financial stability report - Banka Qendrore e RepublikÃ«s sÃ« KosovÃ«s

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Number 3 Financial Stability Report 6. Banking system of Kosovo 6.1. General characteristics of the banking system Banking system in the country remained unchanged in 2012, both in terms of the number of banks participating in the system and it terms of the structure. In June 2012, 8 commercial banks operated in the banking market, of which six were of foreign ownership and dominated the banking market assets with around 89.0 percent of total assets, while two of them were of domestic ownership and their share in total assets was 11.0 percent. Figure 19. HHI for assets, loans and deposits 3000 2500 2000 1500 1000 500 0 June 2009 June 2010 June 2011 June 2012 Assets Loans Deposits Source: CBK (2012) Banking market continues to be characterized by a relatively high concentration rate. However, the concentration rate has been characterized with a declining trend in the recent years due to constant growth of smaller banks activity. In June 2012, the three largest banks managed around 71.8 percent of total assets of the banking system, which represents a decline compared to the same period in 2011 when they managed 74.5 of total assets. The Herfindahl-Hirschman Index (HHI) also indicates a decline of the country’s banking system concentration rate. According to HHI for total assets, the banking market was characterized with a concentration rate of 1,972 points in June 2012, which represents a decline of the concentration rate by 129 HHI points compared to the same period of the previous year. Also, HHI for total loans and deposits of banking system shows a constant decline of concentration in the recent years (Figure 19). Banking infrastructure continued to be characterized by a slower trend of expansion during 2012 as well. The number of branches and sub-branches of commercial banks in the country reached at 312 in June 2012, which represents an annual growth of 3 units (5 units in 2011). The number of employees in commercial banks increased to 3,713 employees by June 2012, compared to 3,654 employees in 2011. 6.2. Banking System Balance Sheet 6.2.1 Assets Kosovo’s banking system continued expanding its activity also during the recent period, serving as one of the key promoters of the economic activity in the country. Total assets of the banking system in Kosovo reached at euro 2.65 billion (54 percent of GDP) and recorded an annual growth rate of 6.1 percent in June 2012 (annual growth rate of 12.7 percent in June 2011). Unlike the previous periods when banks’ investments in securities were one of the main contributors to the growth of the total assets, in the first half of 2012, securities 34 |
Financial Stability Report Number 3 contributed by only 0.4pp. The key contributors to the growth of the banking assets in the first six months were loans and cash and balances with CBK, which contributed by 6.1pp and 1.3pp, respectively (Figure 20). On the other hand, balances with commercial banks in the last two years have negatively contributed to the growth of total banking assets (2.2pp decline in June 2012 and 1.4pp decline in June 2011). Figure 20. The contribution in asset growth by category, in percent 30% 20% 10% 0% -10% June 2009 June 2010 June 2011 June 2012 Other assets Gross loans and leasing Balance with commercial banks Annual growth rate of assets (right axis) Source: CBK (2012) Fixed assets Securities Cash and balance with CBK 25% 20% 15% 10% 5% 0% Despite the fact that the economic growth continues to be positive, signs of slowdown in the economic activity for 2012 have been noticed, mainly driven by the economic decline that is characterizing some of the Eurozone countries. A similar situation is characterizing also the neighboring countries, where some of them are experiencing recession. Judging by the slowdown of indicators of the other sectors of Kosovo’s economy, such as the decline of exports, slowdown of imports and the decline of foreign investments and remittances, a rather similar situation has also embraced the banking system, which recorded a slowdown of lending activity. The annual growth rate of loans in June 2012 was 9.3 percent, compared to the rate of 15.7 percent that was recorded in June 2011. A more significant slowdown was noticed in the securities which grew by 4.8 percent, compared to the annual growth rate of 80.4 percent in June 2011. One of the main reasons for the slowdown of investments in securities was the problem with public debt in some of the Eurozone countries and consequently the uncertainties driven by the performance of these economies. Financial activity of the commercial banks in Kosovo remains concentrated in the intermediation activity within Kosovo’s economy, where loans consist 67 percent of total banking system assets (Table 5). On the other hand, investments abroad comprised 21.9 percent of the total banking sector assets in June 2012 (25.3 percent in June 2011). Table 5. Structure of banking system assets Cash and balance w ith w ith CBK Balance w ith commercial banks Securities Gross loans and leasing Fixed assets Other assets Total Description June 2009 June 2010 June 2011 June 2012 In millions of euro In percent In millions of euro In percent In millions of euro In percent In millions of euro In percent 241.9 12.5 268.1 12.1 265.3 10.6 298.4 11.3 286.7 14.9 351.6 15.8 319.5 12.8 265.3 10.0 13.3 0.7 114.0 5.1 205.6 8.2 215.6 8.1 1,280.9 66.5 1,404.6 63.3 1,624.9 65.0 1,776.3 67.0 40.1 2.1 42.6 1.9 45.0 1.8 49.9 1.9 64.3 3.3 37.8 1.7 40.7 1.6 46.9 1.8 1,927.1 100.0 2,218.8 100.0 2,501.0 100.0 2,652.3 100.0 Source: CBK (2012) | 35
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financial stability report - Banka Qendrore e RepublikÃ«s sÃ« KosovÃ«s

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