Serbia’s banking sector enters the current credit expansion from a strong financial position. Deposits accounted for 76.4% of bank funding at the end of May 2026, while balance-sheet capital represented 12.9%. Household deposits made up 51.2% of total deposits and corporate deposits another 35.2%, giving the system a predominantly domestic and diversified funding base.
The ratio of loans to deposits in the non-financial sector stood at 83.44%. A ratio below 100% indicates that the banking system is not relying on wholesale borrowing to finance an amount of credit greater than its core deposit base. This reduces refinancing risk and gives banks room to accommodate changes in deposit behavior.
Asset quality is another major strength. Non-performing loans represented only 2.09% of total lending in May. That compares with a peak of 23.18% in May 2015. The improvement followed a multi-year process involving loan collection, write-offs, sales to third parties and the implementation of dedicated NPL strategies and regulations.
Capital indicators provide a substantial cushion. The total capital-adequacy ratio was 19.49% in March, while the common-equity tier-one ratio was 17.97%. Common equity accounted for 92.2% of total regulatory capital, meaning that most of the buffer consisted of the highest-quality loss-absorbing capital. The leverage ratio was 9.84%.
Liquidity was similarly comfortable. The liquidity-coverage ratio stood at 162.02%, compared with a regulatory minimum of 100%, while the net stable funding ratio reached 164.05%. These indicators suggest that banks have sufficient liquid assets for short-term stress and a stable funding structure for longer-term activity.
Current ratios nevertheless describe the legacy loan book more accurately than the newest lending. Credit is now expanding rapidly, particularly in household cash and housing products. New loans have not yet passed through a full economic or repayment cycle, and rapid balance-sheet growth can initially suppress the NPL ratio by expanding its denominator.
The main banking-sector question is therefore changing. The issue is no longer the clean-up of old problem loans, but the quality of new underwriting. Banks will need to assess affordability under less favorable income and interest-rate assumptions, monitor highly leveraged borrowers and avoid allowing competition for market share to weaken documentation or risk pricing.
Strong capital, liquidity and funding make Serbia’s banks resilient. Preserving that resilience during a period of fast growth will require the same conservative discipline that helped produce the current indicators.
