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Financing in Serbia 15th European Annual Meeting European Consultants Unit TABLE OF CONTENTS Development of Banking Sector Banking and Economy Development of Raiffeisenbank a.d. Precondition of Financing & Limitations Outlook DEVELOPMENT OF BANKING SECTOR Prior to Political Changes in October 2000 Steady deterioration in the past 12 years prior to political changes: • Large number of banks • Majority of banks undercapitalized • Most banks overstaffed • Banking sector small and not active enough • Politically directed loans dominate the market • Only basic banking products offered • Lack of public trust in the banking sector DEVELOPMENT OF BANKING SECTOR After Political Changes NBS creates the basis for healthy development of financing sector • Significant reduction in number of banks through mergers & closures: Beobanka, Beogradska banka, Jugobanka, Investbanka.. • Increased demand in terms of capital and quality • Level of trust increased Increase in deposits volume: • June 2001 total retail deposits reached EUR 31 mio • September 2006 total retail deposits over EUR 2,74 bn Increase in loans volume: • Until 2001 loans to customers were very modest • During the last 3 years loans volume is increasing Payment system transferred to commercial banks Ownership structure of banks changed TABLE OF CONTENTS Development of Banking Sector Banking and Economy Development of Raiffeisenbank a.d. Precondition of Financing & Limitations Outlook BANKING AND ECONOMY Banks Assets - Share in GDP Total Banks Assets as %of Serbian GDP 140% 125% 122% 120% 100% 80% 81% 60% 39% 40% 32% 38% 43% 20% 0% 1999 2000 2001 2002 2003 2004 2005 CONCLUSION: Due to the closure of large banks and restructuring process undergoing in stateowned banks in Serbia the banks asstets‘ participation in Serbian GDP has declined. Nevertheless, result of new entrants into Serbian banking sector, this ratio is expected to increase. BANKING AND ECONOMY Total Credits - Share in GDP Total Credits as % Serbian GDP 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 40% 32% 27% 21% 18% 23% 16% 1999 CONCLUSION: 2000 2001 2002 2003 2004 2005 Evident decrease of this indicator is a result of assets restructuring of state-owned banks (i.e. Write-offs of bad loans). Following the resructuring of banking sector and presence of foreign banks, participation of total credits in GDP has begun to increase (126 % YoY 2003/04) BANKING AND ECONOMY Retail Loans - Share in GDP Retail Loans as % of Serbian GDP 8% 7% 7% 6% 5% 4% 3% 2% 1% 0% 5% 3% 1% 1% 1999 CONCLUSION: 2000 1% 2001 2% 2002 2003 2004 2005 Retail market segment is the most dynamic in term of growth rates. The large increase is primarily generated through much larger supply of retail loans in recent years. There is still enough scope for further growth. BANKING AND ECONOMY 1M BELIBOR BANKING AND ECONOMY EUR/CSD ANALYSIS AND FORECAST In 2005 CSD nominal depreciation towards EUR was 8.4%, effective depreciation was amounting to 7% In 2006 up to now CSD depreciated for 1.29% It is expected that the EUR/CSD would be around 87.5-88.5 level at the end of 2006 Expectations are that CPI would be in range 9.5%-13.5% 31.12.2005 8 5 .5 31.03.2006 31.05.2006 31.08.2006 30.09.2006 31.12.2006 8 6 .9 0 0 5 8 4 .4 0 0 0 8 8 .0 0 3 9 8 7 .6 3 8 0 8 5 .8 3 1 7 This commentary is for information only and the comments and forecasts are intended to be of a general nature and are current as at the date of issue. Issued by Raiffeisenbank A.D., Belgrade who takes no responsibility for any individual investment decisions based thereon. This documentation is not intended as an offer, solicitation or recommendation to buy or sell currency. Information is obtained from sources that are believed to be reliable but their accuracy cannot be guaranteed. Relevant economic data has been taken from Statistical gazette of NBS, Economical gazette of NBS, Ministry of finance of Serbia internet page, NBS internet page, Republic of Serbia statistic department. Market position and growth rates Market- position No. of NWBs Bosnia and Herzegovina -3 Albania Kosovo Top 1 8 Slovakia Serbia Belarus Romania Croatia -6 Bulgaria Top 4 3 Czech Rep. Hungary Ukraine (2) Slovenia Russia (3) >6 4 Poland Ø EU-12 3,6% p.a. 0% 2% ____________________ (1) av. nom. GDP-growth 2004e-2007e (p.a.): 19,0 % (2) av. nom. GDP-growth 2004e-2007e (p.a.): 14,0 % (3) av. nom. GDP-growth 2004e-2007e (p.a.): 14,4 % 4% 6% 8% 10% Average nominal GDP-growth 2004e – 2007 p.a. > 12% (1) TABLE OF CONTENTS Development of Banking Sector Banking and Economy Development of Raiffeisenbank a.d. Precondition of Financing & Limitations Outlook RZB Group in CEE RAIFFEISENBANK a.d. Belgrade First bank established with 100% foreign capital in the country The Bank‘s shareholders: • Raiffeisen International • IFC, World Bank Group Equity – EUR 200 mio More than 365,000 clients 54 branches Universal bank for 4 main business segments: • Corporate Banking • Retail Banking – Private individuals • Retail Banking – SMEs (small & micro enterprises and professionals) •Treasury & Investment Banking TOP 15 BANKS by total assets 1,800 1,664 1,600 1,400 511 400 446 390 313 AIK banka Pro Credit Bank Alpha Vojvodjanska Societe Generale Komercijalna Hypo AlpeAdria Banca Intesa Raiffeisenbank - HVB Bank 200 280 276 238 231 228 Erste 533 600 Meridian - CA 800 Volksbank 943 EFG Eurobank 1,000 NBG 1,118 1,077 1,061 1,200 As at: 30/06/2006 in million EUR Source: NBS, under local statutary requirements, prepared by: Raiffeisenbank TABLE OF CONTENTS Development of Banking Sector Banking and Economy Development of Raiffeisenbank a.d. Precondition of Financing & Limitations Outlook Preconditions for financing-limitations Profile of the borrower: • • • • Privately owned companies with undisputable ownership rights Subsidiaries of Multinationals State owned and mixed companies with good prospects of privatization Track record of at least 2-3 years Credit profile • Purpose: working capital financing, financing of investments, project/trade financing • Amounts: • Tenors: up to EUR 50 mio (current legal lending limit) working capital financing: up to 2y investments/project financing: up to 10y • Collateral: Mortgage, pledge on equipment and inventory, bank/corporate guarantees and cash deposits, assignment of receivables, unsecured etc Preconditions for financing-limitations Limitations •Country risk: maximum tenor, costs of refinancing, maximum country limit •Lack of country-wide land register •Lack of available construction/industrial land in towns •Legal restrictions: Law on Foreign Credit Transactions, necessity of registration of international financing with National Bank of Serbia (reduction of flexibility) •Costs of refinancing: mandatory reserve costs (60%), costs for political risk •Still limited transparency of balance sheets but strongly improving Improvements •Significance of balance sheet, International Accounting Standards •Positive track record with the bank, willingness and capability to repay •Increasing of competition in the banking area TOP 15 BANKS by total loans 917 123 114 111 109 95 Panonska 124 Volksbank 134 Agrobanka 209 Continental 238 NBG Societe Generale HVB Bank Komercijalna banka Hypo-AlpeAdria Bank Banca Intesa 253 EFG Eurobank 396 Meridian - CA 501 AIK banka 599 Pro Credit Bank 609 Raiffeisenbank 1,000 900 800 700 600 500 400 300 200 100 - As at: 30/06/2006 in million EUR Source: NBS, under local statutary requirements, prepared by: Raiffeisenbank TABLE OF CONTENTS Development of Banking Sector Banking and Economy Development of Raiffeisenbank a.d. Precondition of Financing & Limitations Outlook Outlook - Plans Outlook •Increased competition due to entrance of new banks into the market •Increased mandatory reserve requirements •Positive development of the country – current country rating: Standard & Poors BB•More foreign Greenfield investments expected •EU entry and further stabilization expected on mid term Summary Serbia is no longer a high risk country, currently ideal proportion between opportunity and risk Thank you for your attention!