Dr. Veroljub Dugalic Secretary General. Banking Sector of Serbia 2 REMEMBER THE PAST "Old" foreign...

Dr. Veroljub DugalicSecretary General

2

Banking Sector of Serbia

REMEMBER THE PAST

"Old" foreign exchange savings

Hyperinflation

352,000,000,000,000% (31.12.1993 : 31.12.1992)

exchange rate: 1 USD = dinars (31.12.1993)

official: 1,775,998,648,615

"black market": 8,500,000,000,000

Pyramidal institutions

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4


RESULT:

Loss of confidence in banks

Savings disappeared

Reform in the year 1993

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THE NEW BEGINNING: YEAR 2001

Consolidation of banks

Extinction of the 4 major banks

Privatisation

Regulatory role of the National Bank of Serbia

Change of regulatory framework

International Standards for Financial Reporting – ISFR

Basel

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SERBIAN BANKING TODAYBANKING SECTOR OF SERBIA

Element 31.12.2001 31.12.2003 31.12.2005 31.12.2006 31.12.2007 31.12.2008

Number of banks 86 47 40 37 35 34

Total balance sheet size in mil. dinars

891,947 377,264 756,968 1,161,936 1,561,822 1,769,368

Growth rate of the total balance sheet size in %

- - - 53.5% 34.4% 13.3%

Balance sheet size in resp. to the GDP in %

113.63 34.44 70.85 55.89 62.70 71.14

Capital in mil. dinars - 207,433 86,302 136,471 215,422 327,504 419,021

Capital growth rate in %

- - - 57.8% 52.0% 27.9%

Capital according to the balance sheet size

- 22.8 18.0 18.5 20.9 23.7

Capital in mil EUR - 3,474 1,263 1,470 2,726 4,133 4,879

Financial result in mil. dinars

- 249,139 - 1,105 7,272 16,725 23,473 34,956

in mil. dinars

Source: NSB, ASB

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SERBIAN BANKING TODAY

BANKING SECTOR OF SERBIA

Element 2001 2002 2003 2004 2005 2006 2007 2008

Capital -3,474 1,033 1,263 1,365 1,470 2,972 4,411 4,879

Financial result

-4,538 -443 -16 58 93 203 296 394

Number of banks

86 61 47 40 40 37 35 34

Number of employees

17,653 18,786 20,323 23,463 25,615 28,041 29,577 32,220

Growth of employment in banks

/ 6.4 8.2 15.4 10.9 9.2 5.5 8.9

Growth of employment in Serbia

/ -0.9 -1.9 -0.5 -1.8 -4.6 -1.1 6.8

in mil. EUR, %

Source: ASB, Republic Institute for Statistics

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REVENUE STRUCTURE OF BANKSIN THE YEAR 2008

Position Mane of position Amount

I Net interest profit/loss 95,935,387

PR. 1 Interest income 157,770,452

RA. 1 Interest expenditure 61,835,065

II Net profit/loss on fees and commission 29,831,854

PR. 2 Income from fees and commission 38,953,658

RA 2. Fees and commission expenditure 9,121,804

III Net profit on fair value securities sale on BU 62,872

IV Net profit on sale of securities available for sale 681,151

V Net profit on sale of securities held to maturity 46,434

VI Net profit on sale of stake 130,929

VII Net profit on sale of other placements 541,660

VIII Net income from foreign exchange rates differences -53,739,212

IX Income from dividends and participation 985,353

X Other business revenues 3,655,897

XI Net income per direct writing off of placements and reserves -26,082,096

XII Staff costs 36,060,355

XIII Depreciation expenses -7,477,341

XIV Other operating expenses 43,650,850

XV Net income from the change in value of assets and liabilities 69,213,129

XVI Profit/Loss from regular business operations 34,957,092

XVII Net profit/loss from suspended business operations 0

XVIII Profit/loss before taxes 34,957,092

Revenues from repo placements 32.09Profit (before taxes) 34.96

in billion dinars

in 000 dinars

Source: NBS

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FINANCIAL RESULT OF THE BANKINGSECTOR OF SERBIA AND THE NBS

Banking Sector of Serbia 34.9

National Bank of Serbia 58.1

in 2008, in billion dinars

Source: NBS, ASB

National Bank of Serbia


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SERBIAN BANKING TODAYINTEREST RATES

Item No.

Type of interest rate

2008

Jan Mar Jun Sep Dec

1. Reference interest rate 10.00 % 11.50-14.00 % 15.75 % 15.75 % 17.75 %

2.

Aggregate average weighted interest rate on the NBS securities for open market operations

10.00 % 13.50 % 15.75 % 15.75 % 17.76 %

3.Average weighted interest rate on total bank loans

11.29 % 14.59 % 16.93 % 17.35 % 18.11 %

4.Average weighted passive interest rate on total bank deposits

4.33 % 5.20 % 6.14 % 6.40 % 7.32 %

Annual level

Source: NBS

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INTEREST RATE ELEMENTS – Presentation of elements covered by the price of one housing loan financed from the external sources

0,00%

5,00%

10,00%

15,00%

20,00%

4.21%

2.89%

5.02%

1.31%

4.83%

Administrative expenses (Costs of processing and of the distribution network)

Cost of provisioning for the client risk

Costs of required reserves (45% earmarked resources)

6m EURIBOR

CDS (country risk)

INTEREST RATE ELEMENTS on 30.06.2009

Total interest rate: 18.26%

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SERBIA CREDIT RATINGCOUNTRY RISK

Serbia credit rating BB-

Euro money (March 2009):According to its credit rating Serbia occupies the 122nd place out of the total of 186 countries, with 39.03 points out of a maximum of 100 points economic performances 6.80 (max 25) political risk 11.83 (max 25)

Institutional Investor (March 2009):According to its credit rating Serbia occupies the 84th place out of the total of 177 countries (score of 40.7 points out of max 100)

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SAVINGS, DEPOSITS, LOANS

2004 2005 2006 2007 2008

1 Household savings 113,861 193,224 266,044 391,548 423,447

2 Retail lending 64,183 124,651 195,453 295,005 380,693

3 Difference (2-1) -49,678 -68,573 -70,044 -96,543 -42,754

4 Corporate time deposits 67,401 74,757 108,279 198,510 194,159

5 Corporate lending 197,022 281,855 421,181 570,444 852,253

6 Difference (5-4) 129,621 207,098 312,902 371,934 658,094

7Difference of total lending and total deposits (3+6)

79,943 138,525 242,858 275,391 615,340

in mil. dinars

Source: NBS, ASB

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GDP AND LENDING

051015202530354045505560

2004 2005 2006 2007 2008 2009

4.5

5

5.5

6

6.5

7

7.5

8

8.5

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GDPLoans

2004 2005 2006 2007 2008 2009*

GDP 8.3 6.1 5.3 7 5.4 -2 (-6)

Loans 52 53 24 38 35 3

Growth in %

* Estimated value Source: NBS, ASB

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FINANCIAL INTERMEDIATION AND THE GDP

2003 2004 2005 2006 2007 2008 2009*

Financial intermediation in proportion with the GDP

3.14% 3.12% 3.13% 3.30% 3.81% 3.98% 4.30%

Changes in financial intermdiation

- 7.4% 11.9% 12.2% 15.6% 10.2% 5.9%

Changes in the GDP (in market prices)

- 8.3% 5.6% 5.2% 6.9% 5.4% -3.5%

Source: Republic Institute for Statistics* In the first quater of 2009, estimated value

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GOVERNMENT – THE WORST DEBTOR

The amount of outstanding debt per loans in default

198.3

Debt of public companies 100

31.12.2008, in billion din.

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RELEVANT INDICATORS OF THE FINANCIAL

POSITION

AND STABILITY OF THE BANKING SECTOR IN SERBIA

(on 31.12. 2008)

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Item No. ELEMENT in billion dinars and in %

1. TOTAL ASSETS 1,769.3

2. TOTAL CAPITAL 419.0

3. CAPITAL ADEQUACY RATIO (prescribed minimum 12%) 23.1 %

4. SUM OF LARGE EXPOSURES (maximum allowed 400%) 57.1 %

5. FOREIGN EXCHANGE RISK INDICATOR (maximum prescribed 30%) 9.4 %

6. LIQUIDITY RATIO average 2

Item No. BANK DEPOSITS WITH THE NBS in billion dinars

1.REQUIRED RESERVES- in dinars- foreign exchange deposits of banks

194.6193.0

2. NBS LIABILITIES PER REPO TRANSACTONS 199.0

3. NBS SAVINGS CERTIFICATES 0.3

TOTAL 587.3

Item No. OTHER RELEVANT DATA in billion dinars and in %

1. HOUSEHOLDS TIME DEPOSITS IN DINARS 9.9

2. HOUSEHOLDS TIME DEPOSITS IN FOREIGN CURRENCY 413.6

TOTAL 423.5

3. STRUCTURE OF TOXIC ASSETS 70.5 % cat. A and B

4. FINANCIAL RESULT 34.9

Source: NBS

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COMPARATIVE DATA

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REQUIRED RESERVES OF BANKS

Element Serbia Croatia B&H Macedonia Montenegro

Required reserves

rate

Basis in dinars - differentiated rate (0%,5%, 10%, 45%)

Basis in foreign exchange - differentiated rate (0%, 20%, 40%, 45%,100%)

14% uniform rate for entire basis

14% on deposits and borrowed funds up to 1 year

7% on deposits and borrowed funds over 1 year

10% - basis in denars

20% - basis in denars with the currency clause

11,5% - basis in foreign exchange

2,5% - on savings deposits

10% uniform rate on entire basis

Source: Central Banks

Required reserves 387.6

Banks capital 419.0

31.12.2008, in billion dinarsSerbia:

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REFERENCE INTEREST RATEOF CENTRAL BANKS

At the annual level

2002 2003 2004 2005 2006 2007 2008

Eurozone 3.75 3.0 3.0 3.25 4.5 5.0 3.0

Hungary 9.5 13.5 10.5 7.0 9.0 8.5 10.5

Romania 20.4 20.4 17.96 7.5 8.75 7.5 10.25

Slovenia 10.5 7.25 5.0 5.0 4.5 - -

Turkey 51.0 31.0 22.0 17.5 22.5 20.0 17.5

United Kingdom 4.0 3.75 4.75 4.5 5.0 5.5 2.0

USA 1.25 1.0 2.25 4.25 5.25 - -

Japan 0.1 0.1 0.1 0.1 0.4 - -

Serbia 9.72 10.63 16.44 15.73 14.00 10.00 17.75

Source: Eurostat, NBS

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REFERENCE INTEREST RATE OFCENTRAL BANKS (year 2008)

17.75

2

17.5

10.25

10.5

3

Serbia

Japan

USA

United Kingdom

Turkey

Slovenia

Romania

Hungary

Eurozone

At the annual level

Source: Eurostat, NBS

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CAPITAL ADEQUACY

2003 2004 2005 2006 2007 2008

Albania 28.5 21.6 18.6 18.1 17.1 17.5

B&H 20.3 18.7 17.8 17.7 17.1 15.8

Bulgaria 22.0 16.6 15.3 14.5 13.9 14.9

Croatia 16.5 16.0 15.2 14.4 16.9 15.3

Hungary 11.8 12.4 11.6 11.0 10.4 11.1

Macedonia 25.8 23.0 21.3 18.0 17.0 15.0

Montenegro - 31.3 27.8 21.3 17.1 15.6

Romania 21.1 20.6 21.1 18.1 20.7 11.9

Turkey 30.9 28.8 24.2 22.1 19.0 17.7

Greece 12.0 12.8 13.2 12.2 11.2 10.4

Serbia 31.1 27.9 26.0 24.7 27.9 22.0

Source: IMF, Global Financial Stability Report, April 2009

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CAPITAL ADEQUACY (year 2008)

Source: IMF, Global Financial Stability Report, April 2009

22

10.4

17.7

11.9

15.6

15

11.1

15.3

14.9

15.8

17.5

Serbia

Greece

Turkey

Romania

Montenegro

Macedonia

Hungary

Croatia

Bulgaria

B&H

Albania

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RETURN ON EQUITY (ROE) in %

2003 2004 2005 2006 2007 2008

Albania 19.50 21.10 22.20 20.20 29.70 16.30

Bulgaria 22.70 19.60 21.40 25.00 24.8 23.10

Croatia 14.10 16.10 15.10 12.70 10.70 10.90

Hungary 19.30 25.30 24.70 24.00 18.10 17.70

Macedonia 2.30 3.10 7.50 12.30 15.00 16.50

Romania 20.00 19.30 15.40 13.60 11.50 15.90

Turkey 16.00 16.40 11.80 19.80 21.60 17.90

Greece 8.90 6.40 15.90 12.80 14.80 11.20

Serbia * -1.25 -5.00 5.3 7.7 7.2 8.3

Source: IMF, Global Financial Stability Report, April 2009* ASB data, before taxes

Average infl. rate in Serbia

11.7 10.1 8.3 6.6 10.1 8.5

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RETURN ON EQUITY (ROE) (year 2008) in %

Source: IMF, Global Financial Stability Report, April 2009* ASB data, before taxes

8.3

11.2

17.9

15.9

16.5

17.7

10.9

23.1

16.3

Serbia *

Greece

Turkey

Romania

Macedonia

Hungary

Croatia

Bulgaria

Albania

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AVERAGE INFLATION RATE IN %

At the annual level

2002 2003 2004 2005 2006 2007 2008

Eurozone 2.2 2.1 2.1 2.2 2.2 2.1 3.3

Germany 1.4 1.0 1.8 1.9 1.8 2.3 2.8

Greece 3.9 3.4 3.0 3.5 3.3 3.0 4.2

France 1.9 1.2 2.3 1.9 1.9 1.6 3.2

Italy 2.6 2.8 2.3 2.2 2.2 2.0 3.5

Austria 1.7 1.3 2.0 2.1 1.7 2.2 3.2

Slovenia 7.5 5.7 3.7 2.5 2.5 3.8 5.5

USA 1.6 2.3 2.7 3.4 3.2 2.8 3.8

Japan -0.9 -0.3 0.0 -0.3 0.3 0.0 1.4

Serbia 19.5 11.7 10.1 8.3 6.6 10.1 8.5

Source: Eurostat

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AVERAGE INFLATION RATE (year 2008) in %At the annual level

Source: Eurostat

8.5

1.4

3.8

5.5

3.2

3.5

3.2

4.2

2.8

3.3

Serbia

Japan

USA

Slovenia

Austria

Italy

France

Greece

Germany

Eurozone

Dr. Veroljub Dugalic Secretary General. Banking Sector of Serbia 2 REMEMBER THE PAST "Old" foreign...

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