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NewsMontenegro, At the end of December last year, profitability in banks improved

Montenegro, At the end of December last year, profitability in banks improved

According to preliminary data from the Central Bank (CBCG), commercial banks, 11 of them, operated with a profit of EUR 85.7 million at the end of last December, which is EUR 34 million more than the year before, when the banks had a profit of EUR 51.7 million.

That market last year was marked by the growth of loans, deposits, assets, capital, preserved stability, the growth of interest rates on loans and the decline of interest rates on savings.

CBCG News was officially told that at the end of December last year, profitability was improved compared to the same period in 2021.

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– The biggest contribution to the business result was the growth of basic income, i.e. the growth of net income from interest, fees and commissions. Based on the submitted reports, all banks showed a positive result in their operations – they said in the CBCG, adding that the banking sector preserved stability last year.

Banks’ non-performing loans and receivables (NPLs) at the end of last year were EUR 209.1 million and recorded an increase of EUR 1.7 million, i.e. by 0.82% in percentage compared to the comparative annual period. NPL consists of loans that banks cannot collect and for which repayment is delayed for more than three months.

– This did not affect the increase in their participation in total loans and receivables due to the significant growth of the banks’ loan portfolio compared to the growth of non-performing loans. Namely, NPL at the end of last year was 5.71%, while at the end of 2021 this ratio was 6.17%, which represents a drop of 0.46 percentage points. Taking into account the application of the new regulation, i.e. the application of the new definition of default, the macroeconomic environment in which banks operate, including the high degree of uncertainty caused by the war in Ukraine, as well as the developed and applied mechanisms for managing non-performing exposures from banks, the CBCG does not expect a deterioration of the banks’ credit portfolio in in the following period – they said in the supreme monetary institution.

Data show that at the end of December last year, the average weighted active effective interest rate on total loans was 5.92%, while in the same period of the previous year it was 5.66%, which represents an increase of 0.26 percentage points.
The passive average weighted effective interest rate (on savings) at the end of last year was 0.26 percent, and compared to the same period of the previous year, it recorded a decrease of 0.09 percentage points when it amounted to 0.35 percent.

– In view of the global trends in interest rates, the crisis caused by disturbances in the market and the increased degree of risk for financial operations, a further increase in the active interest rates of banks is expected. This is indicated by the significant growth of weighted active rates on newly approved bank loans. The average nominal effective interest rate on newly approved loans in December last year was 6.55% and is the highest since 2018. In December 2021, it was 4.83 percent. Also, the growth of interest rates is expected, bearing in mind the announcements of the European Central Bank that it will further increase reference interest rates with the aim of curbing high inflation, in conditions of great uncertainty, also fueled by geopolitical tensions – stated the CBCG.

When it comes to the passive average weighted effective interest rate, the CBCG expects its increase, given that the growth of active interest rates affects the growth of passive interest in the same direction.

– Key balance sheet positions recorded growth in the one-year comparative period. Bank assets grow by 20.24%, deposits by 24.35%, loans and receivables by 8.92% and capital by 11.94%. Banks’ liquid assets increased by 41.53%, while its share in total assets increased from 26% to 31% in the comparative period – the CBCG announced.

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