Banks in Serbia Thrive Amid Crisis: Some Report up to 90% Earnings Increase

Banks in Serbia Thrive Amid Crisis: Some Report up to 90% Earnings Increase

In the face of a 15.1% inflation rate last year, while Serbian citizens grappled with rising costs and diminishing salaries, banks and retail chains in the country prospered. Many financial institutions reported drastic profit increases, with some banks enhancing their earnings by up to 90%. This surge is attributed to various factors, including skyrocketing interest rates, which positioned Serbia as the regional leader.

The top five banks in Serbia, even amidst the crisis of 2022, recorded significant profits. As per the economic magazine ‘Biznis i finansije’, AIK Bank performed the best, noting a profit of around 222.8 million euros. This represents a 340% increase from 2021. However, this substantial rise mainly stems from AIK’s acquisition of the former Russian Sberbank, which resulted in significant one-time revenues for AIK, distorting its actual profit growth.

Other banks’ financial statements showed the following:

• OTP Bank’s net profit was about 92.6 million euros, an 88% increase from the previous year.
• Unicredit Bank’s 2022 net profit was approximately 71.4 million euros, marking a 42% rise from 2021.
• Raiffeisen Bank realized a net profit of around 82.6 million euros in 2022, 40% more than in 2021.
• Intesa Bank’s net profit for 2022 was 108.1 million euros, up by approximately 19,679,010 year-on-year, resulting in a 22% profit increase.

Despite these impressive figures, financial expert Vladimir Vasić highlighted that on average, 80% of a bank’s profit comes from interest rates. Dr. Zoran Grubišić from the Belgrade Banking Academy added that profits also depend on loan turnover and whether clients take on debt at all.

Serbian Interest Rates Highest in the Region

High interest rates are a significant contributor to the robust bank profits in Serbia. Especially when comparing housing loan rates, which are indexed in euros and thus linked to Euribor, Serbian clients are at a disadvantage. Fixed rates range from 7.55% to 9.92%, while variable rates are between 7.2% and 8%. In contrast, Montenegro, Bosnia and Herzegovina, and EU countries like Slovenia and Germany offer more favorable rates.

Banks Set to Continue Profit Uptrend

As of September 1st, an agreement between the National Bank of Serbia and commercial banks on freezing fees and commissions prices will end. Consequently, banks can now raise service prices, including online payments and account maintenance. Following this decision, Intesa introduced a new price list, implying that other banks could soon follow suit, potentially boosting their revenues from the payment services they offer to clients.

Sources: Nova S, Biznis i finansije