Serbia: Banking sector profitable but NPLs rise
Overview:
The Serbian banking sector has managed to remain profitable throughout the global financial crisis. Profits certainly fell relative to the pre-crisis period but are now recovering. Profits were up 17% y-o-y in H1. However, the level of non-performing loans (NPLs) is high and continues to rise. This reflects widespread problems in the real economy. Banks are well placed to deal with these NPLS: provisioning is high. Bank liquidity and capital adequacy are also satisfactory. It would certainly be better if the share of NPLs would start to fall. Indicators of bank profitability are reasonable although lower than in most peers and hide a wide variation in bank performance. A few large banks are highly profitable while many smaller ones are not. Some consolidation of the sector seems likely.