January 11 (SeeNews) - Serbia's banking market is set for further consolidation as the local players are faced with another challenging year, local media reported, quoting a senior official of Belgrade-based Raiffeisen Banka, a unit of Austria's Raiffeisen Bank International.
"Market participants who have a small share and generate poor results have no prospects on this market," news agency Tanjug quoted the chairman of the bank's executive board, Zoran Petrovic, as saying.
There were a total of 30 banks operating in Serbia, a market of around 7.2 million, at the end of September.
Although competition among banks is healthy, statistics show that almost every third bank in Serbia is recording losses, Petrovic noted.
According to central bank data, the combined pre-tax profit of the Serbian banks rose 27% to 26.63 billion dinars ($237.5 million/218.1 million euro) in the first nine months of the year. A total of 19 banks recorded pre-tax profit in the nine months through September while 11 posted a pre-tax loss. The sector's capital adequacy ratio at the end of September stood at 21.22%.
Petrovic noted that return on invested capital has been extremely low over the past five or six years, as 2010 saw the highest results with a return rate of 5%.
In terms of non-performing loans (NLPs), the official expressed confidence that with economic growth and the extra effort of each individual bank, 2016 will end on a brighter note.
According to data of the National Bank of Serbia, NPL levels n the Serbian banking sector fell by 0.8 percentage points on the quarter to 22% at the end of September. Total gross NPLs in the Serbian banking sector amounted to 425 billion dinars at the end of September, down by 13.4 billion dinars from the previous quarter.
In May 2015, the International Finance Corporation launched together with the Serbian government a programme to improve the country's insolvency system, reduce risks and boost lending in the Eastern European country.
The IFC-backed programme is expected to make the debt resolution system in Serbia more efficient by improving the insolvency frameworks and practices, which will mean stronger NPL prevention and resolution as well as increased returns to creditors and greater protection for economically viable companies.
(1euro=122.120 Serbian dinars)
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