In 2000, 47 banks were operating in Serbia, but their number has been continuously decreasing until today and fell by more than 50%. The reason for the decrease in the number of banks is their merger in the process of consolidating the banking market. That is why the banks like: Metals banka, Credy banka, Continental banka, Niška banka, Panonska banka, Ju banka, Alfa banka, Marfin banka no longer exist and seem to be completely forgotten.
Whether they changed their name or ownership structure, the merger of banks in Serbia is not an isolated case and came as a consequence of the global processes of consolidation in the banking market. The ongoing process raises a number of questions about the reasons, risks and conditions for prospective and existing clients. However, fewer banks does not mean weaker competition and worse business conditions.
Why are banks merging?
A large number of banks, especially smaller and specialized ones, are being merged into larger financial groups. There are various reasons why banks decide to take this step, the most common being a higher credit potential. One of the key advantages of large banking groups is their ability to invest in new channels. Small banks are not in a position to afford such solutions, which is why the entire banking sector could develop more slowly, compared to some other countries.
The National Bank of Serbia has repeatedly stated that changes in the ownership structure in banks were mostly initiated by the parent banks. This is not surprising considering that we currently have 20 banks, but that four or five financial institutions hold about 90 percent of the market, while the rest cover a negligible part. Through merger, they can optimize their operations, increase their market shares, and offer their customers a better and more diverse offer.
Also, larger banks have the capacity to finance large development projects. They possess an enviable level of financial knowledge for structuring more complex financial solutions for business users, which is a key prerequisite for faster economic growth.
Diversification of the ownership structure increases the resistance of the banking sector to potential shocks and strengthens the stability of the banking system as a whole. However, the question is what these changes actually mean for customers.
What does a smaller number of banks mean for customers?
A smaller number of banks also means less competition, so it could be assumed that the level of quality of services for customers will decrease because of this. Actually, the truth is quite the opposite. The changes that are taking place are evaluated as positive because they strengthen the resilience and flexibility of the system, making the Serbian market similar to mature banking markets.
A smaller number of banks does not automatically mean weaker competition, because large financial groups remain on the market, and they have the strength and capacity to compete with each other. They strive to provide extremely competitive conditions, supported by quality products and services.
What is most important for customers is that the conditions under which they use banking services remain the same, regardless of the merger of their current bank with another bank. With larger banks, customers receive better service, that is, the range of products offered to customers is expanded and they will receive a more positive user experience. Thus, the standard offer of services such as bank accounts, cards and loans are expanded to include services such as leasing, insurance, fund management and the like.
A good example is the merger of AIK banka and Eurobank Direktna banka, where private and business users received a higher quality of service and new products that they did not have until then. Also, a large bank can reduce certain costs and offer more favourable financial services.
However, the biggest advantage of consolidation is the withdrawal of foreign capital in favour of regional capital and the strengthening of the presence of banks originating from the region and playing a systemic role in it.
How many banks operate in Serbia and where do they come from?
There are currently 20 banks operating in Serbia, and among them there are regional banks that have an interest in operating and investing efficiently there. Such banks come from Germany, Italy, Austria, Hungary, and Slovenia. Among the banks from the European continent, the following stand out: NLB Komercijalna banka (Slovenia), Banca Intesa (Italy), Unicredit (Italy), Erste (Austria), Raiffeisen bank (Austria), OTP (Hungary), Mobi banka (Czech Republic).
Expobank, which is majority-owned by a Russian citizen, also operates in Serbia, as well as Turkish Halkbank, then Mirabank, owned by the United Arab Emirates, and the Chinese Bank of China. AIK and Alta are owned by Serbian citizens, while Banka Poštanska štedionica (Postal Savings Bank) and Srpska banka are owned by the Republic of Serbia.
Banka Intesa, OTP Banka, Unicredit banka, NLB Komercijalna banka and Raiffeisen banka stand out according to their size. In 2022, the most profitable bank was AIK banka, which is largely a consequence of the consolidation of Naša AIK banka. In May this year, Raiffeisen banka Beograd announced that the merger of RBA banka (former Credit Agricole Srbija) was successfully completed. NLB Komercijalna banka is also a good example of a successful merger.
Experts estimate that the optimal number of banks for the Serbian market is 10-15, so it is expected that the process of bank mergers will continue in the coming period, but with less intensity.
From past experiences, it can be concluded that large regional groups will continue to be significant actors of consolidation. It will probably expand strongly, and not only in its core banking business, and will bring the best regional solutions to the local market, as well as competitive business conditions.