The Profitability and Capital Adequacy in Central and Eastern European Countries in the Light of the Basel III Requirements – a Forecast Approach
The Profitability and Capital Adequacy in Central and Eastern European Countries in the Light of the Basel III Requirements – a Forecast Approach

Summary/Abstract: Previous studies have shown that the banking sector of the Central and Eastern European (CEE) countries performed better than other developed European sectors during the crisis, due to their sound capitalization and a high profitability before the crisis. That is why we consider that it is interesting to see how they will perform in terms of the profitability and capitalization ratios during 2016 – 2017 in the light of the new international capital adequacy regulations. We have used Combinatorial forecasting method and Artificial Neural Networks (ANN) forecasting method for the banking sectors of five Central and Eastern European countries, non-members of the Eurozone, in order to predict the further developments of capital adequacy ratio, return on assets (ROA) and net interest margin during 2016 – 2017. Our results show that the capital adequacy ratio will improve in all five analysed banking sectors. The bank net interest margin will increase in all five banking sectors (except in the Czech banking sector) and ROA will increase a lot in Hungary, but also in Bulgaria and Romania, while in Poland and in the Czech Republic it will slowly increase.

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