Banks edging back to health, but beware of the hidden risks

The past few months have brought further signs that, after a torrid couple of years, the region’s banking sector is starting to find its feet. But credit growth is likely to remain subdued across most of the region for the foreseeable future, providing a significant headwind to growth. And in a number of countries the legacy of the past decade’s boom/bust credit cycle means that familiar frailties are likely to resurface if investor risk appetite takes a turn for the worse. In general, we think that banks in the Czech Republic and Poland look most secure, while the biggest vulnerabilities remain in the South East of the region.