ProCredit is a Germany-based group operating regional banks across South-Eastern and Eastern Europe and Ecuador. The banks focus on SMEs and private middle-income and high earners. At end-September 2021, the group’s total assets stood at €7.9bn.
ProCredit (PCB) has extensive experience in supporting SMEs in emerging economies (and strong ESG profile), with a focus on Southeastern (SEE) and Eastern Europe (EE) and banking operations in Ecuador. It streamlined its business in recent years, including a digital direct bank strategy for private clients and a reduced branch network and headcount. As macro conditions normalise further and PCB continues to grow its business, we expect it to realise its scaling potential and reach its mid-term ROE target of 10%.
While the SEE and EE region benefitted from secular GDP growth of 3–5% pa in the five years prior to COVID-19, the pandemic triggered a recession in 2020 with a GDP decline of 2.0% in Emerging and Developing Europe, according to IMF data. The IMF forecasts a return to growth in 2021 with GDP up 6.0%. PCB’s in-depth, impact-oriented relationships with SME borrowers (92% of loan book at end September 2021), prudent credit risk management and solid capital base (CET-1 ratio of 13.8% at end September 2021) should help drive further loan book growth while reducing the impact of any macro headwinds. Longer term, PCB’s business should be assisted by the low banking sector penetration in the region (loan book to GDP of 40–45% on average vs >70% in Western Europe).