Montenegro: Central Bank revises state of banking sector

Montenegro: Central Bank revises state of banking sector

At its 67th session, the Montenegro Central Bank Council discussed the situation in the banking sector and the impact of the pandemic, noting that the banks had responded adequately to the crisis, contributing to mitigating the consequences of the novel coronavirus pandemic on the population and the economy. In addition to approving the moratorium, the banks’ intensive lending activity continued, with almost 8,000 new loans approved from the beginning of March to the end of May, amounting to roughly 185 million euros. The Council also assessed that, following the carefully selected CBCG measures, banks successfully addressed liquidity and other risks in their operations which were significantly exacerbated, as a result of the pandemic. At the end of May 2020, banks earned a net profit lower by 36% year-on-year, resulting in establishing additional loan loss provisions and reduced net fee income.

The Council members were informed on the results of the CBCG analysis, which examined the impact of the Coronavirus pandemic on online and mobile payments. According to the data for the January-April 2020 period, the total number of payment transactions performed by mobile payments at the end of April increased by 49% compared to January this year. The number of payment transactions conducted by natural persons by mobile payment increased by 73%. In the same period, the number of new mobile payment users increased by 14.7%, while the number of new users – natural persons who contracted with payment service providers to use the application installed on a mobile phone went up by 15%.

“It was concluded that, in addition to all the adverse consequences it engendered, the pandemic contributed to the financial literacy of Montenegro’s citizens and accelerated the digital transformation process to which we are committed”, the Bank’s press release notes.

The Council discussed and adopted the Report on Business Operations and Policy Implementation of the Central Bank of Montenegro for April 2020, which stated that the activities of the Central Bank during this period were implemented in accordance with the planned obligations.

At today’s session, the Council considered and adopted the Report on the operations of financial service providers as of 31 March 2020. The Report highlights the growth in the microcredit sector in the first quarter of 2020 compared to the end of 2019 in total capital (5.12%), total loans and receivables (2.3%) and liquid assets (143.6%). At the end of March 2020, non-performing loans in this sector were 9.7% higher than at the end-2019. Regarding the operations of leasing companies, stability, positive financial results and growth in assets (1%), receivables (2.4%), and capital (7.3%) characterized this sector in the first quarter of this year. Compared to the end of the previous year, there were no significant changes in the operations of the factoring sector, which consists of only one factoring company.

Today, the Council adopted the Central Bank of Montenegro Macroeconomic Report for Q1 2020.

The Report stated that the pandemic would have significant consequences that would affect the Montenegrin economy.

The Inflation Report for Q1 2020, adopted today by the Council, indicates that CPI inflation in Montenegro in March 2020 was -0.4% compared to December 2019. The average rate of consumer prices (the first three months of 2020, compared year-on-year) was 0.8%, while prices in March 2020 compared to March 2019 remained unchanged. The Report further states that the model forecast for end-2020 projected inflation ranging between 0% and 1.2%, with a central tendency of 0.5%. The expert assessment of the CBCG is similar and indicates that the inflation will range from -0.2% to 1.8% at the year-end, with a 0.8% central projection.

The Council also adopted the Bank Lending Survey Report for Q1 2020. According to banks, the standards (criteria for approving loans) for micro, small and medium enterprises and consumer loans are expected to be relaxed during the next quarter. Also, the banks have the same expectations when it comes to credit conditions (interest rate, commission and fee costs, required collateral, etc.) for households and the economy.

The Council received information on the bankruptcy proceedings of Atlas banka AD in bankruptcy and the activities of the bankruptcy administration, and discussed other current issues in the domain of its competence. /ibna