Financial Stability Report No1 20 December 2010 - Banka Qendrore ...
Financial Stability Report No1 20 December 2010 - Banka Qendrore ... 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 |
Financial Stability ReportNumber 1Source: CBK (2010)Despite that the structure of liabilities of Kosovo’s banking sector is mainly dominated bydomestic funding, a tendency of increasing the use of external funding has been observedrecently. This will broaden the sources of finance for banks, contributing to the increase oftheir capacity to further expand the lending activity. In June 2010, the banking sectorliabilities to the external sector in the form of subordinated debt reached at euro 24.4million from euro 16.9 million in June 2009. Despite an annual increase of 44.3 percent, theshare of the subordinated debt to total liabilities continues to be low at only 1.1 percent.6.2.2.1 DepositsIn June 2010, deposits amounted at euro 1.8 billion, which represents an annual growth of15.8 percent. Although the annual growth rate of deposits in this period was lower than in2009 by 3.9pp, deposits were less sensitive to the crisis mainly because the Kosovo’sbanking sector is mainly dominated by deposits collected within the domestic economy.The increase of total banking sector deposits was mainly driven by the increase of depositscollected from households, which in June 2010 amounted at euro 1.13 billion, contributingwith 15.6pp to the total deposit growth. Reaching a value of euro 306.2 million, enterprisedeposits recorded an annual declineFigure 16. Structure of deposits by sector, inof 36.1 percent in June 2010. The120.0 percentdecline in enterprise deposits ismainly attributed to the fall of thedeposits of public enterprises fromeuro 270.4 million in June 2009 toeuro 75.7 million in June 2010. Thesharp decline of deposits of publicenterprises, and at the same time the100.080.060.040.020.00.0substantial increase of governmentJune 2007 June 2008 June 2009 June 2010deposits (from euro 1.5 million inJune 2009 to euro 138.1 million inGovernment Other Households Private enterprises Public enterprisesJune 2010) is mainly due to the Source: CBK (2010)transfer of Post and Telecom ofKosovo (PTK) dividend amounting euro 200 million to the government in October 2009. Onthe other hand, the value of deposits of private enterprises increased by 10.5 percent inJune 2010, amounting at euro 230.5 million.The structure of deposits at the banking sector remained similar to previous periods, withhousehold deposits representing the main source of deposits for the banking sector (65percent of total), followed by deposits of enterprises that represent 17.5 percent of total(Figure 16). Government and other financial institutions’ deposits are represented with 7.9and 5.0 percent, respectively.The deposits of non-residents in the Kosovo’s banking sector in June 2010 represented 4.3percent of total deposits (3.6 percent in June 2009), indicating an upward trend of thesedeposits in the recent years. Favourable interest rates on deposits and the increased publicconfidence on Kosovo’s banking sector are among the main factors that have contributed tothe growth of non-residents' deposits. Risks deriving from potential exchange rate| 33
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<strong>Financial</strong> <strong>Stability</strong> <strong>Report</strong>Number 1Source: CBK (<strong>20</strong>10)Despite that the structure of liabilities of Kosovo’s banking sector is mainly dominated bydomestic funding, a tendency of increasing the use of external funding has been observedrecently. This will broaden the sources of finance for banks, contributing to the increase oftheir capacity to further expand the lending activity. In June <strong>20</strong>10, the banking sectorliabilities to the external sector in the form of subordinated debt reached at euro 24.4million from euro 16.9 million in June <strong>20</strong>09. Despite an annual increase of 44.3 percent, theshare of the subordinated debt to total liabilities continues to be low at only 1.1 percent.6.2.2.1 DepositsIn June <strong>20</strong>10, deposits amounted at euro 1.8 billion, which represents an annual growth of15.8 percent. Although the annual growth rate of deposits in this period was lower than in<strong>20</strong>09 by 3.9pp, deposits were less sensitive to the crisis mainly because the Kosovo’sbanking sector is mainly dominated by deposits collected within the domestic economy.The increase of total banking sector deposits was mainly driven by the increase of depositscollected from households, which in June <strong>20</strong>10 amounted at euro 1.13 billion, contributingwith 15.6pp to the total deposit growth. Reaching a value of euro 306.2 million, enterprisedeposits recorded an annual declineFigure 16. Structure of deposits by sector, inof 36.1 percent in June <strong>20</strong>10. The1<strong>20</strong>.0 percentdecline in enterprise deposits ismainly attributed to the fall of thedeposits of public enterprises fromeuro 270.4 million in June <strong>20</strong>09 toeuro 75.7 million in June <strong>20</strong>10. Thesharp decline of deposits of publicenterprises, and at the same time the100.080.060.040.0<strong>20</strong>.00.0substantial increase of governmentJune <strong>20</strong>07 June <strong>20</strong>08 June <strong>20</strong>09 June <strong>20</strong>10deposits (from euro 1.5 million inJune <strong>20</strong>09 to euro 138.1 million inGovernment Other Households Private enterprises Public enterprisesJune <strong>20</strong>10) is mainly due to the Source: CBK (<strong>20</strong>10)transfer of Post and Telecom ofKosovo (PTK) dividend amounting euro <strong>20</strong>0 million to the government in October <strong>20</strong>09. Onthe other hand, the value of deposits of private enterprises increased by 10.5 percent inJune <strong>20</strong>10, amounting at euro 230.5 million.The structure of deposits at the banking sector remained similar to previous periods, withhousehold deposits representing the main source of deposits for the banking sector (65percent of total), followed by deposits of enterprises that represent 17.5 percent of total(Figure 16). Government and other financial institutions’ deposits are represented with 7.9and 5.0 percent, respectively.The deposits of non-residents in the Kosovo’s banking sector in June <strong>20</strong>10 represented 4.3percent of total deposits (3.6 percent in June <strong>20</strong>09), indicating an upward trend of thesedeposits in the recent years. Favourable interest rates on deposits and the increased publicconfidence on Kosovo’s banking sector are among the main factors that have contributed tothe growth of non-residents' deposits. Risks deriving from potential exchange rate| 33
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