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Cross S ection of the F inancial S ector Developments in Bosnia and Herzegovina

Cross S ection of the F inancial S ector Developments in Bosnia and Herzegovina. Radomir Božić. Ph.D. Sarajevo. October 5. 2011. Fifth SASE International Conference. Macroeconomic indicators. The structure of BH financial sector.

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Cross S ection of the F inancial S ector Developments in Bosnia and Herzegovina

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  1. Cross Section ofthe Financial Sector Developments in Bosnia and Herzegovina Radomir Božić. Ph.D. Sarajevo. October 5. 2011. Fifth SASE International Conference

  2. Macroeconomic indicators .

  3. The structure of BH financial sector • The banking sector dominates the financial system in Bosnia and Herzegovina. The share of this sector in the assets of the financial system amounted to 84.3% at the end of 2010. At the end of 2010 82% of average equity was concentrated in banks with majority foreign ownership. A large percentage of foreign ownership is a potential risk due to the fact that the strategic decisions are made out of the scope of monetary authorities of Bosnia and Herzegovina. • Table: The value of the assets of financial intermediaries

  4. Profitability and the level of the non-performing loans .

  5. The results of the banking sector of Bosnia and Herzegovina for Q2 2011 • Better business results compared to the same period last year – KM 82.9 millions of profit compared to KM 63.9 millions of loss • The total income of banks in this period amounted to KM 828.4 millions (increase by 5% compared to Q2 2010), while total expenditure amounted to KM 741.7 millions (decrease by 13% compared to Q2 2010) • 22 banks reported the positive financial result (profit) in the total amount of KM 100.5 millions and 7 banks reported negative financial result (loss) in the total amount of KM 17.1 millions

  6. The results of the banking sector of Bosnia and Herzegovina for Q1 2011 • The total of 29 commercial banks, two under provisional administration • 25 banks had a licence for the deposit insurance • The total of 10.319 employees, being the increase of 0.4% compared to Q1 this year

  7. The structure of share capital • At the end of the first quarter realized capital adequacy ratio amounted to 15.5 (at the end of 2010 it amounted to 16.1).

  8. The banks assets In KM millions • The banks continue to keep significant funds in the accounts with depository institutions abroad amounting to KM 1.66 billions, which is 32% of total funds. Compared to the same period of 2010, this share decreased by three percentage points.

  9. The banks liabilities In KM millions • The share of obligations in total liabilities is 88% and the share of equity is 12%

  10. The structure of deposits by sectors In KM millions • The deposits in local currency increased by KM 143 millions or 8% and deposits in foreign currency decreased by KM 77 millions or 1%. The share of deposits in local currency in total deposits increased by one percentage point - from 44% to 45%.

  11. The structure of deposits by currencies • In period January – March 2011 there was a change in the maturity structure of deposits – the share of short-term deposits increased from 53% to 55% and the share of long-term deposits decreased from 47% to 45%. In KM millions

  12. Savings • The savings in local currency increased by KM 135 millions or by 8% and the savings in foreign currencies increased by KM 108 millions or by 2%. In KM millions

  13. Loans • The loans to private companies increased by KM 354 millions or 5% and the loans to households increased by KM 98 millions or 1.5%. In KM millions

  14. Lending interest rates • The data on the average interest rate on loans to private companies and households in foreign currencies are provided by small number of banks and therefore not included in this review.

  15. Deposit interest rates • The data on the average interest rate on deposits by private companies and households in KM with currency clause are provided by small number of banks and therefore not included in this review.

  16. Microcredit sector in Bosnia and Herzegovina as of June 30, 2011 • There is a trend of reducing the number of employees, as well as the number of organizational units. • Compared to December 31, 2010. number of employees decreased by 3.4% (total of 64 employees)

  17. The organization of microcredit sector in Bosnia and Herzegovina • The legal basis • The Law on microcredit sector in the Federation of BH • The Law on microcredit sector in RS • Form of organization • MC foundations as non-profit institutions (max. Loan up to KM 10.000) • MC associations as profit institutions (max. loan up to KM 50.000)

  18. The structure of assets of the microcredit sector in Bosnia and Herzegovina • The balance sum in first half of the year amounts to KM 774 millions and it decreased by KM 70 millions or 8.3% compared to the previous year.

  19. The structure of the liabilities of microcredit sector in Bosnia and Herzegovina • There is a downward trend in balance sum compared to the previous year in all entries of assets and liabilities

  20. Profit and Loss Account for the microcredit sector in Bosnia and Herzegovina • Profit and Loss Account • Total income KM 70.1 millions • Total expenditures KM 74.9 millions • The excess of expenditures KM - 4.8 millions • The income decreased by 22% compared to the same period in previous year, while the expenditures decreased by 31% in the same period. • In the first six months of 2011, the MCO sector reported the profit amounted to KM 3.05 millions (in the same period of previous year the loss amounted to KM 16.8 millions)

  21. The total loans portfolio of the microcredit sector • The total loans portfolio amounts to KM 629.6 millions

  22. The structure of loans to legal entities .

  23. The structure of loans to physical entities

  24. The interest rates in the microcredit sector in Bosnia and Herzegovina .

  25. Trends in the microcredit sector in Bosnia and Herzegovina • Reduction of lending activities due to restrictive lending policy • Increase in written off loans • Increase in liquidity • Improving of the business results • Improving of internal control systems in most MCOs. the adjustment of lending policies to the demands of regulators.

  26. Neccessary measures at the sectoral level • Amendments to the Law on the MCOs in order to eliminate ambiguities of existing regulations • Improving in corporate management and internal controls • Limitation of transactions with connected persons • Increasing the transparency of MCOs business through the exchange of information at the sectoral level through the CRC • Consolidation of the sector

  27. The situation in the leasing sector in Bosnia and Herzegovina • The balance sum of the leasing companies in Bosnia and Herzegovina for the first six months of 2011 amounted to KM 1.066 millions with the following structure and it decreased by 4% compared to 2010.

  28. The organization and ownership structure of the leasing sector • Legal framework • The Law on Leasing in the Federation of BH • The Law on Leasing in RS • In Bosnia and Herzegovina there are nine leasing companies registered, as follows: • In Federation of BH - seven • In RS - two • The ownership structure of leasing associations • 100% foreign owned - three • Majority foreign ownership - four • Majority domestic ownership - two • There are 245 employees in the leasing companies in Bosnia and Herzegovina

  29. The structure of liabilities of the leasing sector • The structure of liabilities as follows: • obligations based on loans 101.1% • Other obligations 2.7% • equity * -3.8% *the total obligations are bigger than the total liabilities due to the negative value of equity

  30. The situation in the leasing sector in Bosnia and Herzgovina • The first half of the year ended with a loss of KM 32.06 millions, which is by 54% less compared to the same period last year. • Total income KM 59.3 millions • Total expenditures KM 91.4 millions • Profit before taxation KM - 32.1 millions • Taxes KM 10 millions • Loss after taxation KM 32 millions

  31. Trends in the leasing sector • The sector shows signs of recovery and the stopping of negative trends • A slight increase in business activities • The biggest negative impact on the financial indicators of leasing companies have loans being lended before the law on leasing entered into force • The negative equity of the sector is the result of accumulated losses

  32. Neccessary measures at the sectoral level • Capital strengthening • Improving the policies and procedures for management of loans, operational and market risks. • Establishing the system of internal controls and the functions of the internal audit • Increasing the transparency of business through the exchange of information at the sectoral level through the CRC.

  33. Thank you for your attentionhttp://www.cbbh.ba 33

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