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Bosnia a. H. Watch: Another Banking Sector Record Year in 2024?!
Different trends in high-frequency economic indicators did not affect the B&H banking sector performance, as the sector reported a new record being on track in the context of net profit, loan portfolio and dynamics of deposits, whilst showing a record low NPL level in H1 2024.
Loans and deposits development with forecast for 2024
Net Interest Income still main driver of profitability
Profitability data for the B&H banking sector for H1 2024 showed a continued trend of rising profitability in absolute terms and in key profitability ratios. Specifically, net profit at the end of H1 2024 amounted to EUR 237 mn, supported by robust growth of +22.1 % yoy and high profitability ratios of ROA 2.5% and ROE 18.4%. The main factor supporting the surge in profitability was the Net Interest Income category (EUR 325.7 mn, +14.7% yoy in H1 2024) while the Non-interest segment reached an amount of EUR 204.9 mn (+21.4% yoy). At the same time, the sector continued with costs cutting initiatives and reduction which is confirmed by the declining trend in CIR ratios (from 52.2% in H1 2023 to 50.0% in H1 2024).
Lending to Corporate segment showed signs of visible recovery
Total loans of the banking sector reported amount of EUR 12.7 bn with which is growth by +9.2% yoy and new loan placements in H1 2024 totalling EUR 0.6 bn. The momentum of growth in loan portfolios in all main institutional categories in B&H has been the strongest since the Global Financial Crisis. Looking at the structure, the largest part of overall loan placements at the end of H1 2024 (EUR 6.3 bn) belongs to the Retail segment which reported +8.7% yoy growth in H1 2024 (new volume in H1 stood at EUR 505 mn), but its dynamic was slightly behind the Legal entities (LE) segment. Noteworthy was also that the Retail segment went below 50% of total volume for the first time in 17 months. The LE segment (EUR 5.6 bn) grew vividly, by 9.3% yoy (EUR 318 mn of new volume in H1 2024), thereby leading overall loan growth in H1 2024. Beside Retail and LE segments, the B&H banking sector has loan placements in Public and FI segments, but these categories have only modest shares in the total portfolio. The robust expansion of the loan portfolio toward the private sector was accompanied by a further declining trend of the NPL ratio which reported a record low as of H1 2024 at 3.5%, 60bp below the ratio of H1 2023, reflecting the good quality and resilience of banking sector loan portfolio.
Deposits with new records
Meanwhile, Deposits reported a total value amounting to EUR 16.4 bn, with lower growth dynamics in comparison to loans (+7.2% yoy) and the new amount of deposits inflow in 2024 worth EUR 0.5 bn. In terms of structure, deposits share characteristics with the loan portfolio, due to fact that Household deposits have a dominant role (EUR 8.5 bn, +9.15% yoy), and this segment reported new inflows in H1 2024 in amount EUR 0.3 bn. The LE segment (EUR 4.8 bn) has risen faster (+12.8% yoy) and new inflows totalled EUR 0.2 bn in H1 2024, which is in line with the general tendency in H1 2024 where the LE segment thus reported stronger growth rates in H1 2024 in both loans and deposits. On the other hand, segments which were denoted negative rates were the FI segment (EUR 0.5 bn) with annual dynamics of -7.6% yoy and the LRG - Public segment (EUR 2.1 bn) decreasing by -7.0% yoy.
Outlook coloured by positive expectations
The outlook for entire 2024 envisages robust growth on both business sides. Further, we expect stable deposits dynamics (+7.5% yoy), while loan growth was subject to an upward revision due to higher than expected growth in H1 2024 (revised to +8.6% yoy). Profitability reached a historical peak in 2023 but H1 figures indicate that 2024 could already smash this record for the B&H banking sector.
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Ivona ZAMETICA
Bosnia Herzegovina Ivona Zametica has established B&H Research Team within Raiffeisen BANK d.d. Bosnia and Herzegovina back in March 2010. She graduated at Economic Faculty of Zagreb in Macroeconomics and Finance and further deepened her knowledge through the Master degree program in Advanced Financial Management and Markets. She has been among top 3 forecasters for economic indicators of B&H in Focus Economics pool in the past four years and granted the award as the best overall forecaster for 2021. She has been further deepening her knowledge about the Financial Markets and Investment Banking in several projects and transactions of the Bank and being part of the Working Group supporting establishing the local DCM market in B&H. She has been also author of several research papers and studies related to currency board in B&H, government debt management and access to finance of SME’s in B&H. Apart from current coverage of B&H market and interest in SEE and CEE region, she has been particularly interested in monetary policy and recent technological impacts on future of monetary policy and currencies. Ivona is passionate yoga practitioner while in the free time she enjoys the most with her family and friends in travelling, hiking while dancing, theater and music are her passions from the childhood which she shares now with her daughter.
Mirza ZORNIC
Bosnia Herzegovina Mirza is macroeconomic analyst in Raiffeisen Bank BH dd Sarajevo. He has joined to the Research Team in spring 2022 after 16 years work activities as a Credit analyst in Raiffeisen Risk Department where he was in charge for Corporate, FI and LRG clients. With desire to make step forward and improve his analytical skills in macroeconomics, he decided to join the Raiffeisen Research Team. Mirza holds master’s degree of Economic Sciences at Sarajevo University and he has experience in management of public institutions/companies as a member of the Supervisory Board / Assembly / Audit Committee in public institutions/companies. In private, most of time he spends with his family but he is trying to find some moments for tennis, football and running as a passionate sport fan.
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