MARKOVIC: Situation in banks regular, there will be no another Agrobanka

(Bojan Markovic)

Vice Governor of the National Bank of Serbia (NBS) Bojan Markovic stated Wednesday that there were no indications that other banks in Serbia would find themselves in a similar situation as Agrobanka, which is in receivership at the moment.

At the presentation of the May Inflation Report, Markovic also stressed that the situation in banks whose headquarters were in Greece was regular, adding that no unusual trends were noticed.

According to the words of the vice governor, implementation of the Action Plan adopted by shareholders and approved by NBS is currently underway at Agrobanka.

- That Action Plan should get a chance, and if it fails to give results, other options will be taken in consideration - Markovic said and pointed out that Agrobanka was still a licensed bank.

As the representatives of NBS announced, bank lending in Serbia rose at a slower pace in Q1 compared to a quarter earlier. Household borrowing declined, while enterprise external borrowing stepped up after quite a while.

However, Serbia is one of the rare countries where, excluding the effects of inflation and exchange rate changes, bank lending kept a constant, positive pace even during the economic crisis.

According to the words of Markovic, the share of cross-border lending was substantial before the crisis, but the number of such loans is now dropping, while those granted by banks in Serbia are on a rise, which means that the potential of domestic banking sector is growing and that the currency structure of lending is improving.

The loan repayment capacity, measured by the share of non-performing loans (NPL) in total loans, deteriorated mildly on end-2011. According to preliminary data, the total NPL share totalled 20.1% in March. The NPL share in the corporate sector fell by 0.3 pp to 22.1%. Household loan arrears were up by 0.3 pp to 8.3% in March 2012.

Despite a high NPL share, other relevant indicators point to the stability of the banking sector – the capital adequacy ratio came at 17.3% in March, while the loan loss reserves to NPL ratio equalled 127.1%.