Download ppt - Cross S ection of the F inancial S ector Developments in Bosnia and Herzegovina

CrossCross S Section ofection of the the FFinancial inancial SSector ector Developments inDevelopments in Bosnia Bosnia

and Herzegovinaand Herzegovina

Radomir Božić. Ph.D.Sarajevo. October 5. 2011.

Fifth SASE International Conference

Macroeconomic indicatorsMacroeconomic indicators.

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2009 2010 2011

Gross domestic product (GDP) KM 23.95 bill KM 24.75 bill

GDP per capita KM 6.233 KM 6.440

Real growth rate -3.2% 0.7% 3.2% (proj.)

Industrial production growth rate -3.3% 1.6% 7.7% (period till June)

The average annual inflation 0.0% 3.1% 3.8% (June)

Unemployment rate at the state level 24.1% 27.1% 27.6 %

Average wage at the state level KM 790 KM 798 KM 820 (June)

External debt KM 5.2 bill (21.7% GDP)KM 6.25 bill (25.4 %

GDP)KM 6.193 mill (June)

Current account deficit KM 1.48 bill (6.2% GDP) KM 1.36 bill (5.5% GDP)KM 1.423 mill Q1(16.7 %

compared to 2010)

Coverage of import by export 44.8% 52.1% 58.1%

DFI (estimate) KM 358.9 millions KM 93.7 millions KM 131 mill in Q1

Foreign exchange reserves KM 6.212 bill KM 6.457 bill KM 6.265 mill (Aug)

The structure of The structure of BHBH financial sector financial sector The banking sector dominates the financial system in Bosnia

and Herzegovina. The share of this sector in the assets of the financial system amounted to 84.3% at the end of 2010. At the end of 2010 82% of average equity was concentrated in banks with majority foreign ownership. A large percentage of foreign ownership is a potential risk due to the fact that the strategic decisions are made out of the scope of monetary authorities of Bosnia and Herzegovina.

Table: The value of the assets of financial intermediaries

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2007 2008 2009 2010

Value. KM millions

Share. %Value. KM millions



Share. %

Banks 19.570 79.8 20.815 80.8 20.604 82.7 20.416 84.3

Investments Funds 1.762 7.2 1.225 4.8 871 3.5 888 3.7

Leasing Companies 1.378 5.6 1.607 6.2 1.416 5.7 1.108 4.6

Insurance and Reinsurance Companies 853 3.5 890 3.5 940 3.8 941 3.9

Microcredit Organization 946 3.9 1.213 4.7 1.087 4.4 856 3.5

Total 24.510 25.749 24.919 24.210

Profitability and the level of the non-Profitability and the level of the non-performing loansperforming loans.

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The results of the banking sector of The results of the banking sector of Bosnia and Herzegovina for Q2 2011Bosnia and Herzegovina for Q2 2011

Better business results compared to the same period last year – KM 82.9 millions of profit compared to KM 63.9 millions of loss

The total income of banks in this period amounted to KM 828.4 millions (increase by 5% compared to Q2 2010), while total expenditure amounted to KM 741.7 millions (decrease by 13% compared to Q2 2010)

22 banks reported the positive financial result (profit) in the total amount of KM 100.5 millions and 7 banks reported negative financial result (loss) in the total amount of KM 17.1 millions

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The results of the banking sector of Bosnia The results of the banking sector of Bosnia and Herzegovina for Q1 2011and Herzegovina for Q1 2011

The total of 29 commercial banks, two under provisional administration

25 banks had a licence for the deposit insurance The total of 10.319 employees, being the increase of

0.4% compared to Q1 this year

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31.12.2008. 31 .12. 2009. 31. 12. 2010. 31. 03. 2011.

Total number of banks 30 30 29 29

Private owned banks 28 28 28 28

State owned banks 2 2 1 1

The structure of share capital The structure of share capital

At the end of the first quarter realized capital adequacy ratio amounted to 15.5 (at the end of 2010 it amounted to 16.1).

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31. 12. 2008amount Share




TOTAL CAPITAL 1.528 100 % 1.597 100 % 1.719 100 % 1.746 100 %

STATE CAPITAL 49 3 % 44 3 % 54 3 % 50 3 %

PRIVATE CAPITAL 1.479 97 % 1.553 97 % 1.665 97 % 1.696 97 %

Herein:-foreign capital

1.284 84 % 1.347 84 % 1.416 82 % 1.441 82 %

-domestic capital 195 13 % 206 13 % 249 15 % 255 15 %

The banks assetsThe banks assets

The banks continue to keep significant funds in the accounts with depository institutions abroad amounting to KM 1.66 billions, which is 32% of total funds. Compared to the same period of 2010, this share decreased by three percentage points.

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31. 12. 2008 amount Share




TOTAL ASSETSOut of which:

20.821 100 % 20.617 100 % 20.451 100 % 20.648 100 %

-Funds 6.180 30 % 6.288 31 % 5.756 28 % 5.163 25 %

-Placements to other banks 109 152 1 % 203 1 % 388 2 %

-Loans 13.518 65 % 12.842 62 % 12.953 63 % 13.388 65 %

-Fixed assets and business premises

674 3 % 731 3 % 765 4 % 759 4 %

-Securities 33 171 1 % 431 2 % 568 2 %

-Other 307 2 % 433 2 % 343 2 % 382 2 %

In KM millions

The banks liabilitiesThe banks liabilities

The share of obligations in total liabilities is 88% and the share of equity is 12%

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In KM millions

31. 12. 2008

Amount Share31. 12. 2009



Amount Share

TOTAL LIABILITIESOut of which:

20.821 100 % 20.617 100 % 20.451 100 % 20.648 100 %

-Deposits 15.167 73 % 15.207 74 % 15.011 73 % 15.077 73 %

-Liabilities based on loans 2.559 12 % 2.329 11 % 2.120 11 % 2.131 10%

-Borrowing from other banks 3 3 7 2

-Reserves for potential loan losses 22 23 43 47

-Capital 2.166 11 % 2.210 11 % 2.402 12 % 2.487 12 %

-Other liabilities 904 4 % 845 4 % 868 4 % 904 5 %

The structure of deposits by sectorsThe structure of deposits by sectors

The deposits in local currency increased by KM 143 millions or 8% and deposits in foreign currency decreased by KM 77 millions or 1%. The share of deposits in local currency in total deposits increased by one percentage point - from 44% to 45%.

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In KM millions





TOTAL DEPOSITSOut of which:

15.167 100 % 15.207 100 % 15.011 100 % 15.077 100 %

-Government institutions 2.132 14 % 1.833 12 % 1.466 10 % 1.241 8 %

-Public enterprises 1.567 10 % 1.645 10 % 1.654 11 % 1.884 13 %

-Econ. comp. and associoations

2.134 14 % 1.975 13 % 1.941 13 % 1.742 12 %

-Non-profit organizations 312 2 % 559 3 % 470 3 % 497 3 %

-Banking institutions3.177

21 % 2.953 19 % 2.362 16 % 2.375 16 %

-Households 5.311 35 % 5.761 40 % 6.624 44 % 6.851 45 %

-Other 534 3 % 481 3 % 494 3 % 489 3 %

The structure of deposits by currenciesThe structure of deposits by currencies

In period January – March 2011 there was a change in the maturity structure of deposits – the share of short-term deposits increased from 53% to 55% and the share of long-term deposits decreased from 47% to 45%.

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In KM millions





TOTAL DEPOSITS 15.167 100 % 15.207 100 % 15.011 100 % 15.077 100 %

Out of which:-Deposits in KM

6.030 40 % 6.211 41 % 6.573 44 % 6.716 45 %

-Deposits in foreign currency

9.137 60 % 8.996 59 % 8.438 56 % 8.361 55 %

SavingsSavings

The savings in local currency increased by KM 135 millions or by 8% and the savings in foreign currencies increased by KM 108 millions or by 2%.

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In KM millions





TOTAL SAVINGS 4.808 100 % 5.255 100 % 6.044 100 % 6.287 100 %

Out of it:-Savings in KM

1.447 30 % 1.435 27 % 1.712 28 % 1.847 29 %

-Savings in foreign currencies 3.361 70 % 3.820 73 % 4.332 72 % 4.440 71 %

LoansLoans

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In KM millions





TOTAL LOANS 14.040 100 % 13.496 100 % 13.936 100 % 14.407 100 %

Out of which:-Private companies

6.633 47 % 6.474 48 % 6.732 48 % 7.086 49 %

-Public enterprises 222 2 % 237 2 % 309 2 % 350 2 %

-Government institutions 231 1 % 343 2 % 436 3 % 445 3 %

-Households 6.687 48 % 6.292 47 % 6.314 46 % 6.412 45 %

-Other sectors 267 2 % 150 1 % 145 1 % 114 1 %

The loans to private companies increased by KM 354 millions or 5% and the loans to households increased by KM 98 millions or 1.5%.

Lending interest ratesLending interest rates

YearYear

INTEREST RATES ON LOANS IN KMINTEREST RATES ON LOANS IN KM INTEREST RATES ON LOANS IN KM WITH INTEREST RATES ON LOANS IN KM WITH CURRENCY CLAUSECURRENCY CLAUSE

INTEREST RATES ON INTEREST RATES ON LOANS BY CREDIT LOANS BY CREDIT

CARDSCARDS

Short-term loansShort-term loans Long-term loansLong-term loans Short-term loansShort-term loans Long-term loansLong-term loans

Short-term Short-term loansloans

to to householdshouseholds

Long-term Long-term loansloans

to to householdshouseholds

Private Private companies companies

and and associationassociation

ss

HouseholdHouseholdss



ss




ss




ss


2006 7.66 9.55 7.39 9.34 ... ... ... ... ... ...

2007 7.03 10.54 7.1 9.97 7.8 10.06 7.83 8.42 11.56 12.76

2008 7.42 9.14 7.16 11.09 8.93 9.88 8.55 10.2 11.44 13.96

2009 8.1 9.88 6.8 7.87 8.62 9.81 7.74 9.56 11.71 15.06

2010 7.84 9.67 8.25 9.1 8.15 9.51 7.84 8.7 11.93 14

7.2011 7.39 9.93 7.47 8.36 8.50 9.59 7.65 8.57 11.64 14

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The data on the average interest rate on loans to private companies and households in foreign currencies are provided by small number of banks and therefore not included in this review.

Deposit interest ratesDeposit interest rates

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YearYear

INTEREST RATES ON DEPOSITS IN KMINTEREST RATES ON DEPOSITS IN KM INTEREST RATES ON DEPOSITS IN FOREIGN CURRENCIESINTEREST RATES ON DEPOSITS IN FOREIGN CURRENCIES

Demand DepositsDemand Deposits Time and Saving DepositsTime and Saving Deposits Demand DepositsDemand Deposits Time and Saving DepositsTime and Saving Deposits


and and associationsassociations

HouseholdsHouseholds










2006 0.37 0.49 3.75 3.48 ... ... ... ...

2007 0.33 0.35 3.65 3.98 0.06 0.36 3.41 3.83

2008 0.37 0.32 2.99 3.61 0.11 0.31 4.94 4.2

2009 0.3 0.25 3.6 3.57 0.22 0.27 4.23 4.18

2010 0.17 0.15 3.38 2.89 0.04 0.18 3.21 3.25

7.2011 0.15 0.11 2.01 3.00 0.02 0..27 2.62 3.22

The data on the average interest rate on deposits by private companies and households in KM with currency clause are provided by small number of banks and therefore not included in this review.

Microcredit sector in Bosnia and Microcredit sector in Bosnia and Herzegovina as of June 30, 2011Herzegovina as of June 30, 2011

24 microcredit organizations operating on state level

Federation of BH Republika Srpska

16 microcredit foundationsOne microcredit association

Four microcredit foundationsThree microcredit associations

1.844 employees in BH micorcredit sector

Federation of BHRepublika

Srpska

1.477 emloyees

367 employees

There is a trend of reducing the number of employees, as well as the number of organizational units.Compared to December 31, 2010. number of employees decreased by 3.4% (total of 64 employees)

The organization of microcredit sector The organization of microcredit sector in Bosnia and Herzegovinain Bosnia and Herzegovina

The legal basis The Law on microcredit sector in the Federation of BH The Law on microcredit sector in RS

Form of organization MC foundations as non-profit institutions (max. Loan up to KM

10.000) MC associations as profit institutions (max. loan up to KM

50.000)

The structure of assets of the microcredit The structure of assets of the microcredit sector in Bosnia and Herzegovinasector in Bosnia and Herzegovina

The balance sum in first half of the year amounts to KM 774 millions and it decreased by KM 70 millions or 8.3% compared to the previous year.

The structure of the liabilities of The structure of the liabilities of microcredit sector in Bosnia and microcredit sector in Bosnia and

HerzegovinaHerzegovina There is a downward trend in balance sum compared to the previous year in all entries of assets and liabilities

Profit and Loss Account for the Profit and Loss Account for the microcredit sector in Bosnia and microcredit sector in Bosnia and

HerzegovinaHerzegovina Profit and Loss Account Total income KM 70.1 millions

Total expenditures KM 74.9 millions The excess of expenditures KM - 4.8 millions

The income decreased by 22% compared to the same period in previous year, while the expenditures decreased by 31% in the same period.

In the first six months of 2011, the MCO sector reported the profit amounted to KM 3.05 millions (in the same period of previous year the loss amounted to KM 16.8 millions)

The total loans portfolio of the microcredit The total loans portfolio of the microcredit sectorsector

The total loans portfolio amounts to KM 629.6 millions

The structure of loans to legal entitiesThe structure of loans to legal entities.

The structure of loans to physical entitiesThe structure of loans to physical entities

The interest rates in the microcredit sector The interest rates in the microcredit sector in Bosnia and Herzegovinain Bosnia and Herzegovina.

Trends in the microcredit sector in Trends in the microcredit sector in Bosnia and HerzegovinaBosnia and Herzegovina

Reduction of lending activities due to restrictive lending policy

Increase in written off loans Increase in liquidity Improving of the business results Improving of internal control systems in most MCOs. the

adjustment of lending policies to the demands of regulators.

Neccessary measures at the sectoral Neccessary measures at the sectoral levellevel

Amendments to the Law on the MCOs in order to eliminate ambiguities of existing regulations

Improving in corporate management and internal controls

Limitation of transactions with connected persons Increasing the transparency of MCOs business through

the exchange of information at the sectoral level through the CRC

Consolidation of the sector

The situation in the leasing sector in The situation in the leasing sector in Bosnia and HerzegovinaBosnia and Herzegovina

The balance sum of the leasing companies in Bosnia and Herzegovina for the first six months of 2011 amounted to KM 1.066 millions with the following structure and it decreased by 4% compared to 2010.

The organization and ownership The organization and ownership structure of the leasing sectorstructure of the leasing sector

Legal framework The Law on Leasing in the Federation of BH The Law on Leasing in RS

In Bosnia and Herzegovina there are nine leasing companies registered, as follows: In Federation of BH - seven In RS - two

The ownership structure of leasing associations 100% foreign owned - three Majority foreign ownership - four Majority domestic ownership - two

There are 245 employees in the leasing companies in Bosnia and Herzegovina

The structure of liabilities of the The structure of liabilities of the leasing sectorleasing sector

The structure of liabilities as follows: obligations based on loans 101.1% Other obligations 2.7% equity * -3.8%

*the total obligations are bigger than the total liabilities

due to the negative value of equity

The situation in the leasing sector in The situation in the leasing sector in Bosnia and HerzgovinaBosnia and Herzgovina

The first half of the year ended with a loss of KM 32.06 millions, which is by 54% less compared to the same period last year.

Total income KM 59.3 millions Total expenditures KM 91.4 millions Profit before taxation KM - 32.1 millions Taxes KM 10 millions Loss after taxation KM 32 millions

Trends in the leasing sectorTrends in the leasing sector

The sector shows signs of recovery and the stopping of negative trends

A slight increase in business activities The biggest negative impact on the financial indicators

of leasing companies have loans being lended before the law on leasing entered into force

The negative equity of the sector is the result of accumulated losses

Neccessary measures at the sectoral Neccessary measures at the sectoral levellevel

Capital strengthening Improving the policies and procedures for management

of loans, operational and market risks. Establishing the system of internal controls and the

functions of the internal audit Increasing the transparency of business through the

exchange of information at the sectoral level through the CRC.

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Thank you for your attentionThank you for your attentionhttp://www.cbbh.bahttp://www.cbbh.ba

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