Financial Stability Report No1 20 December 2010 - Banka Qendrore ...

Number 1Financial Stability Reportservices, the majority of loans are issued to the trade sector (51 percent of total loans toenterprises), which reflects the high reliance of the Kosovo’s economy on this sector (Figure15). The largest increase during the first half of 2010 was noticed in loans issued to themanufacturing sector and the construction industry, which grew by 33.6 and 59.7 percent,respectively. As a consequence, the share of loans to the manufacturing sector reached at14.7 percent of total loans to enterprises (11.8 percent in June 2009); while loans to theconstruction industry accounted for 11.2 percent in June 2010 (8.1 percent in June 2009).Loans issued to the agriculture sector continue to represent only a small part of total loansissued to enterprises. In June 2010, loans issued to the agriculture sector amounted at euro39.9 million, representing only for 4 percent of total loans. The low share of loans extendedto the agriculture sector to some extent might be attributed to high interest rates onagriculture loans, which may discourage farmers to apply for loans. In addition, some of thespecifics that characterize the agricultural sector, such as the uncertainty over propertyrights and the small number farms organized as businesses with appropriate bookkeeping,may increase the credit risk for this category of loans, resulting in higher interest rates andmore stringent lending criteria.Longer maturity loans have continued to increase their share to total loans. Loans withmaturity of over two years represented 71.8 percent of total loans in June 2010, whichindicates a continuous increase of these loans over the past years (67.2 percent of totalloans in 2009 and 65.6 percent of total loans in 2008, respectively). The share of loans withmaturity of up to two years followed a decreasing trend on the other hand, representing28.2 percent of total loans in June 2010 (32.8 percent of total loans in 2009 and 34.4 percentof total loans in 2008, respectively).6.2.2. LiabilitiesBanking sector activity continues to be financed mainly from domestic sources of financing,which has contributed to a lower sensitivity of Kosovo’s banking sector towards thechanging conditions in the external financial markets during the crisis. Deposits collectedwithin the country continue to be the main source of finance for banks, representing 79.0percent of total banking sector liabilities (Table 6). Another important source of finance forcommercial banks in Kosovo have been own resources, representing 10.1 percent of totalbanking sector liabilities. In June 2010, own resources recorded an annual growth of 10.3percent, which mainly resulted from the increase of shareholder capital, which comprisesaround 73.3 percent of total own resources.June 2007 June 2008 June 2009 June 2010DescriptionIn millions of euro In percent In millions of euro In percent In millions of euro In percent In millions of euro In percentBalances from other banks 25.0 2.0 32.6 2.0 41.8 2.2 48.5 2.2Deposits 981.6 79.4 1264.4 79.0 1513.0 78.5 1751.7 79.0Other debt 3.2 0.3 0.0 0.0 0.0 0.0 0.0 0.0Other liabilities 94.3 7.6 112.4 7.0 152.1 7.9 168.7 7.6Subordinated debt 7.0 0.6 7.0 0.4 16.9 0.9 24.4 1.1Ow n resources 125.6 10.2 183.2 11.5 203.3 10.5 224.3 10.1Total liabilities 1236.7 100% 1599.6 100.0% 1927.1 100% 2217.6 100%Table 6. Structure of banking sector liabilities32 |