Banking Sector of Republika Srpska in 2013.

The RS banking sector embodies the most significant portion of the total banking system of Republika Srpska. The share of foreign private ownership is dominant in the ownership structure of bank capital, including also foreign state ownership.

From the legal and regulatory aspect, the banking sector is highly regulated, while its character of operation classifies it as a conservative banking with deposits as the main source of operation, and loans as the main product.

Under the influence of economic and financial crisis both development and growth of the banking sector have been slowed down, while exposure, primarily to the credit risk, has been increasing.

As a reaction to the crisis, the banks managements have applied a more prudent lending policy, while a special attention was directed to the planning and maintaining of liquidity position, as well as to the capital strengthening and maintenance of capital ability to absorb the increasing risks.

Nevertheless, the banking sector has retained the confidence of business entities, and, above all, the households.

Banks’ operation has been improved and modernized on a continuous basis with a goal to have banking products and services adjusted to clients’ needs (development of e-banking, and introduction of new types of users’ service packages).

Also, the international accounting standards and financial reporting standards have been applied.

The banking sector also performs the function of internal payment transactions and inter- banking transactions, and has a significant role in preventing money laundering and terrorism financing. In the RS banks, there are 3,306 employees out of which over 50% are highly qualified staff.

On a continuous basis, the activities have been undertaken in implementing the provisions of the Law on Banks of Republika Srpska stipulating the protection of rights of users of financial services.

At the end of 2009 and in order to alleviate negative effects of the crisis, the Management Board of the Agency passed the Decision on temporary measures for rescheduling loan obligations of legal and physical persons in banks, which was in force in 2013 as well, and it enabled easier rescheduling of both households’ and companies’ liabilities preventing jeopardy to banks’ stability and safety. Effects of the Decision were significant in the last three years, and the trend continued in 2013 as well, especially in the case of legal persons (119 requests amounting to KM 118.8 million were rescheduled).

Basic indicators of the banking sector operation as of 31/12/2013:

  • -  Total balance sheet amount was КМ 7,508.9 million with a growth rate of 5% if compared to the balance as of 31/12/2012.
  • -  Cash funds (КМ 1,294.3 million) were 20% out of total assets with a growth rate of 3% in comparison with the previous year. Out of total banks’ cash funds, the amount of KM 340.2 million or 26% was on accounts abroad (foreign currency current accounts amounted to KM 245.5 million, and the funds termed up to 30 days amounted to KM 94.7 million).
  • -  Total gross loans (KM 4,875.6 million) increased by 7%, as well as loans to households (KM 1,805.4 million) in comparison to the end of 2012.
  • -  Share of due loans in total loans was 8.81%, which was an increase by 0.91 percentage point in comparison to the year 2012. Out of total receivables due, cca. 93.5% were receivables in default longer than 30 days.
  • -  Share of non-performing loans (loans classified into higher risk categories) in the total loan portfolio increased by 2.11 percentage points in comparison with the end of 2012. (from 14.12% to 16.23% as of 31/12/2013). The NPLs level and trend call for a continuous attention. An important factor in maintaining the RS banking sector safety was the strengthening of capital of the RS banks in the year 2013 (in 2013, the shareholders capital of banks increased by KM 87.7 million or 16% in comparison with the end of 2012 ).
  • -  Total calculated reserves for the coverage of potential credit and other losses under regulatory requirement increased by 16% in comparison with the previous year, while the coverage rate of classified assets by reserves amounted to 11.6% (as of 2012, the rate of coverage amounted to 10.8%).
  • -  Deficient amount of reserves under regulatory requirement, representing the balance between reserves under regulatory requirement and value adjustment and reserves under IAS, amounted to КМ 61.8 million (as of the end of 2012, it amounted to KM 65.6 million).
  • -  Average coverage rate of classified assets by the value adjustments under IAS amounted to 8.9% (as of 31/12/2012 it amounted to 7.5%).
  • -  Deposits (KM 4.637 million) were a basic source of funding of banks’ operation, and their share was 70%. Since 2011, deposits have had a trend of increase. As of 31/12/2013, deposits increased by 6% in comparison with the previous year.
  • -  Based on deposit maturity structure, the amount of 54% represented short-term deposits with a growth rate of 12%, while 46% were long-term deposits with a growth rate of 1% if compared to the condition as of 31/12/2012.
  • -  Trend of growth in households’ deposits continued also in 2013 and as of 31/12/2013 increased by 15%. Share of households’ deposits in total deposits increased from 44% to 48%.
  • -  Banks’ total capital (KM 856.3 million) increased by 8% if compared to the condition as of 31/12/2012.
  • -  Based on the shareholder ownership structure, private capital was 93% private, while the state owned share (owned by Republika Srpska) amounted to 7%. In the private capital structure, the share of foreign capital was 82%, while domestic capital was 18%.
  • -  Core capital (KM 696.3 million) increased by 15% in comparison with the previous year, and represents the legally defined parameter for measuring a maximum exposure of banks to loan and other risks concentrations.
  • -  Average capital adequacy rate improved significantly and amounted to 17.42%, as of 31/12/2012 it was 16,23% (legally required minimum is 12%).
  • Banking sector of Republika Srpska is liquid and able to meet all its obligations in due terms, although one bank faced difficulties in maintaining current liquidity position in the first quarter of 2013.
  • - At the level of total banking sector as of 31/12/2013, the loss amounted to KM 35.9 million (as of 31/12/2012, net profit amounted to KM 15.6 million). Two banks operated with a loss amounting to KM 80 million, while eight banks generated a profit in the amount of KM 44.1 million.
  • The Agency continued requesting from banks not to allocate the generated profit to dividend payment, but to use it to strengthen their own capital bases.
  • Banks constantly worked on having their operations comply with the requirements stipulated by the Law on anti money laundering and terrorism financing, thus it can be said that they managed to systemize that segment of operation, and they improved the cooperation with other regulatory and supervisory authorities.
  • All banks were in the possession of certificates on their membership in the Deposit Insurance Program.
  • There were 50 organizational units of the banks from the Federation of BiH (within 7 banks from the FBiH) operating in Republika Srpska, with a share of 16% in total loans in Republika Srpska (as of 31/12/2012 the share was 17%), and 12% in total deposits, the same as in the previous year.

 

Source: Banking Agency of Republika Srpska