Three main characteristics marked the Serbian banking industry in 2016:
- Market fragmentation
- Ownership changes
- Balance sheets cleaning from NPLs
Out of 30 active banks, the first 10 have a market share of 77,4% and only the first 6 have a market share higher than 5%. Pre-tax profit of the first 10 is EUR 179,5 million and the same figure for the whole market is EUR 173 million. These few facts are showing clear unsustainability of the current market structure in the long run, especially from the perspective of banks with total assets below EUR 600 million. Greek and Serbian banks (at least partially state owned) seem as most probable two groups of banks in which sales or mergers might occur within a relatively short time period.
In the last three years many banks have changed owners (Hypo, Cacanska, Findomestic) and there are also new players in the market (UAE’s Royal Group, Bank of China). Further consolidation is inevitable, but it is still hard to predict how long these processes will last.
Strong increase of NPLs which started almost 10 years ago seems to be under control. Risk management systems and credit policies have been revised and implemented. Banks are now regularly selling these bad parts of their portfolios and the main problem is to keep loan volumes on a satisfactory level with strong margin pressures, low credit demand and very rigid risk approach.
Please find HERE the main statistical and financial data for Serbian banking industry for 2016.