Bancherul - BANCI / ENGLISH / Erste Group Special Report: CEE companies generate double return on capital compared to Western counterparts

• CEE companies – more efficient and profitable, less indebted – as frontrunners in the competition for capital
• Slovakia and Czech Republic have the least indebted but most efficient non-financial corporate sector
• German corporate sector the only sector to compete with CEE companies in terms of operating efficiency

Central and Eastern European (CEE) companies are significantly less indebted, more profitable and generate double return on capital, also due to higher operational efficiency. Thus, CEE countries are more appealing in the race for capital compared to their Western peers. These are the main key findings of Erste Groups special macro report, assessing the operating efficiency of the different sectors in the economy (households, government, non-financial and financial corporations).

“Over the last decade, the non-financial corporate sector has been a net borrower in many European countries. Investments soared and boosted revenues, but, on the other hand, companies cumulated a huge pile of debt. Thus, the corporate sector had to rebalance too – by increasing the profitability of its business operations and deleverage (reduce the amount of debt)”, says Juraj Kotian, Co-Head CEE Macro Research at Erste Group. “It is clear that the economic rebound in the next couple of years will rely on the corporate sector – whether it is competitive, able to efficiently utilize capital and create new jobs. Fortunately, CEE countries have been doing very well, as capital has been relatively efficiently utilized, generating about twice as high a return on capital compared to Western Europe (about 8%). Also labour productivity has increased in many CEE countries during the crisis, in order to preserve their competitiveness/profitability.”

Full text of the press release and the Special Report to be found under: www.erstegroup.com/pressrelease