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Record-breaking profits: Serbia’s banking sector soars in 2023

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Serbia’s commercial banks saw unprecedented success in 2023, boasting a net profit exceeding one billion euros. After tax deductions, the banking sector’s profit amounted to an impressive one billion and 44 million euros, marking a substantial 40% increase compared to the previous year, which itself was a record-setting period for Serbian banks.

Despite facing challenges such as interest rate limitations on housing loans implemented by the National Bank of Serbia (NBS) in September, the banking sector thrived. These limitations were estimated to affect around 10% of the sector’s profit. Following several years of low interest rates and even negative Euribor, inflation from mid-2021 prompted central banks to raise interest rates, consequently driving up other reference rates like Euribor and Belibor. This increase in interest rates significantly contributed to the banking sector’s income growth throughout 2022 and 2023.

While experts anticipate a potential decrease in interest rates by the European Central Bank in the middle of the year, rates are expected to remain relatively high compared to pre-inflation levels. Nevertheless, bankers remain hopeful that declining inflation could stimulate credit activity, potentially making 2023 a prosperous year for the banking sector.

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Among the banks, the Austrian Raiffeisen Bank emerged as the top earner in 2023, with a profit of 182 million euros, more than doubling its net profit compared to the previous year. Following closely behind were Inteza, with a profit of 179.4 million euros, and Unicredit, which saw its profits soar from 71.4 million euros in 2022 to 157 million euros in 2023. Other notable performers included Hungarian OTP Bank and NLB Komercijalna Banka, both achieving significant profit increases compared to the previous year.

Consolidation within the banking sector resulted in fewer but stronger players, with the five largest banks accounting for a staggering 75% of the sector’s profit. Despite the wave of mergers and acquisitions, Inteza maintained its position as the largest bank by assets and market share. Overall, the banking market in Serbia remains highly concentrated, with a handful of major players controlling the majority of assets and market share.

Furthermore, commercial banks continued to maintain significant placements with the central bank, highlighting a cautious approach amid economic fluctuations. Despite this, loans to clients remained substantial, reflecting ongoing activity in the lending sector.

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