financial stability report - Banka Qendrore e Republikës së Kosovës

Number 3
Financial Stability Report
Provisions aimed at covering
potential loan losses are another
non-interest expense category that
continued to rise.
In June 2012, expenses for
provision amounted to euro 27.5
million, marking an annual
increase of 39.5 percent. The
increased provision expenses are
attributed mainly to the increase of
non-performing loans in the
banking system over the observed
period, which led banks to allocate
additional funds for covering
potential losses.
General and administrative
expenses remain the prevailing
category of the total banking
system expenses (44.5 percent of
total expenses in June 2012),
although all the items in this
category followed a decelerating
growth trend (Figure 41).
Compared to June 2011, personnel
costs recorded a slower growth,
which was mainly due to the
Figure 40. Annual growth rate of expenditures by
category, in percent
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
100%
80%
60%
40%
20%
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
2009 2010 2011 2012
Source: CBK (2012)
0%
Deposit interest rate
Provisions
General and administrative expenditures
Figure 41. Structure of expenditures by category, in
percent
53.2% 50.3% 46.9% 44.5%
banking system employee growth slowdown. Specifically, personnel costs rose by 3.5
percent in June 2012 as opposed to 8.9 percent in June 2011.
19.3%
27.4%
15.8% 24.4% 28.2%
33.9% 28.8% 27.3%
June 2009 June 2010 June 2011 June 2012
General and administrative expenditures
Non-interest expenditures
Iterest expenditures
Source: CBK (2012)
6.3.2. Banking system Profitability
and Efficiency
Figure 42. Profitability indicators
Net profit reduction impacted the 18
16.0%
14.8%
16
deterioration of banking system
14.0%
14
12.8%
12.9%
12.0%
profitability indicators such as
12
10.0%
Return on Average Assets (ROAA) 10
8.1% 8.0%
and Return on Average Equity 8
6.0%
6
(ROAE). In June 2012, ROAA
4
4.0%
declined to 0.8 percent from 1.2
1.3% 1.5% 1.2% 0.8%
2
2.0%
percent in June 2011 (Figure 42). 0
0.0%
ROAE declined likewise, dropping
June 2009 June 2010 June 2011 June 2012
to 8.1 percent from 12.9 percent in
June 2011.
The more rapid expenditure than
Profit
Source: CBK (2012)
ROAA (right axis) ROAE (right axis)
revenue growth has resulted in the deterioration of efficiency indicators for the banking
system. The cost to income ratio increased to 89.9 percent in June 2012 from 85.4 percent in
June 2011 (Figure 43). Nevertheless, the country’s banking system marked improvement in
In millions of euro
46 |