Banks expect stagnation of credit activity in 2014

Published on December 30, 2013 1:36 pm

The credit activity of banks in Serbia will stagnate at best in 2014, amid an increasing number of bad loans and low economic growth, banking experts have told Tanjug.

Data cited by the National Bank of Serbia show a year-on-year drop in credit activity in 2013, after more than two years of slowed-down growth – compared to the end of 2012, the drop amounted to 4.1 percent in October 2013.

In view of forecasts of modest economic growth, Zoran Petrovic, Chairman of the Executive Board of Raiffeisen Bank Serbia, said that he expects the credit activity of Serbian banks to stagnate, or continue this year’s downward trend.

“With the unemployment rate to remain high next year, low economic growth and a high percentage of bad loans, I think that we will see a stagnation of credit activities in the best of cases,” Petrovic told Tanjug.

Zoran Vojnovic, Chairman of the Executive Board of Hypo Alpe-Adria-Bank, told Tanjug that financial problems encountered by many Serbian companies, primarily due to over-indebtedness, contributed to a drop in the banks’ credit activity in 2013.

Also, banks have become more cautious when it comes to approving loans, he said.

“A lack of good projects is keeping us from having higher credit activity. If any progress is made in that direction, I think that it would help strengthen credit activity next year,” Vojnovic said.

Bad loans now account for about 20 percent of total loans, with the percentage likely to grow in 2014, he said.

More or less, stagnant credit activity – or slow growth in the best-case scenario – can be expected in the banking sector in 2014, said Pierre Boscq, Head of Retail at Societe Generale Serbia.

The best thing the government can do to encourage credit activity is to help revive economic growth, and if there are potentially profitable projects, the banks will be prepared to finance both the economy and the citizens, Boscq told Tanjug,

With the rate of economic growth in 2014 expected to be low and credit risks set to increase due to bad loans, a stagnation, or even a drop in credit activity can be expected, Belgrade Banking Academy Dean Hasan Hanic said in a statement to Tanjug.

This will have adverse effects on securing loan funds for financing specific projects, as well as on investments, he added.

Source SerbGov

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