Eastern Europe’s Banks Are Quietly Outgrowing the West

EBM NEWSDESK ANALYSIS-Katie Winearls

As Western European lending cools, banks across Central, Eastern and South-Eastern Europe are reporting some of the strongest credit growth and profitability on the continent — and international banking groups are betting heavily on the trend continuing.

A region pulling against the European grain

While much of the eurozone grapples with sluggish corporate borrowing and tighter lending conditions, the latest European Investment Bank survey paints a markedly different picture across Central, Eastern and South-Eastern Europe. Demand for credit from households and businesses alike remains robust, driven largely by consumer and housing loans — a dynamic that stands in contrast to the more cautious lending environment seen further west. For context on how eurozone monetary policy is shaping borrowing costs elsewhere on the continent, the divergence becomes even more striking.

Supply tightens even as demand holds firm

Credit supply across the region is expected to soften modestly in the coming months, with banks growing more selective about lending to large corporates. That note of caution sits awkwardly alongside the survey’s headline finding: international banking groups show no appetite to scale back. Three-quarters of cross-border banks surveyed plan to expand their CESEE operations further, and not a single respondent anticipates retrenchment — a level of conviction rarely seen in European banking expansion plans elsewhere in the bloc this cycle.

Where the profits are concentrated

Profitability is running well ahead of the regional banking sector’s broader operations, with Bosnia and Herzegovina, Bulgaria, Czechia, Hungary, Kosovo, North Macedonia and Serbia delivering particularly strong results. EIB Vice-President Marek Mora called the figures encouraging for investment and economic development in the region, framing CESEE as a genuine growth engine for the wider European economy.

Market potential split along familiar lines

Banks surveyed rate market potential highest in Czechia, Romania and Slovakia, while expectations for the Western Balkans remain more measured. That split echoes a pattern increasingly visible across EU enlargement and accession economics: capital and confidence concentrate fastest in markets furthest along the convergence path, even as Western Balkans investment continues to draw policy attention from Brussels.

Funding conditions strengthen, but caution lingers

Access to funding for cross-border banking groups and their subsidiaries has strengthened over the past six months, buoyed by rising retail and corporate deposits, wholesale debt issuance, and continued backing from international financial institutions including the EIB itself — a funding mix that mirrors broader trends in European corporate debt markets. Credit quality has also improved, with fewer non-performing loans reported. Yet banks remain wary heading into the second half of the year, expecting some deterioration across both corporate and retail portfolios — a caution that, as the survey itself notes, has frequently proven overly pessimistic in recent cycles.

The EBM take

The real story here isn’t the headline growth figures — it’s the confidence gap between regional banks turning cautious on large-corporate lending and international groups still piling in regardless. That divergence suggests global banking groups are underwriting CESEE’s long-term convergence story rather than reacting to short-term credit cycles, a pattern that has historically preceded periods of accelerated foreign direct investment into emerging Europe. Matteo Ferrazzi of the EIB’s Economics Department noted that the results reflect CESEE banks benefiting from the broader strength of “the global and European banking sectors.” Whether that tailwind holds through the second half of 2026 will likely depend more on eurozone rate policy than on anything happening locally in the region itself.

Related reads:

• European banking sector outlook 2026
• EU enlargement and the economics of accession
• Foreign direct investment trends in emerging Europe

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