December 8 (SeeNews) - The volume of non-performing loans (NPL) in 17 countries in Central, Eastern and South-eastern Europe (CESEE) has reached its lowest level since the global financial crisis of 2008-2009, dropping 6.9% to 32.2 billion euro ($33.89 billion) in the 12 months to June 30, the European Bank for Reconstruction and Development (EBRD) said.
Montenegro, followed by Hungary and North Macedonia were the only countries that saw increases in NPL stocks in the review period, by 17.8%, 13% and 3.5%, respectively, the EBRD said earlier this week in its half-yearly NPL Monitor report prepared under the Vienna Initiative framework.
Problem loans across the monitored region fell by 2.6% since the latest NPL Monitor issue in June.
Montenegro was also the only country where the NPL ratio, or the average share of NPLs in total loans, increased in the 12-month period to end-June, edging up by 0.6 percentage points (pp) to 6.9%.
During the same period, Croatia saw the largest decline in NPL ratio, of 1.6 pp to 4.9%.
On average, the NPL ratio across the CESEE region inched down 0.5 pp year-on-year to 2.6%, a further decline of 0.2 pp from the value recorded in the first half of 2022, which was the lowest since 2016.
Against the background of macroeconomic challenges partly resulting from the war in Ukraine, coupled with the phasing-out of pandemic support measures, the report raises concerns that NPLs may increase in the near future, as borrowers are further squeezed by accelerating inflation and an uptick in central bank interest rates. The measure of that is a recorded 0.9 pp increase in so-called “stage 2 loans”, or assets which may later deteriorate into bad loans.
"Meanwhile, the region’s financial institutions are preparing for future risks by increasing provisioning levels. The average NPL coverage ratio increased by 1.8 percentage points during the period," the EBRD said.
Between June 2021 and June 2022, the average NPL coverage ratio, or the percentage of NPL provisions against NPL stock, rose
by 1.8 pp to 66%, as banks accelerated provisioning to prepare for the potential risks following the war on Ukraine, the report also showed.
Croatia recorded the highest coverage ratio in the region, up 9.4 pp to 92.3%, followed by Slovenia at 91.2% as a result of a 6.5 pp advance.
The report also tracked recent decisions by Vienna Initiative stakeholders and EU regulatory bodies taken in support of CESEE economies, via instruments such as loans, grants and targeted support schemes.
Details on 12-month changes in the NPL profile of ten SEE countries as at June 30, 2022 follow:
| |
NPL ratio % |
NPL ratio (y/y change, pp) |
NPL volume (bln euro) |
NPL volume (y/y change, %) |
| Albania |
5.0 |
-1.5 |
0.3 |
-12.8 |
| Bosnia and Herzegovina |
5.4 |
-0.2 |
0.6 |
-3.0 |
| Bulgaria |
4.1 |
-1.3 |
2.4 |
-10.9 |
| Croatia |
4.9 |
-1.6 |
2.2 |
-16.4 |
| Kosovo |
2.0 |
-0.3 |
0.1 |
-0.9 |
| N. Macedonia |
3.1 |
-0.3 |
0.2 |
3.5 |
| Montenegro |
6.9 |
0.6 |
0.2 |
17.8 |
| Romania |
3.0 |
-0.8 |
2.6 |
-5.3 |
| Serbia |
3.3 |
-0.2 |
0.9 |
-1.1 |
| Slovenia |
1.9 |
-0.5 |
0.8 |
-18.6 |
| CESEE avg |
2.6 |
-0.5 |
32.2 |
-6.9 |
The Vienna Initiative is a framework for safeguarding the financial stability of emerging Europe co-founded by the EBRD, EIB, the European Commission, IMF and the World Bank. It was launched at the height of the first wave of the global financial crisis in January 2009. The initiative brings together all the relevant public and private sector stakeholders of EU-based cross-border banks active in emerging Europe, which own much of the banking sectors in the region.
($ = 0.9514 euro)