and finance acquisitions favorably.
“The high interest rate environment is currently holding back the banking M&A markets on two fronts. On the one hand, it creates a favorable business environment for less efficient players so that they are not under transaction pressure, and on the other hand, it makes acquisition financing more expensive,” explains Csaba Csomor, director of Deloitte Financial Advisory, and head of the firm’s blockchain and digital assets practice in Central Europe.
“The anticipated new monetary easing cycle could, therefore, provide a boost to the banking M&A markets on two fronts,” he adds.
Among regional players, OTP Group has been the most active (or most successful) acquisitor in the past six years, completing five transactions. Other key players in the market include Erste Group, Raiffeisen Bank, and Estonia’s LHV Pank, each of which has executed four acquisitions during this period.
Thanks to these acquisitions, OTP, at the end of 2023, was among the top five banking groups by total assets in Albania, Bulgaria, Croatia, Serbia, and Slovenia. In Hungary, it remained the market leader. OTP was only ninth in Romania by total assets at the end of 2023; the group sold its Romanian subsidiary to Banca Transilvania in 2024, which also points towards consolidation efforts.
For the third year running, the study also highlighted the development of the fintech sector and its impact on the banking ecosystem.
According to the findings, global fintech faces significant challenges due to limited investment funding, a restrictive monetary environment, and a shift in investor focus toward artificial intelligence. As a result, traditional banking institutions may see further opportunities to strengthen their positions through strategic acquisitions, leveraging favorable valuations and market conditions, Deloitte noted.
In Central and Eastern Europe, the maturity of fintech companies has led to several significant capital raises, allowing these companies to expand regionally and enter the European or even global market.
Hungary’s five largest fintechs at the end of 2023 were Simplepay, followed by Dorsum Zrt., W.UP (Finshape), Seon Technologies Kft., and Taxually. Seon’s growth was the most outstanding among these: doubling its turnover in 2022 and growing by 44% in 2023 to HUF 17.3 billion.
This article was first published in the Budapest Business Journal print issue of March 7, 2025.
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