Globally, a longer period of high interest rates is expected until inflationary pressures weaken, and such a policy, according to all forecasts, leads to a recession, said General Secretary of the Association of Banks (UBCG) Bratislav Pejaković, pointing out that smaller systems, such as the Montenegrin one, are also susceptible those external factors.
Pejaković states that analyzes show that the demand for loans will grow moderately in the next six months, but also that projections of regional developments indicate that the conditions for obtaining loans will be tightened. However, for long-standing clients with a high-quality market share in the industry, he sees no problem in being adequately monitored both for operational business and for investments.
– The analyst’s projection is that inflation on the annual level in Montenegro in 2022 will be up to 20 percent, with a statistical display of a 50 percent increase in the prices of some foodstuffs, but also a significant increase in the prices of both real estate and services. The average price of credit debt of bank clients of around six percent on an annual basis looks pretty good. The average is measured through the effective interest rate, where all costs incurred during borrowing are shown. For the sake of clarification, a significantly better general picture of active interest is given by the indebtedness of the best legal entities, which in most of the last year were able to achieve indebtedness below three percent on an annual level, which significantly affects the average – Pejaković pointed out.
He states that the quality of the banking system and the results achieved during 2022 instill confidence in all clients of banks in Montenegro.
– Continuous supervision, assessments of liquidity and solvency by the regulator, are significantly stronger than prescribed by law and by-laws. I would also emphasize the compliance of legal regulations with international standards for banking operations, as well as the income of banks shown through monthly and quarterly reports. The previously mentioned and official data give us the basis for a very positive attitude. Good capitalization, with quality revenues and profit at the end of the current year, where a significant part will be added to the capital, improved experience and regulatory framework compared to the 2007 crisis, allows us to enter the economically and financially challenging year 2023 as a more prepared system – said Pejaković .
He believes that the Interest on savings of 2.5 percent on an annual basis, which is offered in our banking system, is very attractive in the eurozone.
– It is difficult to say whether the price of deposits will rise, stagnate or fall at the level of the system, because all 11 banks are a story in themselves. Boards of directors of banks set a strategy in accordance with available resources and set goals. Liquidity of over 1.9 billion euros indicates that we have a very liquid banking system, which is good from many aspects, but also a cost for banks if you do not have quality projects that apply for credit support. The fact that about 82 percent of deposits are demand deposits significantly affects the total amount of liquid assets, but also blurs the picture of the average interest on deposits, which analysts like to put in context with active interest rates. The so-called spread, or the difference between passive and active interest rates is well balanced, it contains risk and the cost of providing funds, which is indicated by banking indicators and realized income of banks – explains Pejaković.
It Indicates that market operations provide various opportunities. Excess liquidity, shareholders’ desire for expansion and the vision of convenience for growth, along with the will of the other party that wants to redirect its capital, certainly give room for further mergers.
– On the other hand, I would welcome the entry or establishment of another bank in Montenegro. We should not think in narrow terms. I would like to see Montenegro as a regional, European, and why not world financial center. Geographical positioning, development of telecommunications, human resources are important elements that we fulfill. What we lack is the political factor, from local stability to the willing moment of internationally present big players who would recognize our space, where it is not about love but lucrative, interest demands, and primarily through tax incentives, because it is done globally, and taxes are paid locally, local media wrote.