Countries to the north of Greece definitely top the agenda and planning of local banks, being their great expansion challenge in the coming years. Greek banks now control a network of over 2,100 branches in an expanded region marked by Ukraine and Poland in the north, including five neighboring countries in the Balkans, and stretching eastward to Turkey and southward to Egypt. They have therefore transformed into strong regional players. Now the market for local banks has stretched far beyond the small number of the country’s 11 million people, to as many as 300 million people. The size of the broader region’s market and the great prospects for economic growth are attracting the strong interest of foreign investors. Foreign institutionals now control between 25 and 50 percent of major Greek banks, and the buying interest of foreigners has led valuations to high levels. After being problematic for centuries, the Balkans are now becoming a region of development. The states compete in attracting foreign investors, in privatizations, in the creation of infrastructure, in the modernization of institutions and in the adjustment of laws toward the European legal context. This has suddenly turned Greece’s location from a serious drawback into a strong advantage. Although the domestic market continues to be the driving force, with the constant growth of retail banking taking the profits of banks ever higher, it is clear that from now on its momentum will slow. The intensity of competition, shrinking of interest rate margins and the inevitable slowdown in the rates of credit expansion will deprive banks of the impressive pace of growth and profits of the last few years. Their sole hope for growth is expansion abroad, where banks are speeding up: In 2007 they aim to increase their branches abroad from 2,100 to 3,000. Late last month in London, EFG Eurobank presented its objectives and priorities in New Europe: According to its planning, by the end of 2007, it will have 1,000 branches outside Greece, that is, twice as many as its Greek network. At the end of this month, in Bucharest, Alpha Bank will present its plans and objectives for the region. The main aim in its planning is that profits from its activity in Southeast Europe cover 20 percent of all earnings by the end of 2008. The National Bank of Greece, which presented its new business plan a few weeks ago, is seeking to strengthen its position in Romania through organic growth, while proceeding rapidly to the operational incorporation of the banks acquired in Serbia. Yet NBG’s strongest asset is Finansbank in Turkey and its further growth will not only be the focal point of its planning, but it will be the bank to make the difference in the future development and profits of the group. Piraeus Group is also gearing up. With a strong basis of 235 branches abroad, Piraeus is growing by developing autonomously while seeking out takeover opportunities to expand into markets such as Ukraine. Expectations may be great, but so are the obstacles and challenges that local banks will have to face to expand in a way that will bring profits to them and to their shareholders. Major banks’ top officials stress that the perception that the Balkans will become the Greek El Dorado is both exaggerated and mistaken. Expansion is only the beginning and from now on a strong fight will be required for banks to develop and offset competition. After the sprint through acquisitions and expansion, the marathon has begun, in which only the most efficient banks will be able to compete.