NewsDeposits exceed the state budget by 2 billion EUR

Deposits exceed the state budget by 2 billion EUR

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Total deposits of citizens and businesses at the end of October amounted to EUR 5.536 billion. In a one-year period, they recorded an increase of EUR 532.9 million, which is 10.65%, while compared to October 2021, they are higher by one and a half billion.

  • Deposits of individuals account for EUR 2.679 billion or 48.39%, while deposits of legal entities account for EUR 2.857 billion or 51.61%. On an annual basis, deposits of individuals show an increase of EUR 319.5 million or 13.54%, while deposits of legal entities show an increase of EUR 213.4 million or 8.07%. Demand deposits dominate with 81.45% of total deposits. In the banking system, term deposit mismatch is still present. The share of non-resident deposits is significant, amounting to 24.22%, while deposits in other currencies make up 4.78% of total deposits. In October 2023, the passive average weighted effective interest rate (AWREIR) was 0.25%, and compared to October 2022, it remained at the same level – stated in the Economic Reform Program (ERP) adopted by the Government.

The amount of deposits is two billion higher than this year’s budget projected at EUR 3.5 billion. The budget envisages borrowing up to 1.15 billion, so the Government could possibly encourage citizens and businesses to lend the money they hold in banks to the Government through bonds. This way, the Government could borrow on more favorable terms, and citizens and businesses could earn more money. Deposits are higher than the state debt, which amounted to EUR 3.99 billion at the end of October, which is one and a half billion less than the deposits of citizens and businesses. Total deposits are also higher than the total loans issued to the economy and citizens.

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  • Loans to legal entities amount to EUR 2.366 billion or 58.14% of total loans, while loans to individuals amount to EUR 1.703 billion or 41.86% of total loans. In the same period, loans granted to individuals recorded an increase of 8.75%, while loans to legal entities recorded an increase of 14.48%. In the structure of loans by key holders, after loans to individuals that are dominant with 41.86%, followed by loans to the economy with 31.47%, loans to the Government of Montenegro with 4.79%, placements to banks with 16.85%, and other loans with 5.03% participation in total loans – according to data from the ERP.

Corporate loans, as stated, amount to 1.28 billion and record an increase of 1.76% on an annual basis. Loans in other currencies account for 3.46% of total loans, while non-resident loans account for 21.06% of total loans, and this mostly refers to funds on correspondent accounts of foreign banks.

  • Long-term loans, which make up 76.57% of all loans in the system, are predominantly financed from stable short-term deposits, which make up 90.16% of total deposits in the system – stated in the document.

The value of the credit-to-deposit ratio is 73.51%, meaning that there is EUR 1.466 billion more deposit potential in the system than claims based on approved loans.

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Interest rates for the year higher by 0.81%

At the end of October, the average weighted effective interest rate on total loans is 6.49%.

  • In the same period last year, it was 5.68%. During the ten months of 2023, legal entities were granted EUR 617 million in new loans, and these loans recorded a decrease of 14.44% compared to the same period last year, while individuals were granted EUR 465.2 million, which is about 4.01% more compared to the same period in 2022. The AWREIR on newly approved loans is 7.34%, and compared to October 2022, it records an increase of 1.75 percentage points. Credit activity indicators indicate that there is an evident transmission of the impact of the ECB’s monetary policy on the demand and supply of loans in the Montenegrin banking system – stated in the ERP.

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